Whether you are a customer located in a deregulated energy state, an energy broker looking to expand, or are simply curious about the retail energy markets, retail energy suppliers are an integral part of the energy industry. These companies act as power and natural gas marketers by purchasing energy from the wholesale market and reselling it to retail customers. This article aims to outline the key aspects of a retail energy provider and its function in the energy market.
What Are Retail Energy Suppliers?
Retail energy suppliers exist in deregulated energy markets and are involved in the reselling of energy from the wholesale markets to end-use consumers. In deregulated states, retail energy suppliers are many times referred to as providers or competitive, third-party suppliers, and are required to get licensed.
Retail energy suppliers play an important role in the energy economy. In fact, some of the largest energy companies in the world operate as retail energy suppliers. These companies can own electricity generation plants and are also involved in the national sale of electricity and natural gas. In most states, retail suppliers must become members of the local grid operator in order to begin scheduling and supplying power to customers. Many times these suppliers utilize an energy wholesale counterparty that helps them to hedge costs in the energy futures markets. Some of the nation’s largest energy suppliers have their own wholesale divisions that take on the responsibility of managing their energy costs and purchasing energy from the wholesale market.
In the U.S. retail energy suppliers must also comply with FERC federal regulations and become members of electric grids where they plan to sell energy. Many times, retail suppliers will subcontract sales efforts to energy brokers who acquire customers on their behalf.
Do Retailers Own Utility Lines?
No. Retail energy providers are simply involved in the sale of energy in the retail markets and do not own utility lines. Local power lines are owned by utility companies that are responsible for maintenance, delivery, and billing. Retail suppliers can, however, own generation plants and many large suppliers own their own power generation. Here is a look at the electricity supply chain:
When looking at the history of energy deregulation in the U.S., you might notice that many utility companies acted as their own energy suppliers prior to the markets becoming deregulated. In fact, even today in regulated markets, utility companies own generation plants, transmit power over high-tension lines, and sell energy to their customers.
The big difference between retail energy providers and utility companies is seen in deregulated markets. In these states, utility companies are not even permitted to earn profits from the sale of energy supply. Energy suppliers are solely responsible for generating and selling energy to customers in these states, where the utility company’s function is to merely distribute energy and maintain local delivery networks, such as power and gas lines.
The 25 Largest Retail Energy Suppliers In The U.S.
The retail energy market is a trillion-dollar industry. And, many retail energy suppliers also participate in the generation of electricity in deregulated states, making them very large energy companies. For example, the regulated utilities of PECO, COMED, Delmarva, Pepco, Atlantic City Electric, and BGE are all owned by Exelon, a retail energy company. Up until February of 2022, Exelon owned over 35,000 megawatts of electricity generating plants through its other subsidiary, Constellation Energy, one of the nation’s largest retail electric suppliers. Constellation Energy was spun off of Exelon in 2022 and now operates as an independent company. Here is a list of the largest retail energy suppliers in the country today by annual revenue (source compiled from EIA retail power marketer sales):