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Buyer Beware! 

What to know before signing a contract for electricity.

The majority of New Jersey businesses are taking advantage of savings on their electricity costs due to government deregulation. The savings can be quite significant depending on their usage and on their method of energy purchasing.

Many companies are not yet on board, but are contemplating entering this exciting market due to the obvious financial benefits it can bring. They may be hesitant to move forward considering their unfamiliarity with the possible risks and other details.

The first rule in shopping for an energy provider is: Never give your 20-digit customer number to a sales rep, unless you are certain you want to purchase your electricity from the company (this number is located in middle of your bill – this is not your account number – for New Jersey accounts). If you do this, it is deemed as authorization for that salesman (or the company he represents) to take over your electric account.

When signing an agreement for electricity there are two basic plans: Variable pricing and fixed pricing. It is generally very risky to sign up for a variable rate, since this allows the supplier to charge any amount it wants. A fixed rate is the way to go. This ensures the customer that the prices will not be raised throughout the term of contract.

However, even when signing a contract for a fixed rate, the customer must be very aware of the contract expiration date. Many suppliers have a clause stating that upon contract expiration, the customer will automatically be enrolled into variable pricing. Many consumers have been burnt due to this little-known clause. The way to avoid this scenario is to enroll in a new contract two to three months prior to contract termination. For instance, if the contract is expiring in December 2015, then in September or October, the customer should sign a new agreement which will take effect as of December.

If the customer is concerned that he may not be attentive to his contract expiration date, he or she can seek out an energy broker who will be on top of this.

There is another important issue: How to take advantage of market competition. Some businesses are approached by an energy supplier who offers them a rate on their electricity that seems to be an excellent price. However, there is a tremendous amount of price variation among the dozens of energy suppliers, meaning that there may be much better pricing available. Customers have the option of contacting the many suppliers on their own. Most customers will find this to be very tedious and time consuming. The most logical route is to be in contact with an independent energy broker who has a relationship with multiple suppliers, who can advise his clients regarding the most sensible contract terms for their needs.

About the Author: Yaakov Heisler is a commercial energy consultant at Lexon Energy, based in Central New Jersey. He can be reached at:


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