How to Shop For Electricity in Texas
Want to save up to 50% on your electric bill? Before you replace windows, change light bulbs, or adjust your thermostat, take 15 minutes to shop the right way for a cheaper electric plan.
In Texas’s deregulated retail electricity market, Retail Electricity Providers (“REP”s) compete for your business. Sometimes this leads them to offer lower prices. But it also creates a jungle of tricky plans and biased websites that cost the average household an extra $500+ and untold frustration every year.
Not anymore. Texas Power Guide 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 do the work yourself, it helps to know the game and how to shop the right way.
Ignore The Hype
For starters, consider that for-profit REPs are incentivized to resell you electricity at the highest price they can. As a result, some put a lot of effort into advertising and gimmicks that make it harder for the average consumer to compute their real costs.
Anything offered for “free” is generally 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, you can likely buy it yourself much cheaper elsewhere.
The more you hear about a plan on TV and radio, the more expensive it likely is. (How else could they afford all that advertising?)
Network marketing (think Mary Kay or Amway) is a key tactic for several retailers. Perhaps your neighbor on Facebook really did just stumble on a “great plan” to share via his promo code. Or maybe it’s not so great plus you’re paying extra to fund his sales commission.
With over 60 active retailers in Texas, the competition for your attention is fierce. Always compare plans on the basis of their total cost across your home’s range of monthly usage, not marketing teasers.
Where to Shop
There are hundreds of electric plan websites, but only a few worth considering. Here’s a rundown:
Over 90 REP websites sell plans directly, but don’t start there. It’s overwhelming, most of the plans are overpriced, and many sites won’t offer their best rates without the right ‘promo code’.
To help, the Texas PUC created PowerToChoose.org. REPs can list offers there for free, so many post their cheapest plans in the hopes of winning price-conscious shoppers. Unfortunately, a crippled search engine also motivates them to list expensive plans in ways that appear cheap (see “The Shopping Game”, below). Instead of helping, PTC misleads many shoppers into overpaying.
In parallel, countless for-profit broker websites mimic Power To Choose in function and/or name, but with less accountability. They tout “free” advice, but are paid by Retailers to sell you plans at above-market rates. The higher the rate, the higher their commission and motive for trickery.
This environment led us to create Texas Power Guide, to level the playing field for consumers. We expose and filter out overpriced gimmick rates. We’re paid only by our users ($9.99 / new plan), which ensures unbiased ranking of all the best plans from PTC and elsewhere. And we monitor new offers for the life of your plan so you never overpay.
Beyond our model, some full-service brokers (Power Wizard, Energy Ogre, …) also manage the ~10-minute sign-up process with retailers but charge $86-$120/year. That’s fine for some, but we question the incremental value. As DIY’ers, we’d rather teach others to fish (with the right tools) than catch fish for them. If that’s you, too, read on to learn more.
Energy vs Delivery Charges
Each month, you actually pay two electric companies. You pay your chosen REP to resell you electricity at a certain rate, often called the “Energy” charges. And you also pay your Transmission and Distribution Utility (TDU) — i.e. Centerpoint or Oncor — to maintain the power lines that deliver electricity to your home. You can’t choose your TDU, and every residence in their service area pays the same regulated delivery charges each month.
Your REP bills you on your TDU’s behalf, but here’s where it can get tricky. Sometimes the REP will “bundle” the energy and TDU charges into a single, combined rate. Other times they’ll quote the energy charges separately and “pass through” the TDU charges without markup. When shopping, always compare offers “apple-to-apples” with all delivery charges included.
Fixed-, Indexed-, and Variable-Rates
A “Fixed-Rate” plan is one where the rate terms don’t change over the contract period. (But it is not necessarily a “flat” rate.) 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? Most people pay more than they think. To find out, check the fine print on your past bills that reads “The average price you paid for electric service this month is __ ¢/kWh”. The average Texan pays ~12 ¢/kWh, but savvy shoppers pay less than 9 ¢/kWh. Those numbers may sound tiny, but the average home uses ~14,000 kWh annually, for a difference of hundreds or even thousands of dollars per year.
Why do people overpay? Here are the usual reasons:
- They’re unaware they can switch providers, so they keep the pricey company their landlord, neighbor, or TV suggested.
- They’re unsure if switching will compromise their electric service. (Switching is easy and low-risk, and your retailer has nothing to do with your service reliability.)
- They shopped, but got misled by tricky websites and teaser rates.
- 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:
- 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.
- 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 harder to compute and compare your true costs.
As an example, one heavily-advertised website 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.
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 are worth it. At the very least learn your high (usually 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…
- Covers at least the plans listed on PowerToChoose.org
- Computes/compares each plan’s TOTAL cost across your month-by-month usages
- 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 only show 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 with no obligation. If it saves you time and money on signing a new contract, we ask $10 in return.
Or you can always read the Electricity Facts Label fine print and compare plans with your own spreadsheet. Countless Texans have done just that with varying success for years. We’ll even tell you how. But why should everyone have to reinvent the wheel?
Try RateGrinder » …and see how much you’ll save.
Consider Your Current Provider
This part is optional. In an ideal world, retailers would readily offer their best renewal rates to loyal customers. In reality, many publish their best rates only for new customers, while quietly raising prices for the rest (aka “tease and squeeze”). Once you’re primed to switch to a cheaper provider, a call to your old provider may spur them to offer a better deal to keep your business. BE VERY CAREFUL WITH THIS APPROACH. It’s very difficult to judge a plan’s merits over the phone. Always request the EFL and TOS documents in writing and review all the details for gotchas (or ask us) before accepting such a renewal.
Sign Up
Once you’ve selected a plan, click the ‘Sign Up!’ link on RateGrinder to sign yourself up. If it takes you to the retailer’s home page instead of the specific plan’s page, be careful as you navigate through to your targeted plan. Many retailers offer multiple, similarly-named plans with different pricing. Others will tempt you with “featured” plans that appear cheaper than your target, but stay the course. These overpriced “bait and switch” offers almost always have a catch.
Plans also change frequently, so it’s a good idea to doublecheck the key Electricity Facts Label (“EFL”) details (the name, effective date, version #, and basic pricing claims) versus those linked on RateGrinder before submitting your final approval.
If you can’t find the plan you were expecting, make sure the website applied any needed promo code; try reclicking the ‘Sign Up’ link, copying that link to a different browser session, or manually entering the promo code. If you visit retailer websites directly — without the benefit of any promo codes — you may be shown only different, higher priced plans than those on RateGrinder.
Pick the right start date. Most plans issue bills on standard “billing cycles” that match the monthly meter reading schedule for your address. If you start a plan on an off-cycle day, you’ll get partial-month first- and last cycles, or 13 billing cycles in 12-month plan. That’s fine for plans with flat rates. But for plans that levy charges or credits per “billing cycle” (full or partial), you may end up paying more or less. See RateGrinder’s “When to Switch” section for help picking the best plan start date for your billing cycle.
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 old provider, and there’s no risk of electricity loss. The process normally takes 3 to 7 days. You’ll receive a postcard in the mail confirming your switch details.
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, we highly suggest taking advantage of TPG’s free RateAlert service. It not only sends reminders of your plan expiration, but it monitors new offers every day and alerts you if switching early would save you more money.
Spread The Word
Most people would rather eat brussels sprouts than shop for electricity. 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.
Related Topics:
How To Compare Texas Electric Plans
Electricity Shopping Timing Tips
Electricity Shopping Gotchas