Are Energy Service Companies (ESCOs) A Scam?

A women looking through a spy scope.

A quick search for ESCOs will reveal hundreds of articles raising the alarm over ESCOs and ESCO scams 🚨🚨🚨 But is it actually the case that all ESCOs are scams?

No. Energy Service Companies (ESCOs) like Green Mountain Energy are not scams. Yes, they are those people at farmer's markets. And yes, like any relatively unknown business, they can sometimes turn out to be scams.

The way ESCOs work is confusing! So it's easy to misunderstand what they are actually doing.

What is an ESCO?

An ESCO is basically the middle person between your utility company and a renewable energy source. They buy and sell "RECs" or Renewable Energy Certificates.

What the heck is an REC? A REC is produced when a renewable energy source (like a solar or wind farm) generates 1 megawatt-hour of electricity and delivers it to the grid.

4 things you should know about ESCOs

Before you decide on whether an ESCO is right for you, get informed so you don't fall for an ESCO scam.

Here's what you need to know:

Clean energy does not technically come to your home.

This is the #1 misconception about ESCOs! Like community solar projects, the non-fossil fuel energy doesn't actually come directly to power your house.

Example: Let's say you live in Brooklyn, NY and you sign up for clean energy through an ESCO. The ESCO buys RECs on your behalf. These RECs can be generated by a solar or wind farm anywhere - in California, Kansas, you name it.

While you are not directly consuming that clean energy, you are generating more DEMAND for clean energy in the grid. That's a great thing.

ESCOs typically cost a little more

Don't be surprised if your bill goes up a little after becoming a part of an ESCO.

Subscribing to an ESCO will add a small increase to your electricity bill (typically less than 10%). If you think about it, you are technically buying something (RECs). This is different than owning solar panels (where you save money over time) or sign up for community solar (where you get a discount on your bill).

Anyone can sign up for an ESCO

Because of this, ESCOs are probably the most accessible way to support clean energy because anyone with an electric bill can sign up. You don't need to own a home, you don't need money for solar panels, & you don't have to be near a community solar project.

After you sign up, you continue to get billed from your utility company with – as we mentioned – a small additional fee for participating in an ESCO.

Some ESCOs are better than others

This is where the ESCO spam furor comes. There are definitely some shady companies just trying to make a few bucks off your desire for a cleaner planet. 🌎

Example: Green Mountain Energy is owned by NRG, a national utility company that owns coal, nuclear, & natural gas power plants.

If you are interested in getting into an ESCO, look for ones that are certified B-corps, independently owned, or have a similar mission-driven business model.

Another thing to look for is ones taht offer local RECs. Some ESCOs make a point of only buying RECs that are local to your area. Kudos to them!

Feeling overwhelmed? Let our quests help guide you through making your home more sustainable!

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