How ESCos Are Supposed To Work

While we’re talking about IDT Energy and Con Ed and Midtown Promotions and DS-MAX, let’s learn about another acronym, ESCos, which stands for “energy service companies” (the kind of company IDT Energy is).

A public utility offers two main services to its customers:

1) Electrical Distribution
2) The Sale of the Electricity

When larger utility services company, like Con Ed, are deregulated, then the electricity can now be sold independently to the customer by an ESCo. As part of the service, the ESCo also provides billing and customer support to the customer.

ESCos buy electricity on the open market and sell it to utility companies. They will buy electricity from a plant in one area, purchase transport rights, then move it across the grid, a process called wheeling.

The ESCo charges you for the sale of power, and the utility charges you for the distribution over the lines. Switching to an ESCo should essentially be a win/win situation: With energy and distribution bundled together as one payment prior to deregulation, then the entire cost to the consumer was taxed. Separated, distribution is tax-free and only the electricity usage is taxed. Instant savings.

Let’s look at a pretty picture…

howescoswork.jpgSuch, at least is the promise provided by ESCos and energy deregulation. But have any of you readers used ESCos and experienced differences in your utility bills? Let us know, either way, in the comments.

Customers shopping for an ESCo need to read their contracts carefully. Sometimes people will get drawn in by a low rate, only to find out later that the rate is variable.

There is a huge push to get people to sign over to ESCo’s in NY right now. Con Edison even has its own ESCo set up: Con Ed Solutions. — THOMAS MOORE

Shopping For Electricity [AskPSC]
YOUR HOME; The Shock Of Electric Deregulation [NYT]
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Consumerist Undercover At IDT Energy: Day One

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