Wallet Hacks

What a $359.17 Electricity Bill Taught Me About Negotiation

Less than a year ago, I took advantage of “Electric Choice” in Maryland and locked in a great rate for my electricity.

Electric Choice allow residents of states that have deregulated utilities to shop around for the supplier of their electricity. Your local utility delivers it, bills you, and otherwise is your point of contact… but another company supplies the juice. Most states are regulated but those who live in Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Texas and Washington (DC) can pick their supplier.

Just yesterday, I looked at my electric bill and noticed that it was abnormally high for the second month in a row. That alone isn't suspicious, we have a kind of odd pattern of electricity use with respect to the temperature outside. If it's super cold, our heating oil furnace runs fairly regularly and keeps the house warm. If it's mildly warm, one part of our house is heated with electric baseboard.

When it's mildly warm, the whole house furnace doesn't kick on as often but our electric baseboard heating does because that room has a ton of windows. We've had a mild winter so a higher electricity bill coupled with a lower rate of heating oil consumption balances out a bit so our overall heating costs are the same.

But curious as I am, I looked at the bill. Our rate per kilowatt was like 75% higher than the local utility's standard rate (it's listed on the bill) because we moved from a fixed low rate to a floating variable rate after 3 months. I wasn't happy.

10-20% higher? OK, I can accept that. 75% is robbery.

I called to cancel. That's when they offered a 3-month contract at a half cent premium over my local utility's winter rates, plus a $150 check PLUS an adjustment for the past month down to the much cheaper rate. As unhappy as I was, money talks. That offer was a few hundred dollars better than canceling, so I accept it.

Afterward, I put my palm to my face because it was so obvious.

This is how the game worked.

You're supposed to call in after the lock-in period ends to renegotiate your deal. You don't just let it float and expect to be charged market rates. I paid the ignorance tax.

That's when I realized something bigger — if something has a contract, it's negotiable. In fact, the idea is even stronger than that.

If it has a contract, you must negotiate it.

Every. Single. Time.

We know this about cable television, we know this about cell phones, we know this about many of the things we sign contracts for… but electricity?

But it makes sense. They are massive companies and they need predictability over optimization. They sell electricity to each other, to meet customer demand, but having your own customers will always yield the highest profits. Especially if those customers are complete fools and pay the variable rate that is 75% over their already profitable rates!

If you don't negotiate, you're subsidizing the folks that do. Always negotiate.

After this latest 3-month contract expired, I called again to see if they'd offer me anything. Nope! So I switched to North American Power, got a $25 gift card (you can too through that link), lower electricity rates through the end of 2017, and will do this dance all over again. I'll just set a reminder in my calendar to check back in on December 1st, 2017.

Another example?

SiriusXM radio is a pretty good service that'll charge you $30 a month if you let them.

But if you negotiate it, you can save a staggering 75% on SiriusXM service and get 6 months for just $25. From $30 a month to less than $5. If you pay for Sirius XM radio at the regular price, you're subsidizing the customers who spend a few minutes paying the game every six months.

Now I just schedule a calendar reminder, with all the information I need for the call, and will dance the dance when it's time.

Negotiate all the things!