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What are Energy Suppliers, Brokers and Aggregators?

There can be some confusion when it comes to talking about energy suppliers. Most state retail competition laws use the term "suppliers" to refer to suppliers, brokers and aggregators. Yet, there are important differences for consumers to be aware of. You should understand these differences before you sign a paper contract or sign a contract through a website. And yes, an Internet "sign-up" is a binding contract.

Here are few things you should know:

  • All suppliers suppliers, brokers and aggregators must obtain a license from the Public Service Commission (PSC) in order to advertise services, solicit customers or enter into contracts.
  • A company must have separate licenses for gas and electricity.
  • Any company that engages in these activities before it obtains a license is violating the law.
  • If you believe a company is engaging in these activities without a license you should notify the PSC (the company must have a license number which can be verified by the PSC).

What is a Natural Gas or Electricity Supplier?

In its most specific meaning, the word "supplier" refers to a company that:

  • Meets the PSC requirements for a supplier license;
  • Has an agreement with the Independent System Operators (ISO) responsible for ensuring the delivery and transmission of electricity throughout a particular region and meets the credit requirements ($2 million bond), which allows the supplier to buy and sell electricity;
  • Has an agreement with the local gas or electricity company, and meets its credit requirements, which allows the supplier to transport electricity on the utility "wires" or gas within the pipes to a customer;
  • Undergoes a higher level of financial integrity review, which may result in the PSC requiring a bond or other financial guaranty;
  • Has title to electricity or gas supply (this means the company gets supply from its own generating facilities or has contracts to purchase electricity or gas);
  • Must enter into a contract with a customer for the sale of electricity or gas; and
  • Must handle disputes and inquiries about advertising, solicitations and contract terms directly with consumers and relevant state agencies, such as the PSC and Office of Attorney General.

What is a Natural Gas or Electricity Broker?

There is no specific definition of a gas or electricity broker. In general, a broker is an individual or company acting on someone's behalf, like a middleman or negotiator, to obtain the best deal or contract terms. In general, the term broker refers to a company that:

  • Does not have title to gas or electricity supply;
  • Does not have agreements with ISO or the local utility;
  • Cannot offer to sell gas or electricity supply directly;
  • Acts as a middleman between the customer and the supplier (with no title to gas or electricity);
  • Must have an agreement with the customer that is separate and apart from the customer contract with the supplier; and
  • Brokers also may focus on certain customer interests, such as renewable energy.

What is a Natural Gas or Electricity Aggregator?

An "aggregator" is a broker that acts on behalf of a group or groups of customers. Typically, an aggregator will set up arrangements with members of groups such as homeowner associations, affinity groups (religious, cultural, regional, fraternal, etc.) and seek rate offers from suppliers for these "bundled" groups of customers. Customers typically do not pay for the aggregator's services, and are not contractually required to accept the supplier offers that the aggregator finds. The possible advantage is that the aggregator can offer a larger customer pool to the supplier, and may be able to get more competitive offers as a result.