Most Texans live in an area with deregulated electricity, and this means that about 85% of the state’s population has the power to choose their electric supplier. If you’re new to Texas or are moving from a portion of the state that isn’t deregulated, you might be unfamiliar with how this energy system works. Even if you’ve always lived in a deregulated area and aren’t familiar with anything else, learning some of the details may be the best help to cut your power bill significantly.
How does Texas electricity deregulation work?
Under the traditional model, one power company handled all aspects of electric service. They owned and maintained the power lines and poles, they billed you according to your electricity usage for the month, and they took care of all customer service issues and questions. Several states, including Texas, have tried to eliminate this monopoly by splitting the energy transmission and the billing into separate functions for different power companies. There is still only one company in your area that handles the transmission and delivery of electricity. (It wouldn’t be a good idea to have 20 different power companies each installing their own lines and poles across the entire state!) However, there are now numerous companies in Texas that can sell you the electricity itself, and each one has various plans.
Selecting a Texas electricity plan
In the state of Texas, for example, there are over 300 electricity providers to choose from. As a natural part of competition, each power supplier can offer its own plans and rates in return for the energy and associated services. Unfortunately, the various Texas suppliers each do things differently, so their electricity plans can be hard to compare. Electricity plans may or may not include certain services or fees, and this makes it hard to determine which plan is the best. Does an electricity supplier make up for a low rate by charging certain fees as separate line-items? Are you going to pay extra fees or penalties because of limitations to what the electricity plan covers?
The Texas electric providers aren’t necessarily being deceptive. This is just a part of competition–electricity providers come up with different and creative plans as ways of trying to attract customers. What is means, though, is that you have to know how to compare apples to apples when looking for the best Texas electricity rates.
The components of your electricity bill in Texas
If you look carefully at your electric bill, you will see a variety of individual charges: energy charges, delivery charges, service charges, meter fees, and any number of other line-items. It may be helpful, therefore, to understand the different parts of your electric bill, both so you can know what you’re paying and understand what can and cannot be changed in the plan.
Energy charges are what people tend to think of when considering what they pay for electricity. This is where you are paying strictly based on the amount of energy you use in a month (and possibly when you used it). Your electricity plan charges you for each kilowatt-hour (kwh) of power you use. You may be charged one flat rate per kwh, or you may be charged a different rate at different times of the day or month, but it all comes down to how much energy you use.
Electricity delivery charges
In Texas, delivery charges cover everything it takes for the utility to get the electricity from the generation station to you, the end-user. These charges vary by utility, and they can charge you in any number of ways–not just per kwh of electricity. Generally speaking, you’re not going to be able to change what the utility charges for these services. You can change your electricity usage habits, and over time, this can reduce what you pay, but you can’t do anything to change the way it’s calculated.
This can be both good and bad. Of course, it would be nice to be able to negotiate a new, lower rate from the utility like you can with electricity providers in Texas. However, at the same time, you don’t have to worry about your utility fees going up just because you switch electricity plans or power providers. There are enough factors to compare when shopping among the different Texas providers and their electricity plans. If utility fees could go up and down, this would make it even more confusing.
The one thing that can change with utility fees is how the electric plan bills you for them. Since the power supplier is the one that bills you, they essentially just pass on the fees that the utility tells them to charge. However, in Texas, a plan can simply add the fees on your bill as separate line-items, or it can absorb the cost and work it into the per-kwh rate the supplier charges. Thus, a plan may charge you a higher rate, but it will include all or part of the electricity transmission fees.
These are the fees that some Texas plans charge you… just because. It may be in the form of a meter fee (a charge for every energy meter you have) or a base fee / account fee (a monthly charge for each account). Some providers justify this as being for billing, service, or even technology. Ultimately, they’re charging you extra money just because they can. It may not exactly be deceptive–since most Texas power providers have these charges–but it’s certainly unnecessary. When negotiating rates, TruEnergy is able to eliminate these extra fees in virtually every circumstance.
Texas electricity taxes
Taxes are one of the certainties in life, so this may be the most simple charge to understand. Unless you’re exempt for some reason, you will have these charges on your electricity bill.
What is surprising to a lot of people, though, is the types of accounts that are (or should be) tax exempt. In Texas, for example, there are certain types of manufacturing, food and beverage producers, RV parks, apartment complexes, golf courses, and many other businesses that are exempt from some or all of the taxes on their electricity bills. Unfortunately, many of these have been paying the unnecessary taxes all along because no one ever told them their account should be exempt.
TruEnergy can tell you if your Texas business qualifies for an exemption, and in most cases, we can even get the state to pay you back for some or all of the excess you have paid through the years. Call us today to find out if your business meets the criteria.
Your electricity rate: the different ways to calculate what you pay
When it comes to the energy rate, there are a few different types of plans that determine how the supplier charges you. Each has it pros and cons, and which is best depends entirely on what you’re looking for in a new power plan.
Fixed rate electricity plans
The simplest way of calculating your electricity bill is with a plan that charges you a certain amount for every unit of electricity you use. This is a flat rate, 8 cents / kwh of electricity, for example. Whether your usage for the month is 1 kwh, 100 kwh, or 10,000 kwh, you pay that same fixed cost per kilowatt-hour of usage.
The benefit of this type fixed rate electricity plan is its stability and consistency. When you sign a contract in Texas, you are locking in that new rate for the entire length of the electricity contract. Lots of customers prefer this type of fixed rate plan since it does the best to help them budget their electricity expenses. If the cost of electricity skyrockets during a winter storm (like the February 2021 one in TX) or during an intensely hot summer, your power rate will not be affected. When other people’s electricity bills go up, yours will stay the same.
The other side of that coin is that if electricity rates go down during the term of your contract, your per-kwh rate will stay fixed where it is. Granted Texas electric rates don’t generally drop in the extreme ways they go up, but it can happen. The big issue is that power providers are going to hedge their bets when they offer long-term electricity rates. They know real-time power rates can easily go up, so they’re going to charge you a little extra to cover themselves when this happens.
Indexed (market) rate electricity plans
With indexed rate electricity plans, you don’t rely on the power provider’s complex calculations of what the electricity market may or may not do in the future. Your new rate simply follows along with the market rate. Because the Texas energy market rate changes constantly, the rate you pay for electricity will also constantly change. An indexed plan still adds a little bit to the rate so they can make money off you, but the only fluctuation on the electricity bill comes from the energy market itself.
The benefit of this is that it takes some of the power out of the provider’s hands, With a fixed rate power plan, there’s always the chance that the supplier won’t add enough “padding” and you might still come out ahead if electricity market rates increase enough. It’s a gamble for the power suppliers to give you a plan with a fixed rate when the energy market can be so volatile, but just like at the casino, it’s a pretty good bet that “the house” is going to come out ahead. Electricity plans in Texas will likely add enough to cover the supplier and a little more to be safe. With an indexed rate plan, you pay according to energy market changes, not according to how the electricity supplier hedges their bets.
The downside of a market rate plan, though, lies in that volatility itself. In February 2021, for example, some Texas homeowners got electricity bills for thousands of dollars when energy market prices skyrocketed. Some Texas business owners likewise got bills for tens or even hundreds of thousands of dollars, and all because they had power plans with market rates–with a fixed rate plan, their electricity bills wouldn’t have been any higher than usual. Granted events like this are rare in Texas, but they do happen.
Out-of-contract rates for electricity
At TruEnergy, we occasionally find people who are wary of contracts in general. An energy contract means that you are stuck with the same electricity plan and the same supplier for the length of the contract. If you decide you want to switch to a new supplier, you will have to pay a penalty. Likewise, you’re stuck with an electricity plan that you can’t change. Again, if another Texas power supplier offers you a better electricity rate, you have to pay a penalty to switch to that new plan.
The problem is that, generally speaking, out-of-contract electricity rates are the highest we ever see! If you don’t have a power contract to protect you, the supplier can charge you pretty much whatever they want–and often they do just that.
To make things worse, you don’t just end up with a high electricity rate; you end up with a high rate that changes with the Texas energy market. You’re paying too much, for electricity and you have no consistency: the worst of both worlds!
We understand that some people in Texas are a little skittish about contracts. Look at it this way, though: If you don’t like your current electricity supplier, why do you need to hang onto the ability to leave? Go on and switch now! And if you do like your supplier? Why wait? Go on and lock in the best rate you can get in an electricity plan.
Prepaid electricity rates
Prepaid plans are the outliers of rates in that these do really include everything. In Texas, Pay As You Go plans charge you a set amount for a specific number of kwh of electricity. Thus, the electricity plans essentially bundle their rate with all the taxes, delivery fees, etc.
One of the problems with prepaid electricity rates is that they’re going to be significantly higher than other plans. Part of this is just because they include all the other fees. Another part of it, though, is that many of the taxes and delivery fees are typically not charged on a per-kwh basis. This means the electricity provider has to estimate what they think is the equivalent amount per kwh to cover the fee. Of course, since this is an estimate, they could theoretically end up shorting themselves. To prevent that, they just tack on a little more to the rate to make sure they always end up ahead.
These Pay As You Go electricity plans do have their advantages, though. There’s no deposit and no credit check, and there’s no long-term commitment. Also, these energy plans give you the added flexibility to pay what you want when you want. You can get daily notifications about your electricity usage, adjust it as needed, and never again be surprised by a huge electric bill at the end of the month.
Wholesale electricity rates in Texas
With a wholesale electricity plan, you pay the actual Texas wholesale electricity rate. You still have to pay any taxes and fees required by Texas law, but there’s not any markup on the rate itself. If you use a lot of electricity, this can translate to significant savings, but it also comes with tremendous risk. The wholesale power market, in particular, is extremely volatile.
In Texas, there is a price cap on what you can be charged for electricity, but for years, this limit has been $9 / kwh–hundreds of times higher than the average price of electricity! In December of 2021, the Texas legislature voted to reduce this to $5 / kwh, and while this certainly helps prevent the outrageous electricity bills some people saw in the wake of Texas’ February 2021 storm, this is still at least 100-200 times the average price in a given year!
Shopping Texas electricity rates: a one-time task, or an ongoing project?
As noted above, indexed electricity rates constantly change with the Texas power market, but even fixed rates fluctuate through the year. When you sign up for a fixed-rate electricity plan, you lock in that rate, but the rate moves daily until you sign. So, if you are shopping new electricity plans online, you can find the best one available now, but do you know if you might find a better rate next week? next month? maybe even tomorrow?
Certain things consistently cause changes in the electricity market. High demand for power in the summer and winter months, for example, will raise electricity rates. If you’re shopping during a time of peak electric demand, you may not be getting a rate as good as with a plan that would be available in another month.
This is not to say that the Spring and Fall months are the only times to sign up for a new electricity plan. There are a lot of other factors involved in power market rates, and sometimes the best you can do is continuously monitor Texas power rates as they rise and fall through the year.
Where to find the best electricity plans in Texas
With energy deregulation, Texans have the power to choose from a wide selections of electricity providers and plans. What’s the best way to find this though? Do you shop around yourself? Do you hire someone to do this for you? Do you rely on any of the many websites that are set up to compare the best electricity rates in Texas? Here is an overview of the different ways you could choose to do this:
Shop around for electricity yourself
It shouldn’t be too hard to contact your current electricity supplier and ask what they can offer you on a new plan. Maybe it will be the same rate as your old plan. Maybe they will tell you electricity rates have gone up since then. Maybe (just maybe) they might even offer you a new plan that is a little cheaper than last time. That’s a good start, but how far does this really get you?
- Are they offering you a rate that’s as low as what they’ve given other customers? Rates are often customized by usage, location, and many other factors, so there’s a lot of leeway in what power suppliers can charge for electricity plans.
- Are they offering you a new rate that’s as low as what you could get from another electricity supplier? Rates change so frequently that the cheapest power supplier in Texas may not be the beast tomorrow, much less next week or next month. Even if you could be absolutely certain last time that you were with the cheapest provider, do they have the best plan now? And how long are you going to spend contacting different electricity providers? In Texas alone, there are more than 300 to choose from!
- Does another energy supplier have electricity plans that would fit you better than the plans available from your current electric supplier? For that matter, does your current power supplier have an electricity plan that would fit you better? At TruEnergy, we’ve seen more than one way that the “cheaper” electricity plan can cost a customer more in the long run.
Use a site that compares Texas electric rates from different electricity providers
Lots of sites out there claim to be the one-stop shop for finding the best energy rates in Texas. Just start by entering your zip code! Is it really that quick and easy to choose the best plan and cut your electric bill? Are these power sites all the same? If not, how do you determine which is the best to use?
These sites don’t necessarily make it any easier to shop the available rates for electricity. Remember, it’s not always simply a matter of finding the absolute cheapest power plan in Texas. If the new plan doesn’t match your energy usage habits, you can end up spending a lot more for the “cheaper” plan.
The Public Utility Commission comparison site
The Texas Public Utility Commission has a site that is supposed to make it easier to find the best Texas electricity rates. The PUC’s objective is to be completely unbiased with the different electricity providers, so they allow any supplier to post any plan on the site. The power suppliers are required to disclose certain information about the plans, but this does not mean that you can get the full picture just from browsing rates on the site. Some providers are more deceptive than others, so you really need to read the contracts for each electricity plan to make sure you’re really getting the best deal. How many electricity contracts are you going to read (or even skim) before you give up?
The dangers of “bill calculators” and comparison sites
Lots of other electricity sites have popped up through the years, following the format of the PUC’s site. Most of these sites, though, have the same issues as the PUC. How well do they explain the terms and conditions of the new electricity contract? Do they leave it up to you to read the contracts and compare the electricity plans? Can you even be sure that you’re signing up with a reputable provider? How many online reviews do you need to sort through to make a decision on a new supplier?
Some sites even have “bill calculators” that will supposedly tell you what your electricity bill would be with a given plan. In all actuality, the best they can do, though, is use your estimated usage to give you an estimated energy charge, and then add on estimated distribution charges and estimated taxes based on your location. This is rather deceptive, though, because the only piece of their equation that will make a difference is the rate–and we’ve already covered how the “cheaper plan” can potentially cost you more money if you’re not comparing apples to apples.
That’s not to say that every site is bad. TruEnergy even has a site to do just that! We’re here to walk you through any questions you have, but some Texas customers just want the simplicity of signing up for a new electricity plan online. The difference, however, is in the level of service you can expect if you have a problem with your electricity account. Lots of Texas energy companies will help you sign up for a new plan, but then they conveniently forget about you until next time you’re shopping rates for electricity. TruEnergy customers know they get unparalleled customer service along with the low rates, whether you’ve been with us for 10 years or are signing up for the first time!
Hire someone to shop electricity rates and plans for you
Along the same lines as the comparison sites, there are energy brokers all over Texas who claim to be able to find you the best plans available. With over 1,500 registered brokers in the state, though, all the same problems remain. How do you find the best energy broker? Do they really have your best interests in mind? If you have to pay them, is it going to be any cheaper than doing it yourself?
If you get a call from a Texas electricity broker–or if you’re seeking one out yourself–here are some questions we recommend asking.
How many electricity providers do you work with?
If a broker is only partnered with a few electricity providers, they probably cannot get the best rates. A good broker is going to make the different electricity providers compete for their business–a reverse auction of sorts. The more providers you work with, the more options you have, and the better leverage you have to make them give you competitive rates for electricity.
More is not always better, though. If a broker works with too many providers, it’s a good sign that they’re not very picky about their partners. Some Texas electricity providers just aren’t as reputable as others, and a good brokerage should have its own criteria for selecting the best supplier partners.
TruEnergy works with about 30 different electricity providers in Texas. This lets us pick from among the best providers in the state and still gives us plenty of options for our customers!
What will you charge me for this service?
Simply put, if you have to send money to the broker when you sign a new electricity contract, go elsewhere. Texas brokers get paid by the providers, based on the customers we sign up. When you pay your energy bill, the supplier uses that money to pay its expenses: its employees, its equipment, its own utilities, and yes, its brokers. You shouldn’t ever be expected to pay anything additional–no-line items on your bill and no “membership fees” to the broker. Your rate includes what we get paid. Anything else a broker tries to charge you is just double-dipping!
What do I do if I have a problem with my electricity account or my bill?
A lot of Texas energy brokers seem extremely helpful when trying to sign you up for a new plan, but then they seem to forget about you until the next time you’re ready to sign. Other brokers will tell you that they can handle your customer service issues, but in reality, all they do is help put you in touch with someone at the electricity provider. Still others say they will handle the issues themselves, but you’re left thinking you could get it done faster yourself.
Every supplier has its own customer service, so when you switch to new supplier, this is usually another factor you have to consider. The best rate only goes so far if the customer service is horrible. When you use a broker, you need to consider whether they are going to make the process better or worse. Are they really going to handle all the issues, or will they just add another complication as you try to find someone who can help you solve it.
At TruEnergy, we attract customers with our rates. After all, those speak for themselves. But it’s our service that really impresses our existing customers and brings them back renewal after renewal. We have hundreds of 5-star reviews on Google to attest that we’re the best! Check them out for yourself. Then call us and let us help you find the best electricity plan for you.