How to Choose an Electricity Company

What you're actually choosing

In states with deregulated electricity markets, “choosing an electricity company” means selecting a generation supplier — the company that sources the power you use. It does not mean replacing your utility.

Your utility still owns the poles and wires. They still deliver electricity to your home. They still handle outages and emergencies. They still read your meter. In many cases, they still send you a single bill that includes both delivery charges (theirs) and generation charges (your supplier's).

What changes when you choose a supplier is who provides the generation portion of your electricity and at what rate. Everything else stays the same. The electrons are the same. The reliability is the same. The emergency response is the same.

This distinction matters because some people hesitate to switch, worried that choosing a different company means losing the stability of their utility. It doesn't. Your utility remains your utility. You're simply choosing where the generation portion comes from.

The five factors that matter

When comparing electricity suppliers, five factors should drive your decision. Rate is the most important, but it's not the only consideration.

1. Rate per kWh

The generation rate — expressed in cents per kilowatt-hour (kWh) — is your primary comparison point. Lower rates mean lower bills, all else being equal.

In most deregulated states, your utility publishes a default rate for customers who don't choose a supplier. In Pennsylvania, this is called the Price to Compare. Other states use different names (“default service rate,” “standard offer”). Whatever it's called, it's your benchmark. Any supplier rate below that number saves you money on generation.

Be precise about what you're comparing. Some suppliers quote “all-in” rates that include transmission or other charges. Others quote generation-only. Make sure you're comparing apples to apples.

2. Term length

Supplier contracts come in various lengths: month-to-month, 3 months, 6 months, 12 months, 24 months, or longer. Longer terms typically lock in a rate but reduce flexibility. Shorter terms give you more freedom but expose you to rate changes.

Consider your situation. If you might move in six months, a 24-month contract with an early termination fee doesn't make sense. If rates are rising and you want stability, locking in a 12-month fixed rate might be worth a slightly higher premium.

3. Plan type (fixed vs. variable)

Fixed-rate plans lock in your generation rate for the contract term. Your rate stays the same even if wholesale prices spike. Variable-rate plans fluctuate with market conditions — they can go up or down each month.

Fixed rates offer predictability. Variable rates offer flexibility and sometimes lower initial prices. Neither is universally better; it depends on your risk tolerance and the current market environment. See our fixed vs. variable guide for deeper analysis.

4. Supplier track record

Some suppliers have operated for decades with minimal complaints. Others have a history of billing issues, aggressive sales tactics, or poor customer service. Before signing up, check:

• State PUC complaint records. Most state utility commissions publish complaint data. A supplier with an unusually high complaint ratio is a red flag.
• Better Business Bureau ratings. Not definitive, but a pattern of unresolved complaints suggests problems.
• Online reviews. Take individual reviews with skepticism, but patterns matter. If dozens of people report the same billing issue, pay attention.

5. Contract terms beyond rate

The rate is the headline number, but the full contract matters. Key terms to review:

• Early termination fee (ETF). What do you owe if you leave before the contract ends? Some plans have no ETF; others charge $50-$200 or more.
• What happens at contract end. Does the plan auto-renew at the same rate, at a different rate, or convert to variable pricing? Set a calendar reminder before your term ends.
• Introductory rate expiration.Some plans offer a low “teaser” rate that jumps after a few months. Read the full schedule.
• Cancellation process. How do you cancel if you want to switch? Some suppliers make it easy; others require phone calls during limited hours.

Red flags to avoid

Most electricity suppliers are legitimate businesses operating within state regulations. But some use tactics that should make you pause.

Teaser rates that spike

A rate that seems too good to be true often is. Some suppliers advertise a very low introductory rate that increases dramatically after 1-3 months. The disclosure should spell this out, but it's easy to miss. Always ask: “What is the rate after the introductory period?”

Hidden fees

Watch for monthly service fees, paper billing fees, or other charges that inflate your effective rate. A supplier quoting 8¢/kWh plus a $10 monthly fee isn't really offering 8¢/kWh. Calculate your true cost based on your typical usage.

Aggressive door-to-door sales

High-pressure sales tactics — whether door-to-door, phone, or online — are a warning sign. Legitimate suppliers don't need to push you into an immediate decision. If someone insists you must sign today or lose the rate, walk away. Good rates are always available from multiple suppliers.

Opaque pricing structures

If you can't understand how your rate is calculated, that's a problem. Legitimate suppliers publish clear rates and terms. If the pricing requires a spreadsheet to decode, consider a simpler option.

Requests for sensitive information upfront

To shop for rates, you only need your ZIP code. To enroll, you need your utility account number and service address. Anyone asking for your Social Security number, bank account details, or similar sensitive information before you've agreed to enroll is a red flag.

How to verify a supplier is legitimate

Every state with a deregulated electricity market requires suppliers to be licensed. Before signing up with any company, verify they hold a valid license.

Check your state's PUC website

Each state's public utility commission maintains a list of licensed suppliers. Some examples:

• Pennsylvania: PA Power Switch lists all licensed suppliers
• Texas: The Public Utility Commission of Texas publishes a licensed retail electric providers list
• Ohio: The PUCO maintains an apples-to-apples comparison chart of licensed suppliers
• Other states:Search “[your state] electricity supplier license lookup”

If a supplier isn't on your state's official list, they're not licensed to sell you electricity in that state. Full stop.

Review complaint records

State PUCs also track complaints. A supplier with zero complaints isn't necessarily better than one with a few — larger suppliers will naturally have more total complaints. What matters is the complaint ratio relative to customer count and whether complaints reveal patterns (repeated billing errors, signup fraud, cancellation difficulties).

Check BBB and online reviews

The Better Business Bureau and sites like Trustpilot or Google Reviews provide customer feedback. No company has perfect reviews, but consistent patterns of the same complaint type suggest systemic issues. A company with many complaints about surprise rate increases operates differently than one with occasional service complaints.

Step-by-step decision framework

Putting it all together, here's how to choose an electricity supplier:

1. Find your current rate.Check your bill for your utility's default rate (Price to Compare in PA, or equivalent in other states). This is your benchmark.
2. List available suppliers.Use your state's official comparison tool to see all licensed suppliers serving your area.
3. Filter by plan type. Decide whether you want fixed or variable, and filter accordingly.
4. Compare rates. Sort by rate per kWh. Identify the top 3-5 options.
5. Review contract terms. For your top options, read the full disclosure. Check term length, ETF, renewal terms, and any fees.
6. Check supplier track record. Look up complaint records and reviews for your finalists.
7. Make your decision. Choose the supplier that best balances rate, terms, and reliability for your situation.
8. Set a calendar reminder. Mark your contract end date and review your options before it expires.

Frequently asked questions

What's the difference between an electricity company and a utility?

In deregulated markets, your utility owns the wires and delivers electricity to your home. An electricity company (supplier) generates or sources the power. You choose your supplier; you don't choose your utility. Your utility handles outages, meter reading, and often billing regardless of which supplier you use.

How do I know if an electricity company is legitimate?

Check your state's public utility commission website. Legitimate suppliers must be licensed. In Pennsylvania, use PA Power Switch. In Texas, check the PUCT license list. Most states have similar public lookup tools. If a company isn't on the list, don't sign up.

Should I choose the cheapest electricity rate available?

Not necessarily. The lowest rate might be a teaser that expires after a few months, a variable rate that can spike, or come with a high early termination fee. Compare the full contract terms, not just the headline rate. A slightly higher fixed rate with no ETF might be the better choice for your situation.

What is an early termination fee (ETF)?

An early termination fee is a charge for leaving a fixed-rate contract before it expires. ETFs typically range from $50 to $200 or more. Some plans have no ETF. If you might move or want flexibility, factor the ETF into your decision.

Can I switch electricity companies if I'm renting?

Yes, if the electricity account is in your name. Renters in deregulated markets have the same right to choose suppliers as homeowners. Check your lease — some landlords include utilities, in which case they control the supplier choice.