Texas electricity shopping is a minefield of gimmicks and gotchas. The average household overpays by ~$400 annually, while savvy retailers keep inventing new ways to squeeze higher margins from their customers.
To help level the playing field, we list the most common gotchas to watch out for below. How many are you aware of?
Energy-only rates
Each month, you pay both your chosen Retailer for electricity and your local Utility to deliver it. All Retailers bill for delivery on your Utility’s behalf, yet some quote their energy-only costs (without delivery) to appear cheaper. Always compare quotes with delivery charges included. If they aren’t listed, move on.
Usage-dependent rates, credits, or charges
Sites like PowerToChoose condition shoppers to compare prices only at 500-, 1000-, or 2000 kWh/mo, despite their actual usage varying widely over the year. Retailers capitalize with rate gimmicks that appear cheap at those exact usages while charging more overall.
Example: A plan charges a flat $80 for the first 1000 kWh plus 15¢/kWh for usage over 1000 kWh.
That’s only 8 ¢/kWh if you use exactly 1000 kWh/mo. But it’s 10.3 ¢/kWh at 1500 kWh/mo, 11.5 ¢/kWh at 2000, and a whopping 16 ¢/kWh if you only use 500 kWh.
“Non-cumulative” rates
A more extreme version of the above, where using one kWh more can change the rate for your entire month’s usage.
Example: $80 for usage up to 1000 kWh, or 15¢/kWh for usage over 1000 kWh.
Using 1000 kWh costs $80, but using 1001 costs $150.15 (vs. $80.15 in the case above).
Partial billing cycles
If your plan has usage-dependent charges, mind your start date. Most plans count usage per pre-defined “billing cycles”. If you start on a mid-cycle day, you’ll get partial first- and last cycles, or 13 billing cycles for a 12-month plan. Depending on the plan, that can cost you more.
Example: You use ~1500 kWh/month and pick a plan that credits you $95 for using at least 1000 kWh/billing cycle.
If you start (and end) the plan in the middle of a cycle, your first and last [half] cycles will only include ~750 kWh usage and you’ll forfeit one $95 credit.
“Free” nights/weekends/cash back/…
“Free” is the most powerful word in marketing, but there’s usually a catch.
Free Nights and/or Weekends plans tease savings for consumers who shift their usage to off-peak hours. But inflated daytime rates lead most to pay higher average rates. The same goes for plans that bundle gift cards, thermostats, or other freebies. Always do the math.
100% renewable
Wind and solar energy have clear CO2 and pollution benefits, so many Retailers offer them exclusively or as an upsell option.
Unfortunately, the Renewable Energy Certificates (RECs) that underpin virtually all such plans in Texas are completely ineffective. A 100% renewable plan may cost you more, but it makes no difference in the transition to clean energy. Unless it’s your cheapest option, skip the “green” plan.
Wholesale rates
“Wholesale” plans can be good for certain off-peak users, but they’re not for everyone. Real-time rates are highly volatile, and summertime price spikes can quickly erode months of savings. These plans require focused effort and/or home automation to shift usage to lower-priced periods, and higher usage to offset their monthly membership costs.
“Free” plan advice
The psychology of “free” applies to where you shop, as well. All electricity shopping sites must earn money to cover their expenses. If you aren’t paying them to shop on your behalf, Retailers are paying them to sell you plans at higher rates. Guess which costs you more?
Name recognition
Advertising and high-profile sponsorships cost money. So it ‘s no surprise that the Retailers we’re most familiar with tend to charge higher rates for the exact same electricity. (It may be a surprise that those same companies also sell it under less-known sibling brands at a lower price.)
Non-yearly contracts
Summer month electricity costs Retailers extra, which they pass on to you. To appear cheaper, some offer plans that avoid or underweight summer, such as 6- or 18-month plans spanning October to March.
To compare plans of different lengths, always factor in estimated costs for any months they don’t have in common. More details.
Variable rates
With few exceptions, “variable rate” plans are expensive and unpredictable. Retailers can change pricing at their sole discretion, so rates tend to spike dramatically after the promotional billing cycle.
“Bait and switch”
Some Retailers post good deals on shopping sites, then tempt you with a barrage of seemingly cheaper rates when you visit their website to sign up. The new offers are usually of the usage-dependent type (see above) and more expensive, so stay the course to find your original target.
Non-recurring fees
Retailers’ Terms of Service documents detail one-time fees for non-payment, manual payment, disconnection, etc. You can avoid most of these with Autopay, e-billing, and timely payments; otherwise some can get quite expensive.
“Tease and squeeze”
Did you successfully navigate all of the above to nab a cheap rate? Retailers can still count on you forgetting your renewal months or years down the road. When you do, they’ll quietly roll you into an expensive month-to-month plan until you notice.
Win the Game
Knowledge is power, so we share these tips to help Texans get their best rate and save their hard-earned money.
For even more shopping power, click below to let our RateGrinder tool recommend the best plan for your home.
Not in the market for a new plan just yet? Tell our free RateAlert service about your current plan and we’ll monitor daily for better deals until your renewal.
Did we miss any tricks above? Let us know in the comments.
Related Topics:
How to Shop For Electricity in Texas
Best Texas Electricity Rates
As a reminder, Direct Energy’s “average rate” claim already assumes 31% of your usage occurs within the “free” period. So unless your electricity usage is extremely weekend-centric, don’t expect you’ll make up the difference. See the previous review for more on why “free weekends” plans generally aren’t a great deal.
