Retail energy providers: What you need to know

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 their existing electric utility company offers.

When you pay your electricity bill each month, you pay for two primary services: the transmission and distribution (T&D) of electricity and the actual electricity supply. T&D charges cover the maintenance and upgrading of the poles and wires that bring electricity to your home or business. Your bill's supply portion covers the 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). However, you will still pay your existing electric utility for the T&D portion of your account (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 accounts, one for T&D from your utility and one for supply from your REP.

The term "retail energy provider" can mean slightly different things depending on the type of energy market where you live. In a regulated energy market, REPs are 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; additional REPs exist that compete with utility-affiliated REPs 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 conditions where REPs are active.

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.

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 represent entities in regulated and deregulated energy markets but most often refer to energy providers in deregulated markets. 

More and more REPs are offering renewable energy. Energy consumers in deregulated energy markets can often 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 various energy plans, you can often choose green energy plans to help support renewable energy development.