Compare Electricity - Fixed Rate Plans

Opposite variable rate electricity plans are offers known as fixed rate plans. The advantage of a fixed rate plan is that the price, in terms of the base energy charge, is set and doesn't change for the length of the contract term, which can vary between as few as 3 months all the up to as many as 60 months.

So, anyone who signed a contract that carried them through the 2011 heat wave had no worries with regards to their electricity rate (the only remaining concern being rolling blackouts, which we can't control).

The primary attractiveness of the fixed rate electricity plan is the comfort in knowing what your rate is going to be each month and that you can control your final bill simply by keeping tabs on your energy usage (easier said than done).

Fixed rates can vary widely, but, in general, the longer the contract term the higher the rate. That may be due to electricity rates' tendency to follow the price of natural gas. Since that price is unpredictable and riskier the further one looks out into the future, a retailer would need to charge a premium rate for that volatility.

I tend to search specifically for rate offers of 6 and 12 months in length as that's where I've noticed consistently good prices from most reps.

Negatively, however, where variable rate plans are flexible in terms of switching electricity providers, the converse is true for fixed rate plans.  Switching your rep before the contract term has expired can lead to costly cancellation fees.

Typically, cancellation fees are higher with longer contract terms. As of this writing, those fees ranged from about $50 (3 month term) to as much as $450 (5 year term) and can be found in the "Disclosure Chart" section of the Energy Facts Label.

The reason for higher cancellation fees on longer contract terms? I think this is related to each rep's requirement to accurately forecast the energy needed to supply all of their respective customers. I imagine that any unexpected event which throws a wrench into those forecast models (like customers cancelling) are fairly costly from the rep's point-of-view.

Anyways, one example of cancellation fee verbiage, from Direct Energy, which I found really straightforward:

Not many questions there... you cancel before your 12 months are up, you pay $200.

Another example, this time from TXU Energy:

Same clarity in terms... notice that the fee is higher due to the longer, 24 month, contract term.

However, what if you were in the last few months, or month, of the contract and needed to cancel?  The flat cancellation fees would seem a bit harsh.  In that case, there are some offers that will pro-rate the fee for cancelling service, such as this example from Dynowatt:

After just 4 months, you could cancel this 12 month contract for $200, the same cost as the aforementioned Direct Energy example, which charges that much in any month that you cancel.

One last example, this time from Amigo Energy:

This is interesting since they allow you a reason to cancel without a fee:  For moving out.

Bottom-line, fixed rate plans are great if you want to "set-it-and-forget" and not have to chase the lowest variable rate each month.  Just remember to renew on another fixed rate plan, either with the same rep or by switching to a new one, as soon as the contract expires.  The default for all of the fixed rate plans that I've seen place the customer onto a variable rate month-to-month plan which can turn out to be an unpleasant surprise.

Compare Electricity - Variable Rate Plans

A nice feature of the "Power to Choose" website is the option to look only at "variable" or "fixed" rate plans, as opposed to all plans together.

Why is this important?

Simply because there was (or still is) a lot of consumer confusion with regards to the differences between the two types of rate plans.

My understanding of the variable rate plan is that the price can change from month-to-month, and in some cases without a cap to the actual rate of increase. Since Texas electricity rates are particularly sensitive to the price of natural gas (the biggest source of generation here), the direction of variable rates depends upon that price each month.

The primary draw to variable rates are lower prices than fixed rates (secondarily is the flexibility to switch reps at any time without incurring a cancellation fee).

Consequently, the price variability can come back to haunt, as seen last year when Texas temperatures reached record highs (70 days over 100 degrees here in Dallas!). I imagine that a lot of folks on variable rate plans saw significant rate increases over the course of the summer.

Here are some examples of variable rate plan language from various reps...

Like this one from Direct Energy:

The 30% limit on monthly rate increases sounds okay initially, but a $0.10/kWh rate would go to $0.13/kWh, which is pretty high, and could go higher still the next month.

How about this one from Gexa:

A bit better on the 25% monthly rate increase, so a $0.10/kWh rate would go to $0.125/kWh, however, it could still go higher in subsequent months.

Think that all variable rate plans have this sort of protection in place?

Check out these examples from Mega, Pennywise and Reliant:

A bit scary to say the least as rate increases are not capped and up to the "sole discretion" of the retail electric provider.

That last bit of language does make some sense as the electricity that we're paying for has to be procured by the rep in the first place. The rep has to know a few things like how much power their customer base may use that month and what the weather will be like in order to contract generation for the right amount of energy. Get any of that wrong and my guess is that some (or much?) of the cost burden gets passed on to variable rate customers, on top of the actual rise in the cost of energy that month.

Bottom-line, variable rates can provide lower rates, but they are a risky bet and I (stretching it here) think they can only make sense during milder seasons, like the fall or spring.

A better bet would be a fixed rate plan, which I'll cover in the next post.

Shopping Electricity Rate Plans - Energy Facts Label and Fees

While shopping for a new electricity plan, I wanted to point out a few "gotchas" that I've run across lately, especially when going for the lowest rates. When comparing rates, it's important to approach the experience with a "too-good-to-be-true" mentality and make sure to read the Energy Facts Label (or "EFL") thoroughly.

I recently covered the "Electricity Price" section of the EFL document, which is used primarily to estimate your electricity rate, but I'd also like to give a quick overview of one other important section called the "Disclosure Chart". In the Disclosure Chart, there is a row item that explains other fees that may be charged, specifically those that are not included in the Electricity Price section.

For example, in the first screenshot provided, it shows a "Service Processing Fee: up to $5.95". What does this mean exactly?

According to the Disclosure Chart, further explanation can be found in the "pricing" section of a document (part of the rate list that we saw in the first post) called the "Terms of Service".

There, we see (in the second screenshot) that the $5.95 fee is charged for, essentially, any call to customer service. This is due to the verbiage stipulating that anything which can done through online self-service (i.e. bill payment, paper vs paperless billing, etc.) or web chat (same deal) cannot be done through a phone call, unless one would rather pay the $5.95 fee each time.

Other fees are expected, like "returned payment"-type of stuff, so as long as we are aware of these "other" fees, shopping for an electricity rate plan, especially here in Texas, is fairly easy to do, quick and worthwhile. Saving money by comparing rates is a definite must.

Getting Smarter

I like the idea of home automation; more so recently in my attempts to save money and improve energy consumption.  Enabling this concept are products referred to as "smart" appliances. My understanding is that the term "smart" is used rather loosely, really to mean wireless "interconnected" and most likely Internet-enabled.

For example, at CES 2012, Whirlpool committed to introducing appliances over the next year and a half that would be "smart"-enabled.  They also mentioned that "Seventy-eight percent (of consumers) are interested in monitoring their household's energy use."

Now, the level of monitoring that consumers had in mind is my question.  Is the monitoring more automated so that devices can learn consumer behavior patterns and adjust accordingly, or rather something more hands-on that allows consumers to control devices from anywhere (via smart phone). Personally, it would be great to see a bit of both.

In any case, simply the ability to do any of this now appears within reach for the average residence (not sure how to define "average" except that I'm lumping myself into that group). I'm really excited to see what the next year brings in terms of smarter devices.

Federal Energy Tax Credits in 2012

I recently went into the attic and noticed a few areas of low insulation, so I was hoping to purchase some additional insulation and qualify for the 10% federal tax credit for energy efficiency upgrades. Albeit late, I was disappointed to read that certain federal tax credits expired at the end of 2011, attic insulation being one of them.

Additionally, my 75 gallon natural gas water heater is about 15 years old and I'd just started thinking about replacing it with a new Energy Star rated unit, such as a tankless version. Unfortunately, the tax credit ($300!) expired a few days ago as well... Hopefully my old water heater can last through one more winter.

Anyways, it seems that the only energy efficient tax credits available for 2012 are related to renewable generation (solar, wind) or other more exotic products, like the residential fuel cell.  Perhaps I'll look into the latter and post about it.

On a related note (to renewables) I'll also write about my recent experience with solar power and smart meters.

Shopping Electricity Rate Plans - Power To Choose, Price and Energy Charge

This has been a bit harder than I expected, as far as starting a blog.  The difficulty might be with what to really begin writing about. So, I'll just start with what I'm currently working on, which is shopping for a new electricity provider since my current contract ends this month.

I don't regularly think about renewing since I usually sign up for 12 month contracts, but I got burned this past summer ("ha ha" funny given the record temps in Texas) when my last contract expired and I was placed on a month-to-month rate (I went up from 10 to 13 cents/kWh, in the middle of the summer! -yes, poorly timed). My mistake was chasing the absolute lowest rate by signing up for a 6 month contract in December that would expire in June, of course, fully expecting that I would remember to renew on another 6 month contract (ha!).

Lesson learned.  Rates are generally better in the late fall and winter months, so best not to leave anything to chance and simply ensure that my contracts would always expire in those seasons going forward.

With that in mind, I started by going to www.powertochoose.org (a site provided by the Public Utilities Commission of Texas), entering my zip code and preferred contract term (12 months) and then reviewing the resulting rate offers.  That list of rates shows the retail electricity provider (also know as "rep"), term, cancellation charge and special notes.

In case you haven't shopped for rates before, the information you'll need to review is contained in what is called an "Electricity Facts Label" document. Each rate offer will have one.

Clicking the document link will take you to a standard outline with what's behind that rep's offer.

From there, everything I really need to know is in the first section, conveniently labelled "Electricity Price".

The monthly electricity price contains a few key areas that makes comparing rates between reps fairly simple.  One is the "Base Charge", which is really an amount that allows the rep to guarantee that they earn at least that much from the customer.

However, it doesn't mean much unless combined with what is called the "Energy Charge". Unlike the base charge, the energy charge is dependent upon the amount of electricity that is consumed each month.

Lastly, the "Transmission and Distribution Surcharges" (also known as "TDSP", which is Oncor in my example) may be broken down into two parts:  A flat rate amount and a rate, similar to the energy charge, that is based on my usage each month.

For me, since I try to conserve power as much as possible, I go for offers that have the lowest energy charge in addition to a zero base charge.  If my usage was relatively and consistently high, I'd probably go with a $5 or $10 base charge if it was with a much lower energy charge.

On a side note, notice that average prices in the offer are listed from 500 up to 2000 kWh.  You'll need to know your average historical monthly usage pattern in order to give relevance to those numbers. No worries otherwise as you can take your January and August bills (since those are probably worst-case) and, using those consumption amounts, bounce them against the average rates from the offer.

Outside of the base and energy charges, there are a few "gotchas" that are not clearly explained, but I'll cover those in another post.

In the meantime, I'll keep shopping and reveal my rate choice soon.

Milestone

This is my first blog, site and post. Ever. Now saved within the depths of Google's server farm caching mechanism for the rest of internet time.

Ok, with that out of the way, my name is Jim Lertdilok and this will be my place on the web to accomplish a few things:
1) Write about a few of the things that I like
  a) Energy industry stuff (my career niche, specifically power and utilities)
  b) Making things in and around my home more efficient, with the goal that it will save me something (money, time)
2) Practice writing (my wife's suggestion)
3) Learn to spell check (and to check the spell check... for example, has anyone ever had issues with the iPhone's auto correct?)

Other than that, I appreciate any and all input that you can provide.

Cheers and have fun reading!