The electricity grid is a complex system that delivers you the energy you need. But you usually only ever get experience with the REP, which actually fulfills your demand for electricity.
To begin, a power generation company actually generates the electricity you need. This would be a coal, natural gas, or nuclear plant. Or, it could include windmill farms or solar collectors.
Once generated, the electricity then flows to the transmission and distribution service provider (TDSP). The TDSP owns the lines, wires, poles, and meters, and it’s responsible for the maintenance of each.
Finally, the electricity flows to the REP, whose responsibility is to purchase and sell the electricity to you. They make sure you actually get the service. The hard work for them is to predict demand, purchase the right amount of electricity, and turn a profit on it so they can keep their doors open and provide you the electricity you need.
TDSPs simply don’t have the experience or capability to do this well. The same for power plants. So that’s why REPs are necessary.
To tell the truth, REPs actually have a pretty tough job. But you don’t see the hard part. When they purchase electricity, the prices can be extremely volatile. For example, prices can explode to up to $9.00 per kWh (when the average Texan pays around 11 cents per kWh).
That’s a big loss for your REP!
The tricky part about buying electricity is that REPs buy it in blocks. But, you don’t consume electricity in blocks. Rather, you use electricity when you want and need it.
So, they have to constantly play this game of buying blocks of electricity at (hopefully) profitable margins. But, they can’t drive the prices up too high because they know that then you’ll get angry and go with another REP.
Clearly, it makes sense to choose a REP who understands how to do this very well so you get consistently fair (and low) prices.
You’d think REPs would want you to use more, right?
Well, the fact of the matter is that they would rather have you save on your energy usage because that increases their own profit margins too.
It turns out that it’s quite expensive for power plants to upgrade and maintain generators with the latest technology. So, they don’t do it.
Instead, they make modest upgrades when they make sense, and REPs to educate you, the customer, to use electricity more efficiently (or not at all). This, in turn, leads to lower load at the power plants. And finally, that results in lower prices charged to you by your REP.
The exact same concept works in your home: for now, it’s more cost-effective for you to simply use less electricity than it is to install the latest solar panels. So, you simply engage in the most energy-efficient behavior possible.
So, as you search through REPs, you want ones who educate you on how to save energy. And you want ones that charge low prices because that means they know how to forecast demand and buy electricity at low prices.