The Pros and Cons of Energy Aggregation

While energy aggregation has been around for over a decade, it continues to be a topic of interest for many energy customers. There has been quite a bit of discussion about the implications of changing over to the aggregated energy system. Aggregation happens when a group—usually a municipality—decides on one energy supplier for the entire group. The objective is to promote competition amongst energy providers wishing to win the contract by offering the lowest bid. Let's take a closer look at the pros and cons of energy aggregation.

Pros

Easy Enrollment Process

The overall process of sign up for the program is as simple as saying that you wish to participate. You have a time window in which you can opt-out of the service before the agreement takes effect. If customers need more information to make their decision, municipalities often offer educational materials and programs to explain the details surrounding these programs.

Potential for Savings

The fact that the program stimulates competition among providers means that there is more significant potential for savings. There is also a benefit for buying the energy from the providers in bulk; municipalities are likely to obtain better savings than you would alone.  

Certainty

The uncertainty and unpredictability that is all too familiar to energy consumers are eliminated with aggregation. There is a higher level of transparency when dealing with the municipalities, rather than you dealing with the energy providers as an individual. There is also energy tracking software that you can purchase that will help monitor your usage for greater certainty.

Cons

Average-Based Rates

The cost of energy is based on an average when utilizing an aggregated energy program. In fact, aggregated plans may cost you money rather than saving you money; the reason being that you are charged based on the usage of everyone in the group. Your share may be less than the average user, thus making your portion more than it would be if you were purchasing energy as an individual.

Sign-in Required

The basis of aggregation programs is that there is a membership requirement. You must register for the group to benefit from the program. Some people may not be comfortable with signing up for a program just to purchase a product.  

Locked into Agreement

Once you pass the initial opt-out time window, you are legally bound by your agreement to participate in the aggregation program. If you are under this agreement, you are not permitted to switch companies until the time dictated by the contract has expired. This holds true even in cases where the rates increase during the agreement's time period.

Conclusion

The deregulation of the energy markets was intended to give consumers more options and more opportunities to save on their energy costs. This also takes a lot of the mysticism and uncertainty out of the process. However, the process has come under some scrutiny, but with the proper research, you can decide if energy aggregation is right for you.