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Energy Aggregation: Does it Help or Harm Customers?

Posted by: Anna | 02/03/2015 at 04:12 PM


Energy Aggregation: Does it Help or Harm Customers?

Energy aggregation is a hot topic around the United States. But what exactly is energy aggregation? It’s when a group of people, usually a city, combines their buying power and chooses one energy supplier for the entire group. The purpose is to get different energy suppliers to competitively bid against each other to provide the group with a low rate. However, that’s not the way it always works. Let’s take a look at some pros and cons of energy aggregation.

Pros:

  • Hope for Savings: You’re able to buy energy in bulk, so your community could achieve savings you may not have been able to get on your own.
  • Simple Enrollment: You can opt-out (when everyone is enrolled and must say no during a set timeframe) or opt-in (you have the choice up-front to say yes, you want to join the plan).

Cons:

  • Rates Based on Averages: You may not save money because your energy rates are based on the use of everyone in the pool of people, not just your individual energy usage.
  • Lack of Control: The government has control of choosing your energy supplier, not you. While citizens may have a say in the process, it is ultimately the role of your elected officials to make the final decision.
  • Less Competition, Higher Rates: History shows that the ability to select your own provider through deregulation has lowered energy prices. Most times, energy aggregation is divided among only a few providers. This decreases the amount of competition.
  • Locked-in: You can’t change energy providers until an agreed upon time frame, no matter how the rate changes.

The intent of deregulating energy markets was to give consumers the choice to select their energy provider. It also forced the end of monopolies held by local energy suppliers.  But, with aggregating energy, most consider it a step backward from customer choice. It’s your energy, so shouldn’t it also be your choice?


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