Learning Center

Why did electricity rates zig when they should’ve zagged???

If there’s one thing that deregulation has taught us, it’s that while the market does result in price competition, the end result may not exactly come out in the wash. When prices are legally controlled, the cost of the product is dictated by the supplier or manufacturer within a range set by the regulating body and it’s usually geared to the “average” cost of production. Deregulation, such as what happened with Texas electricity rates, means that the price is determined by market demand – Retail Electric Providers buy energy in blocks and resell it and, like any other industry, buying in bulk results in a lower per-unit price. That’s why buying a drill at “Bob’s Auto Supply and Dentistry” is going to cost you more than the same drill at Home Depot: Bob’s only buying two or three drills a month, while Home Depot is buying two or three hundred a week! With regulated power, the governing utility set limits on how much can be charged, whether or not it’s in line with the actual cost of cooking up the electricity and serving it to the customer.

The bubble of wishful thinking hits the needle point of Reality

In a perfect world, market competition is better for the customer than regulation because there is incentive for new players to jump into the water. This means the customer has the power to choose which of the Retail Electric Providers will suit his needs. Those who provide a superior product at a competitive price will profit and those that don’t, won’t. But clearly that isn’t always what happens: after deregulation in Texas, electricity rates for some did drop but overall, the prices went up faster when compared to regulated areas of the state. Why is that?

Part of the problem is that when prices are regulated, they are usually not in line with anything in the real world. Sure, we’d all like to pay 2c/kWh for our electricity but if it costs 5c/kWh to generate it, that’s pie-in-the-sky thinking. In a regulated market, the price is geared to the average cost of production – terrible news for solar thermal power generation (which costs the most) but very good news for natural gas and coal (which cost the least). So now the producer is handcuffed to the price they get which means either they cut back production or else it’s back to the government of Texas, electricity generation expenses in hand, doing the Oliver Twist (“P-p-please suh…. I want some more!”) just to stay in operation, never mind making any kind of profit. This is a real buzzkill for anyone thinking to start up a power generation business because “The whole point of starting a business is to lose money” said nobody, ever.

Corporate welfare: a self-fulfilling prophecy

Let’s say we have two cities in Texas, A and B. City A is regulated – they love their cheap power, they love having no Retail Electric Provider middlemen, and they’re comfortable with having just one utility as a go-to. They’re so comfortable with their electric rates that they’re not exactly conservative when it comes to using it (folks, this actually happens!). City B is deregulated – there’s more confusion and chaos, it’s a bubbling pot full of Retail Electric Providers all fighting to get to the surface and attract more customers yet their electric bills are not as low as City A’s even though City “Beople” are very responsible with their energy usage. City B customers are upset and annoyed: why do City A citizens pay less for more power when they don’t even have a free market? What they don’t realize is that part of the reason City A’s electric bills are so low is that, periodically, the state government has to top up the generator’s bank account – that means that everybody in the state, including the citizens of City B, is helping City A pay their power bills while City B people are self-sufficient and taking care of their own business while helping out City A!

When you look at it, which one really is the American way?

The smart thing to do is to keep on top of your electricity bill and shop, shop, shop! Visit ComparePower on a regular basis so when it’s time to renew your contract, you’ll have no doubt that you have the perfect plan to meet your needs at a price you can afford.

Texas Power – What’s to Understand?

In some ways, a centralized power industry is simple to deal with – they tell you how much you will pay and when your bill will arrive and you either say “okay” or you get yourself a couple of generators or a really complicated treadmill.  Unfortunately, that means you’re at the mercy of the electricity provider when it comes to rates – you don’t have the power to choose even the slightest aspect of your electricity supply.  If you think the rate is too high or you’d maybe like to see more renewable energy sources, well… sorry.  “Mastercard, Visa, or American Express?”

Now, deregulation is a fine thing when it comes to increased market competition, flexibility for the consumer, and giving the consumer the power to choose when it comes to how their power will be generated, but it also means that the Texas power landscape suddenly got a whole lot more complicated!

 Before, it was a soup-to-nuts arrangement where one company handled everything:  power generation, distribution, and retailing.  Now, it’s all fractionated.  In Texas, power generation is handled by “these” companies; distribution (the wire, lines, and whatnot) is managed by “those” companies; and the Retail Electric Providers handle the reselling.

Instead of one major corporation handling Everything Electric, now you have to know whom to call and when:

For account and billing related problems, you call your Retail Electric Provider – Bounce Energy and First Choice Power are examples of well-established Texas power retailers.

• For power outages that are affecting the neighborhood, you call the utility/distributor – Reliant, Tara, Spark Energy are examples.  Unlike the resale end of things, you have no say in who’s handling the distribution – those areas are fixed, as you can see in this map put out by the Public Utility Commission.
• For a power outage that affects your home only, you call an electrician.

Because of deregulation in Texas, power generation and sales has been completely shaken up from end to end.  It’s no longer a matter of paying “the rate”  – you might be on a longer-term flat rate contract or, most commonly, you might be on a plan where the rate varies periodically.  There are three general categories of electric plans:

Fixed-rate plans – exactly what it sounds like:  for the duration of your contract, you pay the same rate.  If rates go higher than yours, you save money.  If rates drop lower, you don’t.

• Variable rate – a variable rate plan changes from month to month based on the cost of generating electricity. You won’t know what you’re paying until the end of the month.  This can lead to a nasty surprise or a pleasant one.  You won’t know until you open the envelope.  The formula used to calculate the rate is crazy-complicated but it will be posted somewhere on your REP’s website or in the documentation.
• Indexed rate plans – this is a variable rate plan on steroids that is rarely available.  If someone is trying to sell you an indexed rate plan, be aware that the price is tied to a commodity – usually natural gas – so prices can really jump around insanely.

The best way to get into the plan that meets your needs  is to educate yourself.  Visit ComparePower for all the information you need to make the right choice for you.

Tired of footing your roommate’s share of the electricity bill?

Just think: right this minute, somebody in a yurt somewhere is yelling at their roommate for burning the last yak butter candle and not replacing it.  Okay, maybe yak butter candles are not a problem in Texas but utility bills?  Whoa, Nelly!  Major cause of roommate discord!  There’s always someone who never seems to have money when it’s time to pony up their share, leaving the account holder to take the hit on their credit report.  Now, thanks to the deregulation of the Texas power industry, consumers have the option to choose from prepaid or postpaid electricity plans.

Yes, “prepaid” electricity, just how they’ve been doing it for decades in England!  You top up your account in advance and the electric company pulls from it according to your usage.  When your account runs low, you’re sent a warning by automated phone call, text, or email and you simply top it up again.  The beauty of prepaid electricity is that you can top it up as you get the funds so if your income is irregular or unpredictable, bump it up when you’re boom and relax when you’re bust.  Now, if cheap electricity is your number-one priority, perhaps prepaid plans aren’t ideal since they are often a higher rate than contract plans – but how much are you saving, really, once you’ve factored in the hassle and expense of a delinquent roomie?  Suddenly, your cheap electricity is looking mighty costly!

When you’re a landlord or living in a shared accommodation situation, the benefits of implementing prepaid electricity for your owned or rented property are immediately apparent: “No power payment?  No Xbox for you!”   Others who could benefit from prepaid electric plans are those with less-than-stellar credit or those just starting out on their own, such as teenagers in their first apartment or women coming out of a bad relationship.  The ones who really benefit are those like international students who lack citizenship, a credit history, a residency history, are typically in the age bracket of highest credit risk, and who frequently don’t have the funds to go locking up hundreds of dollars in an electricity deposit.

Here’s a quick summary of the pro and cons of choosing prepaid electricity:

Pros:

• No deposit required
• No credit check required
• No contract buy-out fee
• Daily usage monitoring – you’re not waiting until you get a shockingly high bill at the end of the month to discover your neighbor’s not only been riding on your Wifi but also stealing your electricity to run his hot tub.
• Much more authority to enforce shared utility situations.
• As a landlord or leaseholder, the electric bill is not your problem if the tenant does a midnight move.
• Pay when you can
• There’s usually a number of payment options, including smartphone, text, bank, in-house, telephone, and mail-in.
• Quick reconnect in the event of an account-related outage (typically within an hour or two)

Of course, every silver lining has a cloud:

Cons:

• The rates tend to be higher than post-paid accounts
• If you use electricity more than you expected, you could be caught short.
• You might get stuck with an inconvenient payment platform because the company, for example, only accepts in-branch payments (and they’re all the way across town!) or levies a fee for telephone credit card transactions.
• Warnings could be pretty last-minute:  24 hours is no good if your paycheck isn’t until Friday!
• The rate still fluctuates so while a sudden drop will give you more electricity than you expected, a sharp spike can leave you short.
• Some prepaid plans use a month-to-month structure where anything left in the account is not carried over to the following month.

In a perfect world, we would have all the electricity we need on demand.  Until that happy time, head on over to ComparePower to learn all you need to know about the Retail Electric Providers in your area and how you can keep ultimate control of your electric bill in your own hands.

How to calculate the REAL cost of an electricity plan

You wouldn’t blindly sign up for a cell phone plan or a car loan without knowing all the details, would you?  Yet, each and every day, people sign up with a cheap electricity company without fully understanding what it is to which they’ve agreed.  They see the glittering promise of cheap electricity and jump at it like magpies on a shiny pebble only to get hammered with the cold, wet fish of reality when the bill comes in.  ComparePower is an example of a website that provides you with excellent information – but you have to know what it is you’re looking at.  Why is Company A’s rate so much lower than Company B’s?

Here’s what you need to know, neat and sweet, about cheap electricity:  you’re not just paying for the kilowatt hours.   Your Retail Electric Provider will also have other fees and charges you’ll be expected to cover, one way or another.  Your bill might include any or all of the following charges:

• delivery of your electricity
• dropping below a minimum usage
• using certain methods of payment
• accessing telephone customer service
• not having autopay set up
• paper billing
• using renewable energy sources

Now you know why, even though Company A’s rate is so much lower than Company B’s, it still might wind up costing you more.   This holds particularly true if Company B doesn’t charge for what would normally be just part of doing business, such as paying by credit card or requiring a customer service agent to sort out the mess you’ve created by trying to do it yourself online.  When a cheap electricity company advertises incredibly low rates, they’re making up the difference somewhere.  No company starts up business intending to lose money.

Other points to keep in mind:

• Beware of the “vanishing discount” where the heavily-promoted rate turns out to be merely an “introductory offer” that disappears very quickly (even without notice) or else requires a certain usage level.  Make sure you find out when that discount disappears and make a note of it somewhere prominent.
• Ask your friends and relatives if they mind you looking at their electric bill, especially if they say they’re with a cheap electricity company.  If their household and lifestyle are similar to yours, then your bill should be in the same ballpark.  If it is an itemized bill, it will have the per-kilowatt hour; the delivery charge (which might be a flat rate or a blended rate with a flat rate base plus a per-kWh charge); and any line items all neatly spelled out.  If it’s a bundled rate, you’ll just see the aggregate total for the regular monthly charges plus any exceptional line items (such as NSF fees and so on) listed which may or may not apply.
• While researching on ComparePower, read both the facts label and the Terms of Service.  While reading the Terms of Service, if there is mention of a fee or charge but it’s not specifically spelled out, make sure to call and ask. Be honest with yourself about how such fees and charges might impact your bill – if you’re a chronic late payer, a late payment fee that’s double the competition’s is going to be something you want to factor in, as would a fee for payment by credit card if you put everything on plastic.
• Watch out for contract terms – that sexy kilowatt rate might be trying to trap you into a commitment for which you’re not ready.  It’s no good signing up for cheap electricity on a multi-year contract if you know you’re going to be moving in a year and then it’ll cost you to break the contract, cost you to disconnect the service, then cost you again to reconnect at your new home.
• If you are not technologically savvy and frequently need Customer Service assistance, a company that charges to speak to an agent could send your bill over the top very quickly.

Sometimes, the promise of cheap electricity is not the only factor when considering which electric plan to choose. The good thing is that power to choose is yours!  For all the information and some really great tips, visit ComparePower today!

Finding the Best Electric Rates by Understanding Texas Power Plans

Prior to 2002, electricity plans in Texas fell into one of three categories: the electric company’s way, the way the electric company wanted it, and whatever the electric company said. After deregulation, Public Utility Commission of Texas decided that was too complicated a system, so now REPs have one of three ways they structure their plans, each of which has different contract terms as well as its own advantages and disadvantages.

Fixed Rate

The simplest plan is the Fixed Rate plan – this means that for the entire term of your contract, which is typically a minimum of three months but can go up to 24 months, your rate will not change. This is easy for you because there’s no real guesswork involved – you know what your rate is going to be when you wake up tomorrow and next week and next month right up until your contract term ends. Not so great if the rates drop and you end up paying more than everybody else, though, and of course you’re almost certain not to get the same rate if you re-up your contract. But you never know: you might luck into a lower rate.

Indexed rate

Then there’s the Indexed electric plan. This one can be on a monthly or term basis with a rate that’s calculated by a formula (which they will gladly share with you) with the base being the public index or some other publicly available information. Basically, if your rate is indexed to, say, the price of natural gas (which it often is), then it will go up and down in accordance with the cost of natural gas. The formulas the companies use to determine your rate are simplicity itself, such as this one from a major REP where the price of a kilowatt hour is:

[ Natural Gas Price ] x [ Seasonal Factor ]

+ Energy Charge

+ [ (Monthly charge + Monthly TDSP Meter Surcharge) ]  /  [Monthly bill kWh Use]

____

$$$ Price you pay $$$

As you can see, easily worked out in your head. Maybe. As you have no doubt also noticed, it’s that whole “dependant on the price of natural gas” thing that can sour you on the whole deal: during a recent heat wave, customers on Indexed plans saw their energy price double and even triple,  totally wiping out the great savings they’d enjoyed up to that point.

Variable rate

The third option is the Variable rate plan, the one that surprises you every month: did it go up? Did it go down? According to Schrödinger, only the act of observing can determine a fixed state so, technically, the rate is both higher and lower until you actually look at the bill and collapse the waveform. Isn’t that exciting? All kidding aside, even though the company generally isn’t obligated to notify you of any rate changes, historically the monthly variance has been nowhere near as wild as can happen with Indexed rate plans, so it can be a reasonable compromise between the locked-in stability of the Fixed Rate plan and the volatility of the Indexed plan.

Your power to choose

In Texas, power to choose is yours and it depends, ultimately, on you: your personality, your preferences, and your spending habits. If you’re a conservative type of person who likes to know exactly how much to budget each month, then the Fixed Rate is probably a better one for you. If you’re a devil-may-care, put-the-pedal-to-the-metal type, go ahead and fly with the Indexed plan. If you like a reasonable chance of savings with maybe not quite so much risk, then definitely you might like the Variable rate plan.

Just make sure to visit a site like Compare Power before you make your final selection – you can never go wrong with getting all the information you need for the best decision!

With Texas Power to Choose, Who Really Wins in the Long Run?

Before deregulation, one government-controlled provider took care of all the power generation and delivery needs for the state of Texas. Customers had no say in the matter – what they got was what they got and what they paid was what they paid. In 2002, deregulation came into effect so now, with the power to choose, who really wins? On the one hand, consumers now have a choice in the price they choose to pay and how their energy is generated. On the other hand, one unforeseen complication was the destabilization and potential toppling of Texas power giant TXU Energy.

Texas Power then: The beginning of the end for TXU?

In 2007, power giant Energy Future Holdings Corp bought out TXU Energy against the advice of many experts. To acquire the company, Energy Future leveraged itself to the tune of $40 billion dollars.  Shareholder misgivings were allayed by the fact that TXU prices were indexed against the price of natural gas.  Most power generation, especially in the Houston area, was coal-fired and coal was directly linked to natural gas leaving a healthy profit margin. At that time, fracking (for “fracturing”) of shale beds was not seen as being of any significant contribution to natural gas stores. Unfortunately, the shale beds turned out to have a bit more natural gas than was expected.

A lot more, actually. So much more that it drove the price of natural gas and, thus, the price of electricity down into the basement, dropping 64% between mid-2008 and the end of 2012.  With so little profit margin left, with retailers offering mega-short-term contracts of under a year meaning no long-term commitment from customers, and with consumers favoring sustainable resources such as wind energy, there’s no real impetus to build any new power generators that rely on coal or natural gas.  Energy Future bled revenue by the bucket, posting a $600 million loss for the first three quarters of 2013, although it did manage to post a $5 million profit for the final quarter.  Still, with its crushing debt load, there was no way anybody was going to lend them more money to fix the situation.

Texas Power now: As the situation stands

Energy Future listed its holdings at the end of September, 2013, as somewhere around $2 billion dollars and long-term debt of $38 billion.  It has a first debt payment due in October, 2014, of $3.8 billion.  Even though Energy Future has such Texas power players as William Reilly, who was the administrator of the Environmental Protection Agency;  Lyndon Olson, former ambassador to Sweden; and James Baker III, 61st Secretary of State under President George H W Bush, batting for it, such high-powered influence isn’t enough to pull the company out of the weeds. Even selling the company is a dicey proposition, as new owners face a potential $3.5 billion in environmental liabilities and another $1 billion for mine reclamation. Whichever way the wind blows, the future for TXU looks bleak. David Power, deputy director of the Texas office of Public Citizen, said that even if the market rose up to full capacity, it wouldn’t be enough to save TXU.

So… now what?

Nobody knows yet how the Texas power regulators are going to handle the disposition of TXU.  There is still about 1.75 million customers on its books (although that number is far down from what it was in its heyday) and those customers will still require their energy needs to be met.  Clearly, however, the deregulation of Texas power needs some tweaking – not unexpected, given that it’s been less than ten years.  Alternatives are being considered, such as a capacity market option, which would ensure electric providers get paid regardless if the volume is used or not.  What this will do to the price of electricity and associated state taxes is anyone’s guess.

Until the dust settles, visit ComparePower (Power to Choose) for information you can really use to select the best Retail Electric Provider and the best plan to suit your needs.

Finding Houston Power Companies for your New Home

Buying your first new home build is no easy task.  It’s months of inconvenience, annoyance, and slogging through a messy jobsite.  It’s the phone ringing at all hours with nuisance questions.  It’s running back and forth to the site for damage control, decisions, approvals, and inspections and in amongst it all, there’s the signing of check after check.  A good amount of those checks are to cover the cost of on-site power.

Not a lot of first-time new home owners realize that…

Although there is electricity running to the house, the account is not in the home owner’s name – it’s in the builder’s name since, technically, the builder owns the property until you’ve paid him in full.  Another thing a lot of first-time home owners don’t realize is that Houston electricity retailers often give preferred rates to corporate clients like housing contractors.  Like many other producers, Retail Electric Providers like bulk purchases and you can’t get much more bulk purchasing than trucks full of power tools, spot heaters, loud radios, directional lighting, hand tools, battery chargers, and so on!  This means you can’t even gauge how much your electric bill will be based on prior bills because the usage pattern is not typical and, on top of that, you’re probably not going to get the same rate as your builder did.

Finally, that wonderful day comes when you close the deal with the bank and, in turn, receive the keys to your new house and now you’re ready to make the call to have the electricity set up in your own name…  but what’s this??  Suddenly the company wants a deposit because your credit is maxed out!?

Before you make the call that brings your house to life…

Take a few minutes to sit down and do some digging.  Not only do you want to find out exactly which Houston power companies operate in your neighborhood and what it is they have to offer, but you want to find out which are the cheap power companies in Houston.  You’ve just bought a home!  You need to save as much as possible everywhere you can until you can get at least some of the move-in expenses paid down.  Now, while it’s true that most Retail Electric Providers require a deposit if your credit is poor or you haven’t had a utility in your name, not all of them do.  Even with those that do, some will accept a letter of guarantee, where someone else guarantees in writing that they’ll pay the bill if you don’t, in place of a cash deposit.  This can be even more useful once you consider that the typical deposit is 1/5th to 1/6th of an annual bill – if it’s a brand-new home, it might be that the only record of use is that of the construction company and that would be a seriously large deposit, indeed!

Instead of calling each company in turn and having to go through the whole credit application process with each inquiry dragging your credit score and your spirits ever lower, visit ComparePower.  Only the REPs active in your area will be shown and you have access to full disclosure – all the FAQs and all the fine print.  This allows you to create a short list of companies that you can then approach with your application and, if needed, letter of guarantee already in hand.  It’s a more dignified way to get the lights turned on.

10 Secrets To Lowering Average KWH

There is no question Texas is an inspiration to the rest of the nation these days, considering so many of the fastest-growing cities in the nation are within Texas state borders. But this rapid growth, beneficial as it is to the economy, comes at a heavy price – the electric grid is under an ever-increasing burden despite the fact that Texas leads the country in wind power generation.

According to the  US Department of Energy, Texas leads the way not just in energy production but also in energy consumption. In 2011, the average kWh per month in Texas was 473.58, compared to a national average of 380.5. The average kWh cost for Texas was 11.3 versus a national average of 12 cents – 0.7 may seem like a decent drop but when you look at the nearly 100 kWh difference in usage, there isn’t a whole lot of out-of-pocket saving. It’s important, not just for your pocketbook but for the nation and for the environment, to bring the rampaging overuse of electricity under control.

The first thing you want to do is conduct a home energy audit. Now, I don’t mean calling in the IRS – it’s not that kind of audit, although if it puts you in the mood and you can make it look good, feel free to don a black three-piece suit and sunglasses. Time to thank your grade school math teacher (or at least break out the calculator) because the formula for calculating kWh is:

(wattage × hrs per day used ) ÷ 1000 = daily consumption in kWh

Or you can just use that pencil and clipboard to tally up everything in your house and plug them into this handy-dandy little calculator.

Once you look at the result of the calculation, you’ll immediately see that hot water and climate control are the two largest drains on your power supply. Obviously, you’re not going to go taking an axe to your AC or kicking the water heater to the curb and switching to a plan with a lower average kWh cost maybe isn’t practical at this time, but, until it is, here are ten secrets to lowering your daily kWh consumption:

1. Use your windows to your advantage: Keep your curtains wide open during the day and closed at night if the weather is cold, but do the opposite if the weather is hot. You want to keep the curtains closed during the day to block out the sun and you want to open them at night to radiate heat. You might even want to invest in special solar-ray blocking curtains.

2. Use lower technology: fans are a great way to keep the air circulating and reduce the heat. If it’s not really that hot outside, shut off the AC and just keep the fans running.

3. “It’s not the heat…”: And yeah – it’s the humidity. Use a dehumidifier and get some of that thickness sucked out of the air. When the air’s not so loaded, it’s easier to sweat and you’ll automatically feel cooler, which will allow you to bump up the AC a few notches.

4. Using a clothes dryer should be against the law in Texas: use the natural fresh air and sunshine to your advantage and dry your laundry outdoors! Heck, why even use a stove or the oven when you can use a barbecue outside?

5. Instead of showering and having to pay to heat up the tank again, either install an on-demand system or (why not?) hit the local swimming hole. Many people still have those old tube-style electronics, such as glass tube TVs and CRT monitors. Lose them and get in some energy-efficient LED or Plasma screens. In fact, with any piece of electronic equipment, if it’s running much hotter than it used to, that heat is electricity wafting away into the air on wings of greenbacks.

6. Lose the incandescent bulbs and replace them with CFL. You’ll get the same light output at a fraction of the electricity.

7. Even in hot weather, your house needs to be well insulated to keep temperatures right where they ought to be.

8. Go online and check out the many DIY solar batch preheaters – in general, they use the sun to heat your water before it hits your tank. If the water is already hot when it goes into the water heater, the water heater doesn’t need to come on (or at least come on for quite as long). An added bonus is you have increased your hot water capacity – for free! Always make sure you research local building codes and, if necessary, get the consent of your landlord.

9. Instead of filling a sink with hot water to wash the dishes, then draining it so you can fill it again to rinse or, worse, washing your dishes under a running tap, follow this method:

• Fill a tupperware container with water, load it with dish soap, then squeeze in a sponge.
• Wet down the dishes under the tap quickly while brushing off food residue, then shut off the water.
• Use the sponge to wash the dishes – just leave them soapy
• Once they’re all done, run the tap and rinse everything quickly using a spray attachment.
• Voila – a whole sink of dishes washed and dried in a sanitary fashion using less than half a sink of water!

Reduce your electricity consumption by following these ten tips and, over the long run, your wallet will thank you and so will your poor, overworked electric grid!

Royalty-free image from www.sxc.hu , used with consent.