By Dave Lieber
Dallas Morning News, Jan. 3, 2019 (updated Jun. 7, 2022)
Did you see the story by my colleague, business columnist Mitchell Schnurman about rising electricity rates? Headline: “We’re in trouble: Electric rates in Texas have surged over 70% as summer kicks in.”
It came to life in a letter to me from Laura K. She says, “I’m one of those unfortunate folks with an expiring electricity contract this summer. Would you suggest a 12-month fixed rate or a 24-month fixed rate at this time?”
The 12-month plan is an astounding 17.3 cents a kWH (kilowatt-per-hour). The 24-month is 15.1 cents. Both are high, high, high.
My answer is, honestly, I have no idea. It’s a gamble, just like putting all your money on red or on black at the casino. NOBODY knows. Pick something and pray. What a terrible situation for everybody.
Mitch reports that the average state kWh rate is now 18.48 cents. A year ago, it was 10.5 cents. He says it’s the highest average rate since deregulation hit us more than 20 years ago.
That’s an extra $80 a month for a family that uses 1,000 kWh a month. I’ve talked to experts who blame the higher cost of natural gas as the main culprit. Other things affecting the bottom line are increasing dependence on wind and solar and the shutting down of coal-fired plants that haven’t been replaced with modern generating systems.
One way to beat this is to get a rate lower than the average. Somebody has to be below that average. Might as well be you. But how?
You can do it by shopping around. Here’s my world-famous guide to shop for electricity in Texas, updated this week:
(Most importantly, I’ve tried to show you how not to overpay on your bill — which, considering the complexities, is very easy to do.)
We’re going to cover a lot in this update. First, let’s look at some basic rules:
Rule No. 1: Shopping for a retail electricity company in deregulated Texas is serious business. You need to read this power guide and know that if you commit to the wrong contract, you might be overpaying. The system is designed to lure you in with a low kWh rate, but learning how much the actual bill is can be more complicated. Why is that? The add-on fees that you have to work hard to find. More on that later.
Rule No. 2: Only go with a plan that has a “fixed rate.” The alternatives are a “variable rate” which floats up and down with the market. Steer clear. And there’s an “index rate” which is tied to an economic index. Forget that, too.
Rule No. 3: Don’t only look at the kWh rate. Read the “Facts Label” and the “Terms of Service.” This massive amount of fine print tells you the real story, especially what the add-on fees are. One study showed that electric companies have come up with 28 different add-on fees. Proponents of the system have always said Texas has the lowest rates. Not so when you add the fees.
Rule No. 4: Use the state’s PowerToChoose website to start. Funny thing about the state-sponsored site, though. A typical electricity plan will state “No hidden fees,” but when you read the fine print in the terms you see they charge $5 for a phone call to customer service or $20 if you ask them to send you a copy of an old bill. Just two examples. By the way. some electric companies use the phrase “power to choose” to buy ads online so you think you’re at the state site, but you’re not. Go directly to PowertoChoose.org.
Rule No. 5: Avoid autopay where they deduct the money straight from your account. If there’s a mistake, good luck trying to get it back.
Rule No. 6: There’s no one good company to pick. The plans change often. You can check a company’s history on PowertToChoose. Do they have a lot of complaints? Do a web search on the company, too. Use terms like reviews, comments, complaints with their name in the search bar.
Rule No. 7: One deceptive technique favored by the companies is to give you kWh pricing for 500 kWh, 1,000 and 2,000. The 1,000 is often the cheapest, but what happens if you end up using more or less? You slide into the other categories and end up paying a lot more than you thought. The system seems to penalize you if you use too little or too much power. Crazy right?
Rule No. 8: A quick overview. The electricity generating plants are privately-owned. The power they create goes into the Lone Star grid, managed by the Electric [Reliability] Council of Texas. ERCOT, but I’ve taken away their “R” because they are hardly reliable. ERCOT manages the power as it goes to the transmission companies. In North Texas, this is ONCOR. Then dozens of retail companies offer to sell you the power, which ONCOR then delivers. It’s complicated, a far cry from the old days when one company — TXU — handled everything. Unless you’re in a co-op or a municipally-owned system, your only decision is which electric company do you want.
Rule No. 9: You pay a kWh rate (offers now are in the high teens, the highest on record in this “cheap electricity” state. And don’t forget you pay an ONCOR deliver charge on top of that. It fluctuates between 3 and 4 cents a kWh. Sometimes the ONCOR charge is already included in the price, but not always. Sheesh. You gotta play detective, and ask a bunch of questions.
Those are some of the basics. Here’s another letter I received.
“Dear Watchdog, I appreciate all you do for consumers. I’m wondering if you have suggestions about reputable electric service providers in North Texas. I think I’m getting overcharged from TXU, but when I read reviews on competing companies all I see are horrible customer service reviews, deceptive business practices and worse.
“I’d love for the [Public] Utility Commission to make some real progress on making the companies honestly publish their rates, but as I’m in my 50s, I doubt I’ll live that long. Cheers, Britt Stokes, Fort Worth”
I asked Britt the two most important questions: 1) What is his rate per kilowatt-hour? 2) When does his contract expire? In response, he sent me a couple of his electric bills. (Note: If you don’t know the answers to those two questions, it’s likely you’re overpaying because, like Britt, you’re not paying attention.)
I pulled out my calculator and divided his bill’s total cost for kWh used that month by the the bill’s dollar amount. I didn’t include his taxes or his $5 monthly base charge. I added the nearly 4-cent-per-kWh Oncor “delivery charge.” Then I called Britt with the bad news.
Because he’d stuck with TXU and hadn’t shopped around for the past decade, it’s likely that he had overpaid his electric bill by thousands of dollars. (He pays $175 a month in balanced billing and didn’t have a feel for his actual costs.)
In that summer, he paid a then-astronomical 16.4 cents per kWh.
His latest bill shows he’s paying 17.6 cents per kWh. Smelling salts, anyone?
Those are shockingly high. About double what he could have paid if he’d shopped around, if he’d switched companies several times a year to obtain new customer discounts, and if he’d actually paid attention to his bill.
The state average when I studied his case was 10.3 cents. Now as I pointed out, it’s much higher at record levels.
I can’t emphasize this enough: If you don’t pay attention, you overpay.
The good news is: If you do know your kWh rate and your contract’s expiration date, it’s likely you’re not overpaying.
Britt is not alone. Thousands of Texans overpay for electricity. Here’s more info on how to avoid that.
Cheap electric companies in Texas
Along with used-car dealers and air-conditioning repair techs, some electricity companies in Texas have become masters of deception. They gamed the state’s electricity-shopping website, PowerToChoose.org, so their low-rate deals came up first on page one of search results. Fortunately, after years of my complaining, the Utility Commission filtered those deceptive deals off the front pages of search results.
How to find the best company
Who’s the best company? No real answer. There have been as many as 55 companies serving our region, and some are owned by the larger companies. They just use different names.
The best way to shop is to spend time on PowerToChoose.org, find a good deal and then call the electric company to check if there are even better deals.
The worst way to shop is by believing anything anyone tells you when they knock on your door or call you on the phone. Don’t buy that way.
The Watchdog recommends hopscotching from one company to the next, looking for the best deals. A few days before a contract expires, start shopping again. Why shouldn’t you stick with a company? Because if you aren’t paying attention and your contract expires, you lose the low new-customer teaser rate. Your rate will go up. Companies offer introductory teaser rates for new customers. That’s why you should shop around for new-customer rates.
Try not to let your contract expire in the summer, when rates are highest. Use the 3-, 6-, 9-, 12- or 24-month contracts to avoid summertime expiration.
More advice from The Watchdog
Be Skeptical Sam. I made Skeptical Sam up, but he represents the mind-set you need when embarking on a search for a company. Assume the company is hiding something from you. Dig it out. No secrets. No surprises.
Check the data. There are three important pieces of information you need to check on each plan you’re considering. On PowerToChoose, check the complaint level by clicking on the word “History.” If there aren’t a lot of complaints, continue to power onward. Download the “Fact Sheet” to read all the details. Then check the “Terms of Service” sheet for more details.
Add the Oncor charge (called TDU Delivery Charge) to the kWh charge called “Energy Charge” to get an idea of what your cost will be (if it’s not already included). Is there also a base charge tacked onto the monthly bill? Are there fees for talking to the company on the phone? Any other fees? Does the company require auto-drafting from your bank account? I hate that.
Further checks. Do Web searches of the company’s name along with these words: reviews, complaints and scams. How bad is it? Only a few? That’s OK. A trunk load? Start again. Also, try calling the company and checking whether customer service is too automated for your taste. Can you get a helpful person on the phone easily?
Outside consultants. A growth industry has developed with small companies helping consumers shop. Some charge a percentage or a monthly fee. Others charge a one-time fee. Still others don’t charge consumers because they get paid by the electric companies.
Shopping for electricity is important because if you spend time on it, you save money. If you don’t pay attention, you overpay. It’s that simple, except that it’s incredibly complicated.
But until the great storms of 2021, our state leaders, from the governor to the Legislature to the [P]UC, didn’t seem to care.
Nothing pleases me more than a letter such as this one from reader Raymond Wooldridge of Dallas:
“I just saved about 40 percent on a two-year contract from my current provider. I was careful to add distribution costs to all numbers. Without your comments I would never have thought to question. Thanks!”
Way to go! Power onward.