how do energy/electric companies allow people to switch providers in some areas?

Question

I’ve seen things with people in different regions talking about how you can switch to a different company for electricity or natural gas. How does this work? Do places where this is the case have lots of pipes and conduit running for each company, or is it somehow shared among them?

In: 12

Answer 1

You buy electricity and gas from a supplier. The supplier does not own the pipes and wire that run to your house.

The supplier purchases electricity and gas from various producers. They make their own arrangements with the producers.

The electricity and gas produced by the producers is transported by the transmission system (over long distances) and the distribution network (over short distances). During transmission and distribution, the electricity and gas mix.

When you use electricity or gas, you draw that energy out of the distribution network operator’s wires and pipes. That is recorded by your meter.

At the end of the month, your supplier reads your meter and works out how much energy you used over that month. They then make sure that they actually bought the correct amount of energy from the suppliers. Sometimes they will need to make a top-up payment, or find another supplier, because they didn’t order enough in advance – sometimes they will get a refund because they ordered too much.

Sometimes there is a similar problem with producers – maybe a wind farm pre-sells some power to a supplier, but the wind doesn’t blow on that day. There is a complicated process where all the suppliers and producers get together and work out who over-ordered, and who under-ordered and make sure that all the accounts match up.

The main role of the supplier is to find the producers and negotiate the prices with them, deal with all the meter reading, billing and customer service. At the end of the day, the final bill includes the price that the producer sold at, shipping charges from the transmission system operator and distribution network operator, metering charges from the meter operator, plus a cut for the supplier for their work.