New Jersey deregulated its energy market in 1999, allowing people to choose which companies generate the electricity that’s supplied to their homes. The idea behind the legislation was to introduce competition to the formerly monopolized energy market.
New Jerseyans haven’t exactly jumped on the opportunity: Only about 6% of residential customers switched in 2023.
“Not everyone bothers to take advantage of the opportunity to switch,” said Clinton Andrews, professor of urban planning and policy development at Rutgers University and director of its Center for Urban Policy Research (which has research contracts with the New Jersey Board of Public Utilities).
But for those with the patience to shop around between suppliers, a good deal could potentially be found (or at least a switch to renewable sources of energy).
Deregulation in New Jersey: What does that mean?
Simply put, it means you can choose where your electricity comes from.
“Deregulation in New Jersey came as part of the national pattern that started in 1978, with the passage of the Public Utility Regulatory Policies Act, which was meant to encourage renewables and alternative energy, but also had basically allowed competition at the generation level,” Andrews said. “Deregulation very much emphasized opening up competition at the generation level, and not really at the transmission and distribution level.”
It wasn’t until 1999 that New Jersey’s legislature passed a bill allowing for energy deregulation. Because of its passage, New Jerseyans can choose who generates the electricity that is then transmitted and distributed by their utilities (which cannot be switched) based on price, contract term and renewable content.
New Jersey utility vs. electric supplier
There are four major utilities that service most of New Jersey. They are:
- Public Service Electric and Gas, or PSE&G. Andrews said it provides both electricity and gas in a territory that is “basically a straight line between New York City and Philadelphia.”
- Jersey Central Power & Light, which operates on the Jersey Shore and some parts of northwestern New Jersey.
- Atlantic City Electric, which serves South Jersey including Atlantic City.
- Rockland Electric, which serves part of the northeastern corner of the state.
- While New Jerseyans are locked into these utilities based on where they live, they have the ability to choose who generates the electricity that is then transmitted to their homes.
How do you find the best electricity rates in New Jersey?
There are three major considerations to finding the best alternative electricity rates: the price per kilowatt-hour, the term of the contract and the renewable content of the energy (for example, solar or wind). Here’s the advice provided by NJ Power Switch, the state’s website for its deregulated energy market:
“Shopping for Energy may save you money on your electric or natural gas utility bill, however, this is not always the case. Prior to agreeing to switch to a Third Party Supplier, it is necessary to become familiar with TPS pricing structures, important contract terms, and how to compare TPS price offers to the price you currently pay for gas or electric supplies from your electric or gas public utility.”
The onus is on you to research the rates you’re currently paying to your utility to what third-party suppliers are offering. Andrews said other considerations are just as important as price.
“As a homeowner, the things that I want to manage are, yes, I want the low price,” Andrews said. “But I also want to know that the price isn’t too volatile, I want to be able to plan ahead and understand how summer rates are different from winter rates,” so as to not be surprised by big changes, like when Europeans encountered energy shortages due to the war in Ukraine or when Texas encountered extreme weather.
“The final thing I would mention is reliability,” Andrews said. “It’s important to be able to count on your electricity provider, both to deliver power 99.99% of the time, but also to respond quickly and effectively after major disasters like a hurricane.” Some of this information can be found in reports by the US Energy Information Administration and Department of Energy.
What should you look for when choosing an electricity plan in New Jersey?
Here’s the issue with deregulated energy markets: They tend to attract dishonest companies looking to gouge potential customers with unclear terms, such as fees for high or low usage. In 2014, there were a significant number of consumer complaints about energy bill increases, leading to an investigation by state agencies.
“You always want to take a ‘buyer beware’ view of things and look for odd contract clauses, like fees for low or high usage, or if there’s a peak power clause that says that you’ll have to pay significantly more per kilowatt-hour during peak hours,” Andrews said. “Or if the provider has the ability to change the price on short notice.”
