Retail Energy Providers
Last updated 9/13/2019
Retail energy providers (REPs) are an important type of company to be aware of in energy markets. Alternatively known as competitive retail electric service providers (CRES), REPs provide energy users with options for purchasing power wholesale from generating facilities beyond what is offered by their existing electric utility company.
When you pay your electricity bill each month, you are paying for two primary services: the transmission and distribution (T&D) of electricity and the actual supply of electricity. T&D charges cover the maintenance and upgrading of the poles and wires that bring electricity to your home or business. The supply portion of your bill covers the actual energy you buy and use.
By switching from your standard electric utility to a REP, you can change the supply portion of your electricity bill (i.e., where your electricity comes from), but you will still pay your existing electric utility for the T&D portion of your bill (i.e., how your electricity gets to you). Depending on where you live, you may still receive just one bill from your utility or two separate bills, one for T&D from your utility and one for supply from your REP.
REPs vs. utilities
Depending on the type of energy market where you live , the term “retail energy provider” can mean slightly different things. In a regulated energy market, REPs are the part of your existing utility company that works to purchase, procure and provide the electricity used across the system. In a deregulated energy market, REPs are not limited to being affiliated with your electric utility; in fact, additional REPs exist that compete with utility-affiliated REPs for the opportunity to supply energy to consumers.
Although REPs technically exist in both regulated and deregulated markets, in most instances, people use the term to refer to energy providers in deregulated energy markets. To learn more about whether your state has a regulated or deregulated energy market, check out our list of states where REPs are active.
At a high level, the difference between regulated and deregulated energy markets has to do with the presence or absence of vertically integrated utilities. A regulated energy market is made up of vertically integrated utilities that manage all aspects of electricity: from the generation of electricity, to the transmission and distribution infrastructure that moves electricity from power plants to your home or business, to the control of electric meters for each ratepayer. In a deregulated energy market, different entities are required to play different roles in the market. Your utility only owns and maintains the local distribution systems and meters, while separate entities take part in generation and transmission to the local electric grid.
REPs vs. generators
Retail energy providers can also be easily confused with generators. The important clarification between these two entities is that REPs don’t actually produce any power - that’s the job of the generator. REPs sign contracts to buy power from generators in bulk quantities and then resell that power to end consumers, effectively aggregating the buying power of utility customers. In the case of electricity, an example of a generator might be a large wind farm, and an end consumer would be a residential home or commercial property connected to the grid.
Types of REPs
REPs exist to provide both electricity and natural gas to homes and businesses, but in most instances, the term “retail energy provider” is used to describe REPs in electricity markets. Likewise, REPs can be used to describe entities in both regulated and deregulated energy markets, but is most often referring to energy providers in deregulated markets.
REPs and renewable energy
More and more REPs are offering renewable energy. Energy consumers in deregulated energy markets can often choose to enroll in a “green” or “eco-friendly” energy plan from their retail energy provider. This is one of the many attractive features of REPs - with a variety of energy plans available, energy customers can often choose green energy plans to help support renewable energy development.