Key Indicators

Despite the continued uncertainty as to how it all will shake out, a number of trends among the leading states are surfacing:

Rate Freezes or Reductions. Many states have automatic rate reduction planned for the transition, including California, with 10 percent cuts for everyone, and Massachusetts, with 10 percent cuts for small customers. Other states, such as Pennsylvania, have price caps in place for the next several years. Even if customers don't choose new suppliers, rates should stay where they are or get better.

Three months after the market opened in California, less than 1 percent of commercial businesses had switched. This is due in part to the automatic rate reductions and also to suppliers who have focused on the larger customers.

Some Ongoing Regulation. State agencies are helping police the industry and ensure that no one company corners the market. Usually, some form of registration or licensing is required for all suppliers, and state public utility commissions (PUCs) have a list of legitimate suppliers. In California, suppliers are required to use a standard format for prices to facilitate comparisons and provide a three-day right to cancel. In addition, suppliers are prohibited from "slamming"-changing a customer's electric supplier without some form of approval- and from contacting customers who ask not to be solicited.

In Pennsylvania, suppliers are required to be licensed and post a bond ensuring they will purchase enough electricity to satisfy their contracts. When the June heat wave and storms hit the Midwest, wholesale electric prices (paid by one utility to another) soared to over 200 times the normal price, and one power trading company defaulted on its contracts. Although prices were not affected for most consumers, this nevertheless points to the need for suppliers to stand behind their contractual commitments.

Transition Charges. Most states have built in some mechanism for utilities to recover investments in power plants already built. These charges are added to the bills and are typically scheduled to be phased out, at which time savings should improve even more. You can't avoid this charge by changing suppliers.

Continued Reliability. Because local utility companies will continue to deliver the power, they also will be responsible for trouble-shooting. Most regions are establishing Independent System Operators (ISOs) that coordinate power requirements among the suppliers and utilities and help ensure a continuous, reliable supply of electricity.

However, the workings of this will vary from state to state. For specifics on how your state is dealing with deregulation, contact your state public utility commission or visit the National Association of Regulatory Commissioners (NARUC) Web site at www.naruc.org for links to state utility commission sites

Types of Power Suppliers

As deregulation unfolds, customers may be approached by a number of different kinks of suppliers:

Power marketers-Middlemen who buy power wholesale and resell it to retail (i.e. smaller) consumers. Marketers do not usually generate their own electricity but buy from others and arrange to get it to you. Since they purchase large amounts, marketers can buy at low wholesale prices and offer competitive retail prices to consumers.

Aggregators-Typically work through city/county governments, business or trade associations, churches or other membership-based organizations. Some aggregators are actually electric suppliers who have organized a group of buyers, whereas others organize the buyers and negotiate with a supplier on behalf of the group. By banding together groups of smaller customers, aggregators often can get lower prices.

Power brokers-matchmakers for buyers and sellers who typically focus on larger customers such as manufacturing firms or commercial chains. They may work on a fee or commission basis.

Other Utilities-Utilities that have established subsidiary companies with new, non-regional names (i.e. more generic, no state mentioned) to supply electricity in markets outside of their regulated operations.

Of these, the aggregators have the potential to offer lower prices by grouping together a large number of customers. For smaller consumers, this may be the route to go. Before listing with any new supplier, however, check with your state public utility commission (PUC) for a list of legitimate suppliers.