How to Shop For Electricity in Texas

How to Shop For Electricity in Texas

Pluggy the piggy bankWant to save up to 50% on your electric bill? For many Texans it’s actually quite easy. Easier than installing new windows. Easier than buying LED lightbulbs. And much easier than fussing at your kids to turn off the lights. For most Texans, it only takes shopping the right way for a lower cost electric plan.

Since 2002, most of Texas has had a “deregulated” electricity market, meaning Retail Electricity Providers (“REP”s) compete for your business. In practice, this is both good and bad. The good part is that competition sometimes encourages retailers to offer lower prices. On the other hand, shopping has become a jungle of tricky plans and biased websites that cost the average household an extra $500+ and untold frustration every year.

Not anymore. TexasPowerGuide.com simplifies finding your best price. As the only 100% transparent site for shoppers, we don’t sell electricity. Instead, we search the plans and do the math for you, then monitor for additional savings. But whether you use our RateGrinder tool or opt to do the legwork yourself, you’ll benefit from knowing the game and how to shop the right way.

Ignore The Hype

First off, consider that for-profit REPs are motivated to resell you electricity at the highest price they can. As a result, some (but not all) put a lot of effort into advertising and gimmicks that make it harder for the average consumer to compute their real costs.

In our experience, anything offered for “free” is a red flag. If it’s free nights and/or weekends, you can bet the weekday rate is inflated more than enough to compensate. If it’s a fancy new thermostat, cash back rewards, or an electric puppy, chances are good you could buy it yourself much cheaper elsewhere.

The more you hear about a plan on TV and radio, the more expensive it tends to be. (How else could they afford all that advertising?) The cheapest plans are unlikely to be posted anywhere but on PowerToChoose.org and maybe the retailer’s own website.

Network marketing (think Mary Kay or Amway) is a key pillar for several retailers. Perhaps your neighbor on Facebook really did just stumble on a great plan to share via his “promo code”. Or perhaps it’s not so great plus you’re paying extra to fund his commission.

With over 60 retailers in Texas, the competition for your attention is fierce. If a particular plan gets you to visit a retailer’s website, don’t assume the other plans touted there as “cheaper” are necessarily better deals. Always compare plans on the basis of their total cost across your home’s range of monthly usage, not marketing teasers.

Fixed-, Indexed-, and Variable-Rates

A “Fixed-Rate” plan is one where the rate terms don’t change over the contract period. We recommend a 12-month fixed-rate plan for most homeowners, as it’s generally the best balance of pricing and hassle. Indexed- and Variable-Rate rates plans also exist, but they tend to be more expensive and it’s much harder for the average consumer to predict their costs. See here for more details.

Dollars vs. cents/kWh

How much are you paying for electricity? Many people think they know, but they’re often surprised at the reality. Check the “average price you paid” disclosure on your past bills to find out for sure. The average Texan pays ~12 ¢/kWh, but savvy shoppers pay less than 8 ¢/kWh. Those numbers may sound tiny, but consider that the average home uses ~14,000 kWh annually, so the difference translates to hundreds or even thousands of dollars per year.

Average Texas Electricity Pricing

Why do people overpay? Here are the usual reasons:

  1. They’re unaware they can switch providers, so they keep the pricey company their landlord, neighbor, or TV suggested.
  2. They’re unsure if switching will compromise their electric service. (Switching is easy and low-risk, and retailers have nothing to do with your service reliability.)
  3. They shopped, but got misled by tricky websites and teaser rates.
  4. They got distracted and their good plan lapsed into an expensive month-to-month renewal.

All of these are common and understandable, but easily solved. If you’ve read this far, you’re likely past the first two already. Which leads to our personal favorite…

The Shopping Game

Electricity shopping in Texas is a minefield of teaser rates and hidden charges. These could be easily avoided but for one problem: Most shopping websites — including the PUCT’s official PowerToChoose.org — only let you search and sort plans at a single usage point, typically 500, 1000, or 2000 kWh/ month. YOU SHOULD NOT SHOP THIS WAY, for two related reasons:

  1. Your monthly electricity usage varies a lot over the year, doubling or more from the spring/fall lows to the summer AC peak. The chart below shows the profile for the “average” Texas residence, but yours will differ depending on your home’s size, layout, insulation, appliances, pool, etc.
2016 Texas Average Residence Electricity Usage by Month
Monthly variation in a typical home’s energy usage
  1. Knowing this, many retail electric companies tease you with “low rates” at one or two commonly searched usages, but charge much higher rates across your broader range of usage. They do this with various fees, credits, pricing tiers, time-of-use rates, lumped services, and other methods that make it hard for shoppers to compute and compare their true costs.

As an example, one website often buys the top ad slot when you search for “power to choose”. Their “lowest-rate” 12-month plan recently touted 7.9 ¢/kWh rates for using 1000 or 2000 kWh/month. While that’s true, the orange line below reveals the full rate profile. Using 1001 kWh in a given month instead of 1000 kWh doubles your bill from $80 to $160. The home above would actually pay an average of 10.7 ¢/kWh. That’s $532/year more than the actual best plan. No wonder they can afford to advertise so much.

Sample Electricity Facts Label (EFL) Rate Structure
Real cost 35% higher than “teaser” rate

If you shop at one of the 25+ sites that let you search by only a single usage point (i.e. 500, 1000, or 2000 kWh), you’ll likely find ill-suited teaser rates and other gimmicks that will cost you many hundreds of dollars extra. DON’T WASTE YOUR TIME. Instead, shop where you can compute and compare your total costs across each of your 12 months of usage. Doing so leaves no room for rate gimmicks to hide.

Know Your Usage

Your month-by-month electricity usage is key since plan rates often vary drastically across that range. It may take a few extra minutes to look up the 12 numbers, but the overall time and money savings will be worth it. At the very least learn your high (~August) and low (~April) usages. It doesn’t have to be exact: Barring major changes to your home, your past usage is generally a good enough estimate of your future usage. Here are two simple methods:

  • Check your past billing statements, or
  • Use the free SmartMeterTexas.com site:
    • Create or Login to your account
    • Navigate to the “Usage” tab, then “My Usage” screen
    • Under “Report Option” \ “Report Type”, select “Monthly Usage”
    • Get your 12 monthly “Actual kWh” numbers from the bottom table

Do The Math

Next, take the 12 monthly usages and plug them into a tool or website that…

  1. Covers at least the plans listed on PowerToChoose.org
  2. Computes/compares each plan’s TOTAL cost across your month-by-month usages
  3. Discloses the details behind its calculations and recommendations

Although PowerToChoose.org lists many of the lowest cost plans, its limited search engine leaves you vulnerable to teaser rates and other gimmicks as noted above. Some websites do the proper math, but only on a small set of their own providers/plans that build in expensive commissions. Finally, other shopping sites manage #1 and #2, but give only high-level recommendations that obscure whether you truly got the best deal.

Only TexasPowerGuide.com does all three. We decipher the fine print on the available plans daily and publish the key details in our RateGrinder tool. You can compare your plan options, check one-time fees, and even download the full spreadsheet if you like with no obligation. If it saves you time and money on signing a new contract, we ask $10 in return, paid on the honor system.

Or you can always read the Electricity Facts Label fine print and compare plans with your own spreadsheet. Countless Texans have done just that for years. But why should everyone have to reinvent the wheel?

Try RateGrinder » …and see how much you’ll save.

Sign Up

Once you decide on a plan, click on a ‘Sign Up’ link. If it takes you to the retailer’s home page instead of the specific plan’s page, then be careful as you navigate through to your targeted plan. Many retailers offer multiple, similarly-named plans with different pricing. If you can’t find the plan you were expecting, make sure the website registered any applicable promo code; try reclicking the referring URL link or manually enter the promo code if needed. Lastly, some plans change frequently, so it’s a good idea to doublecheck the key plan details (the name, effective date, version #, and basic pricing claims) versus your expectations before submitting your final approval.

Once you’ve completed the sign-up process, your new provider will manage the entire switchover process. There is no need to contact or inform your current provider. The process normally takes 3 to 7 days.

Many plans charge extra monthly fees if you don’t enroll in autopay and paperless billing. If the Retailer didn’t collect your autopay information at sign-up, be sure to set it up prior to your first bill.

Don’t Forget to Renew

Last but definitely not least, MANY consumers forget to renew their plans after their contract expires. Retailers often count on this opportunity to quietly roll you into a month-to-month product at a much higher rate. If you’re managing your own providers, it is very important that you re-shop/renew before then. By law, you can switch providers up to 14 days before your contract expiration date without incurring an early termination fee.

To help with this, TPG’s free RateAlert service reminds you of your plan’s pending expiration and monitors daily to alert you to any better switch-and-save opportunities in the interim.

Spread The Word

For most people, shopping for electricity ranks somewhere below eating brussels sprouts on the desirability scale. But with the right tools, it’s easier than ever to save hundreds in a matter of minutes. Deregulation only works as promised if consumers are informed and engaged. See how much you’ll save, then spread the word to your friends and neighbors. They’ll thank you for it.

 

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