Beatrice Lang
Becoming an electricity supplier is a complex process that varies depending on your location. In the United States, electricity suppliers are typically regulated by state public utility commissions, with the Federal Energy Regulatory Commission (FERC) providing federal oversight. Licensing is a critical step in the process, with 17 states and Washington, D.C., requiring electricity supplier licensing. Additionally, suppliers that also act as electricity agents or aggregators may need separate state-issued licenses. To provide services across multiple states, foreign qualification in each jurisdiction is necessary. Understanding the specific requirements, fees, and ongoing reporting obligations for your desired location is essential.
| Characteristics | Values |
|---|---|
| Licensing | 17 states and Washington, D.C., require electricity supplier licensing. |
| Registration | Suppliers must register with the electric utility in their proposed area of service. |
| State utility commission requirements | Suppliers are regulated by state public utility commissions. |
| Federal requirements | The Federal Energy Regulatory Commission (FERC) regulates electricity suppliers at the federal level. |
| Tax registration | Suppliers must file tax registrations with the department of revenue. |
| Ongoing requirements | Suppliers must meet ongoing requirements to maintain their license's active status, including periodic filing deadlines. |
| Switching suppliers | Customers can switch electricity suppliers by contacting the new supplier and providing the necessary information. |
| Default providers | In some cases, companies such as Eversource and United Illuminating act as default providers of electric generation services for customers who have not chosen a supplier. |
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What You'll Learn
State-level licensing requirements
The Federal Energy Regulatory Commission (FERC) oversees electricity transmission at the federal level, but licensing happens solely at the state level. Each state has its own set of requirements for registering as an electricity supplier.
Before beginning the registration process, ensure your business is in good standing. If you plan to provide services outside of your home state, you must be foreign qualified in each jurisdiction you plan to serve.
In addition to state utility commission requirements, you will typically need to register with the electric utility serving your proposed area of service. Depending on where you want to provide service, you may need to register with multiple utility companies.
Some states have no statewide licensing requirements, leaving licensing to local jurisdictions. Some states have reciprocity arrangements for contractor/electrician licensing with states that have the same or similar requirements.
After receiving your license from the public utility commission, you must meet ongoing requirements to maintain your license's active status. Many states require electricity suppliers to file periodic reports related to distribution volumes, revenue, renewable energy usage, and bonding requirements. These reports are usually filed annually or quarterly.
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Registering with electric utilities
To become an electricity supplier, you will need to register with the electric utility that serves in your proposed area of service. This may require multiple utility company registrations if you plan to provide service in multiple areas. In addition to these registrations, you will also need to file tax registrations with the department of revenue. Many states offer consolidated applications for tax registration, but some states require applicants to file multiple applications with multiple state agencies.
Before starting the registration process, it is important to ensure that your business entity is in good standing. You can then begin the process of registering with electric utilities. This process will vary depending on the specific utility company, but you can expect to need to provide information such as your business name, address, and contact information. You may also need to provide documentation such as your business license and proof of insurance.
Once you have compiled the necessary information and documentation, you can begin reaching out to the relevant electric utilities and requesting to register as a supplier. It is important to keep in mind that there may be ongoing requirements to maintain your registration, such as periodic filings. Failing to meet these requirements could jeopardize your ability to supply electricity in a particular jurisdiction.
Additionally, it is worth noting that electricity suppliers are required to hold a license in many states. The specific licensing requirements vary by state, so it is important to review the requirements for each state in which you plan to operate. The Federal Energy Regulatory Commission (FERC) provides federal oversight of electricity suppliers, but licensing occurs at the state level through state public utility commissions. Suppliers that also act as electricity agents or aggregators may need a separate state-issued license to provide those services.
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Tax registration
To become an electricity supplier in the UK, you will need to register with the government for various taxes. The specific tax requirements for energy suppliers vary depending on the structure and nature of your business. Here is an overview of some common tax registrations to consider:
- Value-Added Tax (VAT): Energy suppliers are typically required to register for VAT, which is a tax charged on most goods and services in the UK. The threshold for compulsory VAT registration is currently £85,000 in taxable revenue per year. However, even if your business turnover is below this threshold, you may choose to register for VAT voluntarily. This could be beneficial if your customers are mainly VAT-registered businesses that can claim the VAT back.
- Corporation Tax: If your energy supply business is structured as a corporation, you will need to register for Corporation Tax. This tax is levied on the taxable profits of incorporated businesses. The current Corporation Tax rate in the UK is 19%, but this may vary depending on your business activities and size.
- Income Tax and National Insurance: If you are a sole trader or a partner in an energy supply business, you will need to register for Income Tax and National Insurance contributions. Income Tax is levied on the profits you make, while National Insurance contributions are mandatory for self-employed individuals and depend on your income level.
- Business Rates: Energy suppliers may also be liable for business rates, which are taxes on the buildings your business occupies. The valuation and rateable value of your property will determine the amount of business rates you need to pay. Certain small businesses may be eligible for business rates relief, so it is worth checking if you meet the criteria.
- Carbon Taxes and Environmental Levies: As an energy supplier, you may be subject to various carbon taxes and environmental levies. These could include the Carbon Price Support mechanism, the Climate Change Levy, or obligations under the Renewable Obligation (RO) or Feed-in Tariff (FIT) schemes. Familiarize yourself with these schemes and their associated taxes and requirements.
- Other Industry-Specific Taxes and Duties: The energy industry in the UK is subject to specific taxes and duties, such as the Energy Company Obligation (ECO). This is a government energy efficiency programme that applies to larger energy suppliers. Understand the specific tax obligations that pertain to your business size and type within the energy sector.
It is important to consult with an accountant or tax advisor to ensure you fully comply with all relevant tax regulations and to take advantage of any applicable tax benefits or reliefs. They can guide you through the registration process and ensure your new business is compliant with all tax requirements.
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Federal Energy Regulatory Commission (FERC)
The Federal Energy Regulatory Commission (FERC) is an independent regulatory agency that oversees electric, oil, natural gas, and hydropower transmissions. FERC was established to regulate wholesale electricity prices and determine whether they were unreasonable or unjust. If so, FERC can regulate pricing and order refunds for overcharges.
FERC regulates the interstate transmission of electricity, natural gas, and oil, as well as hydropower projects and natural gas terminals. This includes the licensing of natural gas facilities and pipelines. FERC has the authority to hear appeals on oil price control decisions and conducts "on-the-record" hearings.
FERC issues orders, such as Order No. 841, which required wholesale markets to open up to individual storage installations regardless of their interconnection point. FERC also has siting authority in National Interest Electric Transmission Corridors and can approve pipeline and related projects.
FERC requires electricity suppliers to file periodic reports related to distribution volumes, revenue, renewable energy usage, and bonding requirements. These reports are typically filed annually or quarterly, and dedicated compliance services and software can help suppliers stay on top of these requirements.
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State public utility commissions
Firstly, it is imperative to familiarise yourself with the specific state public utility commission requirements for the state in which you intend to operate. These requirements can often be found on the website of the relevant state's public utility commission. For instance, in New York, electricity suppliers must register as an NYISO Customer, Guest, or Shared Governance Member through the NYISO Member Community. This involves submitting company and contact information to the NYISO Registration Department.
In addition to state utility commission requirements, suppliers typically need to register with the electric utility serving the intended area of service. Depending on the scope of your operations, you may need to register with multiple utility companies. For example, if you plan to provide electricity in multiple states or across different service territories.
Another crucial step is ensuring compliance with tax registration requirements. This may involve filing multiple applications with state agencies, such as the department of revenue. Some states offer consolidated applications to simplify this process. Nevertheless, maintaining active license status by staying on top of periodic filing deadlines is essential to avoid jeopardising your authority to supply electricity in a particular jurisdiction.
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Frequently asked questions
Requirements to become an electricity supplier vary depending on the state. In general, electricity suppliers are required to hold a license in many states and are regulated by state public utility commissions. Suppliers are also usually required to register with the electric utility that serves in the supplier’s proposed area of service.
Filing periodic reports on time is necessary to maintain an active license. Missing deadlines can jeopardize the company’s authority to supply electricity in a jurisdiction.
Business customers should ask, "Is the generation rate fixed or variable?" Residential customers will always get a fixed rate. You should also ask about any cancellation fees that may apply.
If you switch electricity suppliers, your default provider (Eversource or UI) will continue to deliver electricity to your home or business and send the electric bill. The only difference is that the Generation Service rate on your bill will reflect the rate charged by your new electric supplier.
