CLEVELAND, Ohio — Northeast Ohioans can save money by shopping for a better deal on electricity, even if they already did last year. But there’s one question you need to ask yourself first.
How risky do you want to get?
I’m exaggerating, because there’s good risky and risk-averse options. But because of the oddities of the electricity market, you do need to make a decision. Save more money now, or lock-in a good deal for longer.
To recap: Electricity prices in Northeast Ohio have been an absolute cluster. First, NOPEC’s rates skyrocketed in 2022, which prompted it to temporarily drop customers. Then in June 2023, the default rate for FirstEnergy customers called the “price to compare” doubled because the price the utility paid for electricity at auction also doubled.
That’s all the past. What you need to know now is FirstEnergy is buying power at auction for the equivalent of 7.4 cents per kilowatt hour. You can find a better deal if you shop.
Where to shop
Most households in Ohio can shop for their own electricity supplier using Ohio’s Apples to Apples tool, found at energychoice.ohio.gov. There are exceptions, like Cleveland Public Power customers. But if you have Ohio Edison or the Illuminating Company, you can shop.
There are many options. Let’s focus on three from the same company: Energy Harbor.
All of these contracts have no monthly fees, no early termination fees and a fixed rate.
You can get 5.8 cents per kilowatt hour for 12 months, 6.2 cents for 15 months, 6.3 cents for 18 months or 6.6 cents for 24 months.
Why? The electricity market is in a state of contango, said Matt Brakey, who leads an energy management firm called Brakey Energy in Chagrin Falls. Prices are lower in the short term and more expensive as time goes on.
Electricity is more expensive in 2025, 2026 and so on. So, the best deal customers can get for today’s prices are short contracts.
This puts us in a pickle.
The difference between 5.8 and 6.6 cents doesn’t look like much. But for households using 750 kilowatt hours each month, the longer term option is $6 a month more expensive, or $72 more a year.
It’s also unpredictable. If you take a 12-month contract you’ll have to shop again next spring. Would you be able to find a cheap contract next spring? Hard to say.
“With inflation running rampant, it’s hard to know what is and isn’t a ‘good’ price anymore,” Brakey said. “So, we have advised clients to buy the cheapest part of the curve, which right now is the shorter term.”
Brakey recommends a deal from Santanna Energy, which is 5 cents per kilowatt hour for 12-months, or $6 cheaper per month than the cheapest Energy Harbor deal.
The caveat: The Santanna deal has a $100 early termination fee. That’s not ideal. You’d prefer to have no early-termination fee so you can switch suppliers at whim.
But it makes your decision simple. You can pay an extra $6 a month, give or take based on your power usage, to not have an early termination fee. You can pay another $6 a month of lock-in a price for two years, instead of one.
Either way, a deal on the open market seems enticing. Although a 24-month deal, at 6.6 cents, does not.
FirstEnergy’s standard service offer/price to compare will likely be north of 7.4 cents per kilowatt hour. This is the price you’ll be charged if you don’t shop or are part of a community aggregation like NOPEC.
NOPEC announced recently that it will charge 6.5 per kilowatt hour from June through December.
Many communities have their own aggregations. I can’t list everyone of them. But if you don’t know what you’re paying, contact city hall, or look at your electric bill.
If you already know how electricity shopping works, great. If not … read on.
How residents are billed, and how electricity shopping works
Electric bills in Ohio are split into two parts: delivery and supply. You pay the utility to deliver electricity into your home. You pay a supplier for the electricity you use.
It’s odd, because its half free-market capitalism and half controlled by a monopoly. But the usage part can make up a large part of a monthly bill.
People who “shop” for an electricity supplier get whatever company they choose. Shop is in quotes because community aggregations that buy power on behalf residents, like NOPEC and SOPEC, count as “shopping.”
If you live in a community with an aggregation, you become a customer unless you opt out.
Customers who don’t shop get the utility’s standard service offer. The utility, in our case FirstEnergy, must go buy power at auction and then pass that power (and the cost) onto customers. That’s what determines the price to compare.
That price to compare has been high since June, because FirstEnergy and other Ohio utility companies had to buy power at auction when prices were inflated.
Customers were much better off this past year if they shopped for their own electricity supplier last spring, before those high auction prices kicked in last June. Still, about 420,000 customers between Ohio Edison and the Illuminating Company that are paying what’s called the “price to compare” even though its been expensive the past year.
Last spring I recommended, and signed up for, a 19-month contract 6.2 cents per kilowatt with Direct Energy. If you signed up, that expires relatively soon. I’d suggest shopping for a new contract, either from Energy Harbor or somewhere else.
Some tips for shopping
• Fixed rates: Some suppliers offer a fixed price; some offer variable rates that change each month. To save over the long term, look for deals that will stay consistent over time.
• Avoid fees: Some contracts have a monthly fee to pay in addition to your cost per kilowatt hour. Others charge an early-termination fee if you end your contract early. When I shop, I try to avoid both.
• Don’t let your contract end: Some contracts have a “holdover provision” that kicks in when a contract ends. If you’re not careful you could be automatically enrolled in a new deal with high prices and a high early termination fee.
This is the most important tip: Set a calendar reminder and do not let a contract expire without picking a new one.
• Shopping for a natural gas has supplier is more or less the same.
Saving You Money is cleveland.com and The Plain Dealer’s column about saving money. We want to know how we can help you save money. Send your questions and comments to smcdonnell@cleveland.com.
Read past columns at cleveland.com/topic/saving-you-money/.