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Electricity Plans and Home Warranties

Electric choice markets pose challenges for energy providers seeking to build a national brand. First, not all states give customers the opportunity to choose their electricity supplier. Second, even for those states with electricity choice programs, competition is typically limited to customers in areas served by investor-owned utilities. In addition, varying regulations force electric providers to customize their marketing and customer interactions state-by state.

Expanding Electricity Markets

Electricity providers marketing on a national scale need products and services that will allow them to reach a larger customer segment. Logical product tie-ins for energy shoppers are home warranties. Home warranties are a good fit with electricity plans and are also established as a stand-alone service offering. Home warranties allow energy providers to market to customers in all states and in all utility service areas. For example, electricity companies adding home warranties to their product line can reach customers in states like Florida and Washington where electric customer choice markets are not available.

Energy Warranties

Warranty programs vary in coverage, premiums, and deductibles. From a coverage perspective, specialized offerings include appliances, surge protection, heating and cooling equipment, and plumbing. Comprehensive (whole-home) warranties are also readily available. When comparing warranty offerings, it is important to understand coverage limits. Warranties may have per incident limits, annual coverage limits, or a combination of both. It is important to pay attention to coverage limits. A home electronics warranty program with a $500 coverage limit may not be sufficient to repair or replace items damaged by a lightning strike. It is also important to read the warranty disclosures to understand exactly what appliances and systems are covered.

Energy Maintenance Plans

Another option that some electricity providers offer in conjunction with home warranties is maintenance. These service offerings seek to minimize the likelihood of an electrical or plumbing problem through routine inspections and preventative maintenance. Some providers, like Direct Energy, give consumers the option of selecting a warranty program, maintenance program, or a bundle of these two offerings.

An important item to note about home warranties is that they are not the same as insurance. With insurance, consumers typically have the ability to select their service provider. Warranty programs usually contract with a limited number of service providers to address warranty claims. This is not necessarily a bad thing but it is important that consumers understand that all issues, even emergencies, must be reported to the warranty company. The warranty company contacts a service provider who, in turn, coordinates with the customer. Most warranty programs do not allow customers to contract independently for service and seek reimbursement afterwards.

When choosing a home electricity plan, consumers should consider any warranty or maintenance plans offered in conjunction with basic electricity service. Shoppers should read reviews on the warranty provider as these might differ from reviews of the energy provider. These types of home warranties can give consumers peace of mind. However, customers need to understand the coverage, premiums, and deductibles associated with the warranty as well how to contact the warranty company when something goes wrong.

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