In every deregulated electricity state, commercial accounts that don't actively choose a retail supplier are served at a default rate set by the utility or state PUC. That default rate isn't necessarily bad — but it's rarely the most competitive option available, and it's never been through a competitive process on your behalf.
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Side-by-Side Comparison
| Factor | Option A | Option B |
|---|---|---|
| Price determination | Set by utility/PUC, updated periodically | Set by competitive market bid process |
| Competitive bidding | None — you're assigned this rate | Yes — 30+ suppliers compete |
| Price certainty | Often variable or quarterly | Fixed for contract term |
| Price transparency | Published by utility | Bid-to-bid comparison |
| Service interruption risk | None (utility always serves) | None (utility delivers regardless) |
| Cost | Whatever PUC approves | Market-competitive after broker process |
| Effort required | Zero — automatic assignment | Minimal with broker |
What Default Service Actually Is
Default service (called Basic Generation Service in NJ, Standard Service Offer in OH, Standard Offer Service in CT, Provider of Last Resort in TX, etc.) is the supply rate the utility charges commercial accounts that haven't chosen a retail supplier. It's regulated and predictable, but it's not the result of any competitive process on the account's behalf.
When Default Service Is Fine
Default service can be cost-competitive in some markets at some times — particularly after a well-designed PUC procurement auction. In New Jersey, BGS is set through a competitive auction process and sometimes beats what retail suppliers offer small commercial accounts. The answer isn't 'default is always bad' — it's 'you should verify whether default is competitive for your account right now.'
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When Competitive Supply Wins
Competitive supply consistently wins for: accounts using 50,000+ kWh/month (where supplier competition is most intense), accounts that haven't run a market check in 2+ years, accounts in markets where default rates are set as pass-throughs rather than competitive auctions, and accounts renewing at the right market moment.
The Benchmark Test
The right question isn't 'is default service bad?' — it's 'is the current default rate competitive for my account right now?' Running a broker process establishes the answer. If competitive supply isn't meaningfully better, stay on default. If it is — which it often is for mid-to-large commercial accounts — switch.
Default Service as a Fallback, Not a Strategy
Staying on default service as a deliberate, verified choice is different from drifting on default because you've never checked alternatives. A commercial account that actively verifies default service pricing against market alternatives every 12–24 months is managing its energy costs. An account that's simply never evaluated it is not.
Frequently Asked Questions
Is utility default service regulated?
Yes. Default service rates are set by the state Public Utilities Commission (or equivalent) and are published. The utility must offer this rate to any commercial account that doesn't choose an alternative supplier.
Can I switch back to default service after going to a competitive supplier?
Yes. If you're on a competitive supply contract, you can return to default service at contract expiration (or earlier by paying any applicable ETF). Default service is always available as a fallback.
Is default service the same as the utility's regular rate?
Not always. In some states, default service and regulated utility supply are essentially the same. In others (like Texas), the utility doesn't provide supply at all — there's no default, only a 'provider of last resort' at often-unfavorable rates for accounts without a REP contract.
How do I find out if my current rate is default service?
Check your utility bill. The supply portion will indicate either a utility rate code (default service) or a supplier name (competitive supply). If you see your utility's name on the supply line, you're likely on default service.
How often do default service rates change?
It varies by state and utility. Some update monthly (tracking wholesale markets). Some update quarterly (through competitive auctions). Some are set annually. Frequently-updating default rates carry variable-rate risk for commercial accounts.