This is an article I wrote a few years ago with a few updates.
A Brief History
Before 2002, electricity rates in Texas were regulated by the Texas Public Utility Commission (PUC). There was only one electricity provider and only one residential rate in each electric service area. The rate charged by that provider was regulated (limited) by the PUC who made sure that you were charged no more than the cost of providing the electricity plus a reasonable profit. It was a simple and effective system.
Since about 2002, electricity for most Texans has been deregulated. This means that there is not a state (PUC) set limit on what electricity providers can charge for electricity. The theory behind deregulation was that a lot of providers would come into the market and competition and market forces would make electricity prices even lower than they were under the regulated system with one provider.
However under deregulation, the burden of controlling how much you pay for electricity shifted from the PUC to you the consumer. This is not an inconsequential shift because deregulation did bring a lot of providers into the market. In the Oncor (DFW) service area alone, there are currently over 50 providers offering over 400 different plans. Also, the plans expire after a stated period of time, usually a year although shorter and longer periods are available.
In addition, on some of the available plans, costs are not based on a single rate that applies to all of your usage. Rates can vary depending on how many kWh you use per month and there may be fixed monthly fees if usage is below a certain level. Also some plans allow you to earn credits if usage is within certain kWh usage levels.
So we have gone from a simple one plan system to a complex 400 (in Oncor alone , over 2000 state wide) plus plan system where you may get a low rate but it's up you to find the plan that offers that rate and then to find that special plan year after year. This can be a considerable burden for anyone but particularly for the elderly, mentally challenged and those who do not have access to computers and the data needed to make an informed decision about which plan to choose.
You may be thinking that the competition and market forces will keep all of the prices low and you can just choose any plan because they will all be about the same. You may also be thinking that your current provider will automatically enroll you in a low cost plan when you current plan expires. But that's just not true.
Do all Plans Offer a Low Rate?
Unfortunately not. To inform the public about the multitude of available plans and to help you choose a plan, the PUC provides a website that lists all of the plans and some information about each of them. This website is called Power To Choose. (PTC). The PTC website has a lot of information about each plan including company satisfaction rating, term, contact information, cost per kilowatt hour (kWh) etc.
On the PTC site, the cost per kilowatt hour (kWh) currently ranges from an unbelievable low of 1¢ per kWh to a price gouging 13.5¢ per kWh (at the 1000 kWh usage level and with the show all plans option checked). Obviously competition and market forces are not keeping all rates low.
Will My Current Provider Look Out For Me?
Probably not. Six months ago, my contract with one of the larger providers was about to expire and they offered me a new contract that didn't seem too bad. But compared to the rates on the Power To Choose website, the price they offered was about the middle of the pack. If you like a provider, you will be inclined to stay with them since the alternative means searching through the PTC site for the proverbial needle in a haystack. The providers know this and use it to their advantage.
You may be able to get your provider to offer a lower rate plan by just telling them that you will be looking for a lower rate. Or they may be offering the best rate available. But you won't know unless you check out other plans.
Can I Just Use Power To Choose?
The Power To Choose. (PTC) website noted earlier provides a lot of useful information about available plans including company satisfaction rating, term, contact information, cost per kilowatt hour (kWh) etc. However, the site doesn't show just one cost per kWh. It shows 3 different costs per kWh. It shows cost at standard usage levels of 500, 1,000 and 2,000 kWh per month. This is sort of like the standardized food labels and is intended to help consumers compare the cost of plans. But which of the 3 different usage levels do you use to find the lowest cost plan?
You could ignore the usage levels on the PTC site if the rates were the same at all usage levels. But they aren't. Within some plans, there is a tremendous difference between the cost per kWh. For example one plan had the following cost at the standard usage levels.
- 11.7¢ at 500 kWh
- 1.0¢ at 1000 kWh (a 91% decrease)
- 8.2¢ at 500 kWh (a 800% increase)
It would be real easy if your actual usage was about 1,000 kWh per month. Then you could just choose the 1.0¢ plan noted above and go back to binging on Netflix. But everyone's usage varies considerably depending on the time of year (think of blistering summers and frigid winters) and whether you have gas or electric heating. So even though the plan noted above looks great at 1,000 kWh, you could end up paying 8.2 ¢ or even 11.7 ¢ for several months during the year.
Update February 21, 2021: In addition to the above, a supplier named Griddy offered a plan where users paid the wholesale price of electricity plus a monthly fee of about $10. This was a workable alternative until the big freeze hit and the wholesale price of electricity soared up to $9 a kilowatt hour causing some Griddy customers to receive bills of over $10,000. This wasn’t Griddy’s fault. The problem is a system where the wholesale price of electricity (which is bought and sold like stock) can be bid up $9 a kilowatt hour. Just before the big freeze, Griddy told all of it’s customers to switch to a fixed rate energy provider.
The cost per kilowatt hour soared when demand exceeded supply because about half of the generating plants froze up and couldn’t generate electricity. In Texas, generating plants are not required by the state to be winterized. In addition Texas does not participate in any other grids which might have been able to provide some of the needed electricity.
There should be maximum rate for the wholesale price of electricity to say no more than twice the average rate and the generating plants that reaped these outrageous rates should be forced to give most of it back. And we should go back to a regulated utility system which worked just fine and never gouged customers like this. No thanks to George Bush and other republicans for creating this lousy system.