Electricity Scams: Deregulation and Electric Companies a Scam?

by Luke Johnson on January 7, 2011

I have been reading a lot about these so called energy company scams.

Energy companies and the energy market as a whole are not the easiest things to understand. I sat down with my Grandmother and talked to her for two hours about the how deregulation works and I still don’t think she understands it. A question that I had to answer was…

“Is deregulation a scam?”

Electricity ScamsIf it is a scam why did it happen in the first place?

Call us at 1-800-971-4020 to see if you leave in a deregulated area

The truth is that deregulation is not a scam but let me explain.

Let’s start from the beginning; the power plants. The power generation companies own the power plants and produce the electricity. “What is a power plant?” Ok I do not have the time to explain everything.  I will skip over a couple of things that I assume you know (i.e. what a power plant is).

Utility companies or local distribution companies (LDCs) own the lines that go all over the place along with the meters. This is how you get the electricity from the power plants to your home. If a tree falls on the power line you call the utility supplier.

Oncor and CenterPoint are two of the biggest utility companies in Texas.

“So who do I pay?”

That is a great question. If you don’t pay the power generation companies or the utility companies than who do you pay?

You pay the Retail Electric Provider (REP) usually referred to as an electricity provider. Why? “If the electricity providers don’t own the power lines or the power plants then why do I pay them?”

This is because they contract with the power generation companies for “X” amount of electricity with a certain heat rate. Then they mark up the price of electricity to sell to you for a profit.

“Why do I pay more than the electricity providers do?”

Here is the alternative: REGULATION.

Electricity regulation is based on what the Public Utility Commission of (whatever state you live in) sets the electricity price to be.

Still sound likes a scam.

Think about this for deregulation; if the energy market drops in price, some electricity providers are going to try to buy at that lower price to sell to you. For regulated areas, if the energy market drops in price, you will still pay the same electricity rate unless the Public Utility Commission lowers the rate.

“So will my electric bill be lower in a deregulated area?”

My answer to that is “More often than not.”

Electricity Scams are out there.

Now that you understand a little bit more (I hope) about deregulation,

compare our electric rates using our comparison tool to the upper right.

All you have to do (if you leave in a deregulated area we serve) is type in your zip code and click compare.

If you’re a commercial customer use the commercial compare box.

A good place to look for electricity scams is the PUCT website.

If you get your electric bill and you feel that there is some kind of “electricity scams” happening contact the Public Utility Commission.

Here are a few articles about energy companies which are being call “scams.”

Energy Plus Scam: http://www.electricrates.com/35584/energy-plus-scam/

Glacial Energy Scam: http://www.electricrates.com/37128/glacial-energy-scam/

Franklin Power & Glacial Energy Blood Diamond Scam: http://www.electricrates.com/37711/glacial-energy-is-a-scam/

Ambit Energy Scam: http://www.electricrates.com/36471/ambit-energy-scam/

Ambit Energy Scam Lawsuit: http://www.electricrates.com/36866/ambit-energy-scam-lawsuit/

MXEnergy Scam: http://www.electricrates.com/36866/ambit-energy-scam-lawsuit/

Luke Johnson

Luke Johnson has been writing about deregulated energy markets since early 2010. His knowledge has helped consumers lower their electricity cost. Connect with Luke on Google+.

{ 3 comments… read them below or add one }

Les July 27, 2011 at 1:20 pm

My PSE&G bill was $80.00 more because of the deregulated 3rd party billing–looking back over previous months most were over billed also—I think it’s a scam

I’m next checking on my SJ gas bill—It looks way over charged also!

Who allowed/ passed this reformation/ deregulation of banking and energy co’s??? didn’t they PROTECT THE AMERICAN CONSUMER FROM FRAUD???

Tim February 6, 2013 at 4:33 pm

Whoever wrote this article needs to check their facts & terminology.

“Energy Suppliers own the lines that go all over the place along with the meters.”

–This is inaccurate. Utility companies, or local distribution companies (LDC’s, sometimes referred to as Electric (EDC’s) or Gas (GDC’s) distribution companies) own the power lines, gas lines & meters. ELECTRIC SUPPLIERS (and gas) are often the 3rd party companies that sell you “price protection” or price flexibility with their contracted rate plans. Some 3rd party companies are affiliated with utility companies under an umbrella or parent company. Other suppliers are completely independent entities.
Most power plants were originally owned & operated by and were part of the utilities, but were “sold off” or became “independently incorporated” but the parent company still owns a large share of interest in the power plant.

Utility deregulation may or may not be a scam, but it definitely is geared towards business interests & profits, not consumer protection.

Check your facts.
-Tim

Kathy Woods May 18, 2013 at 11:57 pm

Be ware there are scams out there and there are marketing companies like Prime United Marketing Inc that are not paying their subconctracted agents.
Don’t work for this marketing company because they don’t pay out when invoice is due.

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