The True Cost of Texas Electricity Plans
An In-Depth Analysis by Compare Power
Executive Summary
Navigating Texas’s deregulated electricity market can be challenging for consumers.
With over 130 Retail Electric Providers (REPs) offering a multitude of plans, many Texans may unknowingly choose options that lead to higher electricity bills than necessary.
This white paper presents an in-depth analysis conducted by Compare Power, highlighting significant discrepancies between advertised electricity rates and the actual costs incurred by consumers.
By modeling usage data across various consumption levels, we demonstrate how selecting a plan that aligns with actual usage patterns can result in substantial annual savings.
We also introduce Compare Power’s innovative solution, Live Link™, designed to help consumers make informed decisions and reduce their electricity expenses.
Table of Contents
Introduction
Since the deregulation of the Texas electricity market in 2002, residents have had the freedom to choose their electricity providers.
While this was intended to foster competition and lower prices, the abundance of options has made it challenging for consumers to identify the most cost-effective plans for their needs.
The complexity of electricity plans and confusing rate structures often lead to consumers overpaying for electricity.
Background
The Texas Electricity Market Landscape
The deregulation allowed consumers to select from various REPs, breaking up regional utility monopolies.
As of 2024, more than 130 REPs operate in Texas, offering hundreds of plans through direct sales and comparison websites.
While beneficial in theory, this variety has introduced complexities that make it difficult for consumers to navigate the market effectively.
Regulatory Framework and Market Complexity
The Public Utility Commission of Texas (PUCT) requires REPs to disclose charges clearly through Electricity Facts Labels (EFLs).
These labels help consumers compare plans by outlining key terms, rates, and fees.
However, the increasing complexity of plan structures, including tiered rates and conditional credits, has diminished the effectiveness of EFLs in aiding consumer decision-making.
Problem Statement
The rise of intricate plan structures—such as free nights and weekends, bill credits, and tiered pricing—has made it challenging for consumers to compare electricity plans accurately.
Many of these plans feature complex rate structures that can obscure the true cost of electricity.
Relying solely on advertised rates often leads consumers to select plans with higher annual costs, sometimes hundreds or thousands of dollars.
Objectives
Our study aims to:
- Analyze Actual Costs: Based on modeled usage data, determine consumers’ true cost for advertised electricity plans.
- Compare Advertised and Actual Costs: Assess how plans advertised as cheapest at specific usage points compare to other popular plans when actual consumption is considered.
- Evaluate Savings Potential: Identify the potential savings consumers can achieve by selecting plans that match their actual electricity usage patterns, using tools like Live Link™.
Methodology
Data Modeling
We modeled electricity usage for seven consumption levels representative of different household types:
- 500 kWh per month
- 750 kWh per month
- 1,000 kWh per month
- 1,174 kWh per month (average usage in Texas)
- 1,500 kWh per month
- 2,000 kWh per month
- 3,000 kWh per month
To account for seasonal variations, we applied weather-adjusted monthly multipliers based on historical usage patterns:
| Month | Multiplier |
|---|---|
| January | 1.35 |
| February | 1.10 |
| March | 0.80 |
| April | 0.70 |
| May | 0.85 |
| June | 1.20 |
| July | 1.40 |
| August | 1.35 |
| September | 1.00 |
| October | 0.75 |
| November | 0.95 |
| December | 1.30 |
These multipliers adjust base monthly usage to reflect typical seasonal consumption in Texas.
Plan Selection
We analyzed seven electricity plans chosen based on their market prominence and advertised rates at specific usage levels:
- Rhythm Energy Simply Green 23 (identified as the most cost-effective plan across all usage levels)
- Gexa Energy Eco Saver Plus 12
- TXU Energy Live Your Free 12
- 4Change Energy Cash Money 12
- Frontier Utilities Saver Value 12
- Frontier Utilities Saver Plus 12
- Frontier Utilities Saver Premium 12
Types of Plans Analyzed
We focused on three main types of electricity plans:
- Fixed-Rate Plans: Offer a consistent rate per kilowatt-hour (kWh) throughout the contract period.
- Free Nights and Weekends Plans: Provide different rates or free electricity during designated off-peak hours or days.
- Bill Credit Plans: Offer credits on the bill when certain usage thresholds are met, significantly affecting the average rate per kWh.
Cost Calculation
For each plan and usage level, we calculated the total annual cost by incorporating all elements of the rate structure:
- Energy Charges: Cost per kWh consumed.
- Base Charges: Fixed monthly fees.
- Transmission and Distribution Service Provider (TDSP) Charges: Fees set by the local utility for delivering electricity.
- Credits and Discounts: Any bill credits or discounts applied when specific conditions are met.
This approach ensured that cost comparisons reflected the true financial impact on consumers, not just the advertised rates.
Key Findings
1. Discrepancy Between Advertised and Actual Costs
- Significant Differences: Plans advertised as the “cheapest” at specific usage levels often resulted in higher annual costs when actual consumption patterns were applied.
- Up to 40% More Expensive: Some advertised cheapest plans cost consumers up to 40% more annually than the most cost-effective plan identified in our analysis.
2. Impact of Usage Patterns and Seasonal Variations
- Variable Costs: Electricity costs vary significantly based on individual usage patterns and seasonal changes.
- Plan Performance Fluctuations: Certain plans performed well during specific months but were less cost-effective over the entire year due to fluctuations in consumption.
3. Potential Savings for Consumers
- Substantial Savings: By choosing plans that align with their actual usage, consumers could save between 6% and 40% annually.
- High-Usage Households: By selecting the right plan, households using around 3,000 kWh monthly could save over $3,700 annually.
4. Complexity of Plan Structures
- Consumer Challenges: Complex rate structures make comparing options and identifying the most cost-effective plan difficult.
- An advantage to Providers: This complexity can obscure the true cost of plans, potentially benefiting electricity providers over consumers.
Detailed Savings Analysis
Below is a summary of potential annual savings when choosing the most cost-effective plan (Rhythm Energy Simply Green 23) compared to other plans at various usage levels.
Savings at 500 kWh Average Monthly Usage
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $1,054.72 | – | – |
| Gexa Energy Eco Saver Plus 12 | $1,550.16 | $495.44 | 31.96% |
| Frontier Utilities Saver Plus 12 | $1,550.16 | $495.44 | 31.96% |
| 4Change Energy Cash Money 12 | $1,395.22 | $340.50 | 24.40% |
| TXU Energy Live Your Free 12 | $1,331.87 | $277.15 | 20.81% |
| Frontier Utilities Saver Value 12 | $1,325.70 | $270.98 | 20.44% |
| Frontier Utilities Saver Premium 12 | $1,448.16 | $393.44 | 27.17% |
Average Savings with Best Plan: $378.83 (26.12% less on average)
Savings at 750 kWh Average Monthly Usage
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $1,426.41 | – | – |
| Gexa Energy Eco Saver Plus 12 | $2,167.50 | $741.09 | 34.19% |
| Frontier Utilities Saver Plus 12 | $2,167.50 | $741.09 | 34.19% |
| 4Change Energy Cash Money 12 | $1,899.66 | $473.25 | 24.91% |
| TXU Energy Live Your Free 12 | $1,810.22 | $383.81 | 21.20% |
| Frontier Utilities Saver Value 12 | $1,794.82 | $368.41 | 20.53% |
| Frontier Utilities Saver Premium 12 | $2,023.50 | $597.09 | 29.51% |
Average Savings with Best Plan: $550.79 (27.42% less on average)
Savings at 1000 kWh Average Monthly Usage
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $1,948.57 | – | – |
| Frontier Utilities Saver Premium 12 | $2,845.45 | $896.88 | 31.52% |
| Frontier Utilities Saver Value 12 | $2,700.65 | $752.08 | 27.85% |
| TXU Energy Live Your Free 12 | $2,493.57 | $545.00 | 21.86% |
| 4Change Energy Cash Money 12 | $2,305.27 | $356.70 | 15.47% |
| Gexa Energy Eco Saver Plus 12 | $2,174.45 | $225.88 | 10.39% |
| Frontier Utilities Saver Plus 12 | $2,174.45 | $225.88 | 10.39% |
Average Savings with Best Plan: $500.40 (19.58% less on average)
Savings at 1174 kWh Average Monthly Usage (Average Texan)
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $2,150.90 | – | – |
| Frontier Utilities Saver Premium 12 | $3,191.48 | $1,040.58 | 32.60% |
| Frontier Utilities Saver Value 12 | $3,128.18 | $977.28 | 31.24% |
| TXU Energy Live Your Free 12 | $2,794.85 | $643.95 | 23.04% |
| 4Change Energy Cash Money 12 | $2,576.10 | $425.20 | 16.51% |
| Gexa Energy Eco Saver Plus 12 | $2,439.38 | $288.48 | 11.83% |
| Frontier Utilities Saver Plus 12 | $2,439.38 | $288.48 | 11.83% |
Average Savings with Best Plan: $610.66 (21.18% less on average)
Savings at 1500 kWh Average Monthly Usage
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $2,833.39 | – | – |
| Frontier Utilities Saver Value 12 | $4,325.59 | $1,492.20 | 34.50% |
| TXU Energy Live Your Free 12 | $3,655.26 | $821.87 | 22.48% |
| Frontier Utilities Saver Premium 12 | $3,601.59 | $768.20 | 21.33% |
| 4Change Energy Cash Money 12 | $3,305.34 | $471.95 | 14.28% |
| Gexa Energy Eco Saver Plus 12 | $3,029.72 | $196.33 | 6.48% |
| Frontier Utilities Saver Plus 12 | $3,029.72 | $196.33 | 6.48% |
Average Savings with Best Plan: $657.81 (17.59% less on average)
Savings at 2000 kWh Average Monthly Usage
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $3,721.11 | – | – |
| Frontier Utilities Saver Value 12 | $5,950.53 | $2,229.42 | 37.46% |
| TXU Energy Live Your Free 12 | $4,816.95 | $1,095.84 | 22.75% |
| 4Change Energy Cash Money 12 | $4,530.40 | $809.29 | 17.86% |
| Gexa Energy Eco Saver Plus 12 | $4,522.68 | $801.57 | 17.72% |
| Frontier Utilities Saver Plus 12 | $4,522.68 | $801.57 | 17.72% |
| Frontier Utilities Saver Premium 12 | $4,335.18 | $614.07 | 14.16% |
Average Savings with Best Plan: $1,058.63 (21.28% less on average)
Savings at 3000 kWh Average Monthly Usage (Large Home)
| Plan | Annual Cost | Savings with Best Plan | Savings (%) |
|---|---|---|---|
| Rhythm Energy Simply Green 23 | $5,496.58 | – | – |
| Frontier Utilities Saver Value 12 | $9,200.43 | $3,703.85 | 40.26% |
| Gexa Energy Eco Saver Plus 12 | $7,508.63 | $2,012.05 | 26.80% |
| Frontier Utilities Saver Plus 12 | $7,508.63 | $2,012.05 | 26.80% |
| TXU Energy Live Your Free 12 | $7,140.37 | $1,643.79 | 23.02% |
| 4Change Energy Cash Money 12 | $6,980.51 | $1,483.93 | 21.26% |
| Frontier Utilities Saver Premium 12 | $6,252.38 | $755.80 | 12.09% |
Average Savings with Best Plan: $1,935.25 (25.04% less on average)
Implications for Texas Consumers
1. Misleading Advertised Rates
Consumers may be misled by advertised rates that seem attractive but don’t reflect actual costs based on their usage patterns. Relying solely on these rates can lead to substantial overpayment.
2. Importance of Personalized Plan Selection
Selecting an electricity plan that matches one’s actual usage pattern is crucial for maximizing savings. Personalized analysis is essential to identify the most cost-effective options.
3. Need for Comprehensive Comparison Tools
There’s a clear need for tools that analyze real usage data and simplify comparing complex electricity plans, enabling consumers to make informed decisions.
4. Regulatory Considerations
The complexity of plan offerings may require enhanced regulatory oversight to ensure transparency and protect consumer interests. Simplifying EFLs and standardizing plan presentations could help in this effort.
Compare Power’s Solution: Live Link
Introduction to Live Link
Compare Power has developed Live Link™, a tool designed to empower consumers by providing personalized electricity plan recommendations based on their historical usage data.
How Live Link Works
- Smart Meter Integration: Live Link securely connects to a consumer’s smart meter, accessing detailed usage data while ensuring privacy.
- Personalized Analysis: The tool analyzes the consumer’s unique consumption patterns, considering daily and seasonal variations.
- Customized Plan Recommendations: Live Link compares available electricity plans, calculating the expected annual cost for each based on the consumer’s actual usage.
- Transparent Cost Projections: Consumers receive clear, easy-to-understand cost projections, enabling informed decision-making.
Benefits for Consumers
- Accurate Cost Estimates: Provides realistic cost expectations, eliminating surprises on electricity bills.
- Time Savings: Simplifies the plan selection process, saving consumers time.
- Financial Savings: Helps identify plans that offer significant annual savings based on usage.
Conclusion
The Texas deregulated electricity market offers consumers the freedom to choose, but with that freedom comes the challenge of navigating a complex array of plans and pricing structures.
This study highlights how consumers can incur unnecessary costs when relying solely on advertised rates and underscores the importance of selecting plans that align with actual usage patterns.
Live Link™ addresses this challenge using real usage data to provide personalized, transparent plan comparisons.
By empowering consumers with accurate information and simplifying the selection process, Live Link™ enables Texans to make informed decisions that can lead to substantial savings.
Compare Power remains committed to innovation and consumer advocacy as the electricity market continues to evolve.
We strive to bring clarity and transparency to energy choices in Texas, ensuring that every Texan has access to the tools and information necessary to make the best decisions for their household’s energy needs.
Note: All data and findings presented in this report are based on modeled usage patterns and the analysis of available electricity plans as of September 4, 2024. Actual savings may vary based on individual circumstances and changes in market offerings.
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