How To Shop For Electricity In Texas' Deregulated Electricity Market
Shopping for an electricity plan in Texas can be confusing. Here are four tips to avoid overpaying.
Texas’ deregulated electricity marketplace was launched with the idea of offering consumers flexibility to find electricity plans that worked best for them, and the ability to find lower rates for electricity.
In reality, it hasn’t worked out that way for most consumers.
A Wall Street Journal analysis earlier this year found that Texans on the deregulated marketplace paid about $28 billion more for electricity since 2004 than they would have with traditional publicly owned utilities.
That’s no surprise to Dallas Morning News Watchdog columnist Dave Lieber.
Lieber has been a frequent critic of the state’s deregulated marketplace, the Public Utility Commission of Texas charged with overseeing it and the lawmakers who oversee the PUCT. He has written that consumers have largely been left to fend for themselves, on a playing field tilted in favor of electric companies.
Lieber has also spent years offering advice to consumers to find the best way to avoid getting gouged.
Here are his top shopping tips:
1. Do Your Research And Read The Fine Print
The Public Utility Commission of Texas set up the site PowerToChoose.org to help consumers compare retail electricity plans on the deregulated marketplace.
“You have to ignore the ads and look for PowerToChoose.org and nothing else,” Lieber said.
On the site, consumers will see plans listed according to the price they’ll pay for each kilowatt-hour they use. The kilowatt-hour (kWh) is the basic unit of measurement on home electricity bills.
Consumers can limit their search using an array of filters – for the amount of renewables they want in their energy portfolio, for example, or to only see plans with a fixed kWh rate (more on that later).
But Lieber says the key is to read the fine print. Each plan on Power To Choose has links to fact sheets and terms of service for each plan.
“And unless you look at all that stuff, you're going to miss hidden fees and the ways that they gouge you,” Lieber said.
The state doesn’t regulate fees that retail electricity providers can charge customers, Lieber said, so some companies offer plans with a low electricity rate, and then tack on fees for things that should be free. A common example: Some companies charge a fee every time a customer calls customer service.
“I consider that to be a scam,” Lieber said. A scam, he points out, that the state regulators allow to continue.
2. Kick The Tires On A Company Before Signing Up
Even if a company offers an excellent rate and doesn’t charge absurd fees, Lieber said it’s important to make sure they’re not a nightmare to work with.
Power To Choose offers data on official complaints to the PUCT that customers make against electric providers, but a simple Google search might be the best way to see what customers think of an electricity provider. Type in the company’s name with words like ‘fraud,’ ‘complaints,’ ‘scam,’ ‘history,’ and ‘problems,’ and see what others have written.
“Try and dig up all the bad stuff on them that's going to be on the Internet from other customers so that, if you sign up with them, there won't be any surprises,” Lieber said.
After that, Lieber said to call the company and see if a human being picks up the phone, “because if you have a problem with your bill, you want to talk to a human being.”
3. Avoid Autopay
“It is very important for you to avoid signing up for auto pay,” Lieber said.
Autopay is where you authorize a company to automatically deduct money from your bank account or charge your credit card to pay your bill each month.
The idea here is simple: If you have a problem with your bill or your service – if, for example, you’re overcharged – it’s often much harder to get money refunded than to withhold payment until a billing issue has been resolved.
This is particularly important for people on variable-rate plans, where the price-per-kWh you pay can change over time (depending on the price of bulk electricity).
Fixed-rate plans – where the price-per-kilowatt-hour is stable throughout the entirety of your contract – are generally a better bet for customers who don’t want to carefully track their electricity use.
However, consumers with lower credit scores are often pointed toward variable rate plans, a practice that consumer advocates say hurts lower-income and fixed-income Texans by adding additional instability to monthly bills.
4. Shop Frequently
To avoid over-paying for electricity, customers should repeat shop for electricity on a regular basis.
Find a plan with a shorter contract, Lieber said, and time your contract’s expiration date to avoid shopping during the summertime.
Electricity rates are highest in the summertime, and you don’t want to lock yourself into a plan with summer-high rates that you’ll end up paying after things cool down in the fall and the price of bulk electricity drops.
Also: Don’t renew your contract with the same company.
“Always shop for a new company so you can get the newcomer’s discount. And that means you might have to do this two or three times a year,” Lieber said.
“You're always moving because you always want to get the lowest rate possible. And because most people don't do that, they end up paying more for electricity than they should,” he said.
It’s a drag, Lieber admits, and can be daunting for time-strapped consumers.
Lieber is often regularly frustrated that the state’s lawmakers don’t implement better consumer protections. Instead, he said, it leaves consumers largely on their own, with the deck stacked against them.
“This is the kind of thing where you really have to commit yourself to doing some good research and you don't be scared about it because it's actually worth it, because the difference between getting a good company or bad company can be a hundred dollars a month or more.”
Lieber’s parting words: “Shop hard for electricity so you don't get ripped off.”
Got a tip? Christopher Connelly is KERA's One Crisis Away Reporter, exploring life on the financial edge. Email Christopher at email@example.com.You can follow Christopher on Twitter @hithisischris.
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