No Deposit Electric Service

In many states in the USA you will find that electricity service is deregulated. This is a confusing concept to begin with as you may have bought your electricity from one monopoly provider in your area that owned the poles and wires, serviced the electric meter and read it and sent you the bill. For there to be 20 different electric companies to choose from doesn’t make much sense as there is still only one wire connected to a home or business from teh electric pole outside.

The way deregulation works is the government breaks up the monopoly but still lets them own and control the pole and wires. The pole company can pass through the maintenance charges on the electric bill but they cannot sell you retail electric service any longer. From this point forward electric service is sold through 20 or more electric companies. These energy suppliers buyt their energy from the state they are doing business in or a combination of buying commodity futures in the form of natural gas and other commodities as well as electric power from a pricing index managed by the state.

In Texas the organization called ERCOT manages the electric grid and electricity pricing index. The electric companies have to maintain a certain capital requirement in order to buy and sell electric service to their customers. The critical part of all this to keep and electric company from going out of business is to not take on a credit risk customer. If an electric provider decides to take on credit risk customers they must ask for a large enough deposit to make up for the possibility of the energy consumer skipping out on their bill.

Several other states besides Texas participate in the deregulation of electricity which has the goal of lowering electricity prices through competition. This lowering of rates through deregulation is still up to debate in some states but many people are starting to see that the deregulation process has helped in lowering the cost of electricity service. New jersey, New York, Illinois, Connecticut, Michigan, and a few other states are just some examples of states that have deregulated their electricity markets. There are still pockets throughout states like Texas and New York that are not deregulated but many places in these states are participating.

For a credit risk customer that needs electricity service some providers simply ask for very large deposit amounts to have electric service turned on. This is a polite or for some people not so polite way of declining them as a customer. A recent development in the US is the idea of pre-paid electric service. Some electric companies in Texas are doing this but the charges are based on estimated electricity usage and not real and actual usage so the consumers feel taken after a few months with the company. These energy companies usually have no long term contracts but the consumer is on the hook because the credit risk customer may find it very difficult to sign up with a traditional electric company since their credit is bad.

Another choice open to low credit score customers is the no deposit guaranteed electric service choice. This is a rate that is a little higher price then a low cost electric company but if the consumer pays their bill on time the first 3 months the electricity rate is lowered to the cheapest available option. The no deposit guaranteed option represents the most fair choice for a bad credit risk energy consumer. More can be read about no deposit electric companies at the work.com guide here: Waiving a texas electric Company Deposit

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May 4, 2009
Filed Under: Energy

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