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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, 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 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 about cheap electricity
You’re not just paying for the kilowatt-hours. Your retail electric provider (REP) will also have other fees 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 cost you more.
This holds particularly true if Company B doesn’t charge for what would normally be 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 make up the difference somewhere. No company starts up a business intending to lose money.
Beware of the “vanishing discount”
Watch for the heavily-promoted rate turns out to be merely an “introductory offer” that disappears quickly (even without notice) or requires a certain usage level. Make sure you find out when that discount disappears and note 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, your bill should be in the same ballpark.
- If it is an itemized bill, it will have the rate per kilowatt-hour (kWh), 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 see the aggregate total for the regular monthly charges plus any exceptional line items listed, which may or may not apply.
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 much fees might impact your bill. If you’re a chronic late payer, a late payment fee that’s double the competition will 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
The rate might be trying to trap you into a commitment you’re not ready for. If the rate doesn’t look like a good deal, it likely won’t look any better a year later.
Also, don’t worry about matching your electricity contract to your lease if you live in an apartment. Texas law protects movers from paying an early termination fee.
Watch for hidden fees
If you are not technologically savvy and frequently need customer service assistance, a company that charges for speaking 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 the power to choose is yours!
Frequently Asked Questions
Who has the cheapest electricity rates?
There are over 60 electricity providers with hundreds of energy plans. When shopping for the cheapest rate, take your home’s kilowatt-hour usage into account. The best way to find the best rate for your home is to compare energy plans according to your usage. Find the right energy plan for your kWh usage with ComparePower.
How do I find the best electricity plan?
Picking the wrong energy plan without knowing your home’s energy usage can cost you hundreds or thousands of dollars. Compare energy plans and electricity rates with your home’s electricity usage profile to find your best rate. Shop with your usage on ComparePower and save both time and money.