Posted by: Frank Eakin |

The Savvy Shopper’s 10-minute Guide to Choosing the Best Energy Plans in Texas


8 Things
You Definitely
Must Consider
  • Looking for a new Texas electricity plan and the lowest electricity rates?
  • There are 8 crucial things you need to consider to get the
    best energy rate possible from the best electric company and avoid costly billing surprises.
  • These things are often overlooked without the guidance of an expert, but worry not, we’re here to help.

The Texas Electricity Plan That’s Exactly Right for You

There are hundreds of electricity plans in Texas and electricity rates at various usage levels. It’s overwhelming to figure out which energy plans are a good fit for your home, which ones contain gimmicks that set you up for a painful bill shock, and which electric companies are trustworthy.

Follow these steps and you’ll be shopping like a pro in no time.

1

Where to start

Are you moving into a home and need a new plan, or switching energy plans for your current home?

A Switching:

If you’re switching plans for your current home before your contract end date expires, beware of early termination fees (called ETFs).

The Electricity Facts Label (EFL) associated with each plan discloses the fee you’ll pay if you cancel early. If you find a plan with a much lower rate than you’re paying now, you may come out ahead by paying the early termination fee and switching, but you’ll need to do the math first. If you wait until 14 days of your current contract expiration to switch, you can avoid the fee.

Also, you can usually enroll in a plan weeks or months before the start date to secure the plan at the advertised rate at that time.

B Move-in:

If you’re moving into a home, you’ll be asked to provide your move-in date during the enrollment process, and you can usually get an expedited date if needed.

If it’s a new-build home, be sure to speak with the area’s transmission and distribution utility company (TDU) to be certain the meter hookups will be ready when you move in, and that you have an ESID number assigned to your new address, which the electricity provider will need when you enroll in an energy plan.

If you are moving into an apartment or condo, check with the landlord to find out if you will be responsible for lining up electricity, or whether the landlord manages energy purchases.

C Move-out:

If you’re terminating your electricity plan before your contract end date because you’re moving away, there is generally no early termination fee.

Also, if you’re moving away to an area where your current provider delivers service, the provider will normally be happy to move your current contract over to your new address without an extra charge.

2

What is your home’s energy usage?

The price you pay for energy will depend on your energy usage.

 

Electricity Price
Average Monthly Use
Average Price per kWh
500 kWh
11.5 ¢
1000 kWh
8.4 ¢
2000 kWh
11.9 ¢

In the EFL for each plan, you’ll see different price points based on average monthly usage levels of 500, 1,000 and 2,000 kilowatt hours (kWh). See sample above. Visit Smart Meter Texas to access your home’s historical electricity usage.

A monthly usage level of 500 kWh may be for an apartment or condo, 1000 kWh for a small to mid-size house, and 2000+ kWh for a larger home.

There’s no one-size fits all when selecting an energy plan

 

Providers often design each plan to provide optimum pricing for a certain range of usage, so it’s important to select the correct plan for your home based on your expected kWh consumption. If you choose a plan that doesn’t fit your home, you will pay much more than necessary and risk major bill surprises.

Estimate your future energy consumption based on your prior 12 months of usage

Estimate your future energy consumption based on your prior 12-month usage. You should review usage over an entire year due to seasonal fluctuations, and understand the peaks and valleys of your usage to select the best plan for your home.

You can likely automatically pull up your historic usage from your utility company at SmartMeterTexas.com. While you’re at it, calculate the average rate you actually paid for the last year.

Since numerous factors influence your home’s usage level, such as weather and insulation, there is no method to precisely predict what your usage will be in the future, but historic usage should be a good indicator.

3

What month of the year are you planning to switch?

Rates are often higher in the hot summer months because electricity demand significantly increases

If you decide to enroll in a long-term fixed rate plan in summer, you could be locking in pricing at peak levels.

Many homeowners have found that enrolling in long-term fixed rate plans in late winter or early spring months is a good strategy to gain a lower rate for the term of your contract.

Due to market supply-demand imbalances, it’s possible that this trend won’t always hold true, but the odds are good that locking in a rate during low demand periods will save you money.

If your current fixed-rate plan is ending during a summer month, you might consider enrolling in a partial year plan (like a 6-month plan) in summer that ends in a late winter or early spring month, and then enrolling in a 12, 24, 36 or 60-month plan to lock in a rate when pricing is usually lower.

If your plan already renews in a late winter or early spring month, be careful about enrolling in a partial-year plan that may have an attractive rate, but which has a contract end date in late spring.

Providers often offer partial-year plans with very attractive rates that end just before summer, but after such a plan expires, homeowners then have to enroll in a new plan in a warm-weather month when rates are seasonally high.

4

What are your needs and what is your risk tolerance?

 

Do you have a very defined monthly electricity budget?

If so, you should probably go with a fixed-rate contract so you can more easily predict your bill amounts. You’ll see a filter on the home page of Home Energy Club that allows you to view only plans that result in bills which are more predictable.

 

In order to attempt to get the lowest rate for each period of the year, are you willing to monitor and research “no contract” month-to-month plans throughout the year?

Some homeowners who don’t mind the hassle of continuously shopping for electricity rates decide to enroll in variable-rate plans that offer low introductory pricing for the first one to three months, but then increase significantly, and the customer must research the market again for a new plan. If that’s not you, probably a competitive fixed-rate plan will best fit your needs.

Variable-rate plans are more likely to result in bill surprises because rates can usually change monthly and homeowners may forget to monitor pricing. However, if you only need electricity for a few months during a transition, such a plan may be a reasonable choice, depending on whether the energy provider will inform you in advance of any rate increases so that you can exit the plan promptly without paying an early termination fee.

 

Would you rather go to bed at night knowing what your electricity rate will be for a long term, or can you stomach the volatility and high risk of an index rate that floats with the market, and potentially delivers a better average rate over a year?

Most homeowners elect to lock in a fixed rate, but if you wish to take a chance to get a lower average rate, be sure to carefully consider the risk of large bill surprises, especially in the summer months and during winter freezes. Some customers experience bills in the thousands of dollars because they take the risk of enrolling in indexed “wholesale price plans” which have rates that float daily with the market.

Index-rate plans do not offer the ability to lock in protection against rate spikes, and we strongly recommend that you not enroll in these types of plans. We don’t offer index plans on Home Energy Club.

Many Texans have become accustomed to locking in multi-year fixed rates when pricing is at cyclical lows, which protect them against rate spikes and against gradual increases in rates that inevitably occur during market cycles.

5

Choose your length

Define your preferred length term

 

Long Term (12, 24, 36 and 60 months)
  • Good for homeowners
  • Offer greater stability
  • Ability to lock-in low prices

 

Short Term
  • Good for renters
  • Offer greater flexibility
  • Tailor-made to your lifestyle
6

Choose your rate

Fixed Rate

With a fixed rate plan, you pay a fixed rate for the term of your contract

 

Pros
1. Lock-in a fixed electricity rate
2. Most common terms are
  • 6 months
  • 12 months
  • 24 months
  • 36 months
3. Offers locked in electricity rate throughout the seasons
4. Your exact electricity usage is the only unknown
5. Saves money when electricity prices are rising and cuts           bill surprises caused by seasonal rate spikes.

 

Cons
1. Committed to a contract for the term you select
2. Early termination fees (unless you are moving out)
3. Miss out on lower rates during contract term if there’s a decline in market energy prices
  • Best time to sign up for a fixed-rate plan to ensure lower rates is late winter or early spring (after winter peak and just before summer peak)
Great for those who:
1. Like price stability
2. Like to lock in long-term rates during market downturns as protection against increased rates during market recoveries
3. Have a monthly electricity budget
4. Don’t like electricity bill surprises from rate spikes

Changing Rate (Variable)

With a variable rate plan the rate you pay will fluctuate based on the market price of electricity and the discretion of the provider.

Market prices are influenced by factors you can’t control such as:

  • Weather
  • Demand
  • Commodity fuel prices that drive generation costs
  • Generation plant and distribution system issues
  • Decisions by providers to hike prices

Your electricity bill will fluctuate month to month due to price changes, even if your energy usage stays the same

 

Pros
1. Not committed to a contract
2. Some months you may pay less than in a fixed rate plan
3. No early termination fees

 

Cons
1. Some months you’ll pay a lot more, especially during hot summer months and months with winter freezes
2. Unpredictable bills
3. Spike in prices could affect your finances
Great for those who:
1. Move often
2. Like flexibility
3. Don’t have a fixed monthly electricity budget
4. Like to shop for rates continuously
5. Don’t want to enter into contracts
6. Are waiting for fixed rates to decrease

Market Rate (Indexed)

With an indexed rate plan, your rate is associated with an underlying market variable disclosed in your contract, such as a publicly-traded energy commodity index that tracks the price of gas

The rate can change monthly, daily or even multiple times per day for “wholesale price plans” which track the commodity index

 

Pros
1. You can save money if the price of the variable is low

 

Cons
1. Requires monitoring and you should have an understanding of the variable and how it affects your electric bill
2. Prices can increase drastically based on index spikes
3. Index rates can change depending on such factors as:
  • Natural gas or other energy commodity prices
  • Weather
  • Demand for commodities
Great for those who:
1. Who can actively monitor pricing and usage
2. Don’t need price stability
3. Don’t mind the risk
4. Can afford a drastic price increase
7

Beware of too good to be true offers

Free Nights and Weekends

 

These plans are created to incentivize you with “free” electricity during off-peak hours

 

Such plans help power companies control power outages and maintain equal energy usage throughout the day

 

These types of plans can be good for certain customers, such as homeowners who consume a certain percentage of their electricity during nights and weekends, and during specific time periods during the week

The Catch:
1. For most homeowners, the average price per kWh of these “free usage” plans is usually much higher than for regular plans based on typical homeowner usage patterns
2. You’ll end up paying far more than a regular plan for the electricity used during non-free days

 

These plans sometimes have longer contract periods and higher cancellation fees, and can create bill surprises depending on your energy usage patterns

Tiered Rates Based On kWh Usage

 

These plans generally offer a fixed amount of kWh per month at a very low price

 

If you go over or under the defined kWh per month, you’ll likely end up paying very high rates

The Catch:
1. There is sometimes a fee associated with these types of contracts if you go over a specific usage amount, or high rates if you use less than a specified amount. For example:
  • If you use over 1,000 kWh, you can end up paying a large fee for the month
  • If you use less than 1,000 kWh, your effective rate may be very high
  • In gimmick plans that are extremely onerous, you can end up paying a large fee if you don’t use exactly 1,000 kWh in a month

Bill Credits

 

These plans offer bill credits if you stay within a certain range of kWh usage during your monthly billing cycle. The rate associated with the target usage range can be attractive, but you may find it difficult to predict if you will stay within the range in a given month due to the impact of weather extremes.

The Catch:

1. Consider a plan with the following specifications from an actual bill credit plan:

  • Energy rate of 11.85 cents/kWh
  • Utility delivery charge of $5.47 per month plus 4.11 cents/kWh
  • Bill credit for $75 if you use between 1,000 and 1,999 kWh

2. In the following scenario:

  • A company offers a $75 credit if you use between 1,000 and 1,999 kWh in a month, and the energy and utility charges shown above apply. The rates per kWh would be:
    – 500 kWh usage: 17.1 cents (very high rate)
    – 1,000 kWh usage: 9.0 cents (good rate)

    – 2,000 usage: 16.2 cents (very high rate)

  • You would need to stay between 1,000 and 1,999 kWh in a month to benefit from bill credit and get a good rate
3. As your usage increases from 1,000 to 1,999 kWh, your bill credit becomes diluted and the amount of your rate will increase significantly as you move toward 1,999, though it may still be a decent rate at the low to middle of the usage range
4. If you use under or over the target range of 1,000 to 1,999 kWh, you will not qualify for the bill credit and will end up paying a very high rate, creating a bill surprise
8

Avoid any surprises

CHECK
  • Provider’s reviews, satisfaction surveys, complaints and scam scandals online:
  • Note that customers taking the time to fill out reviews of electricity companies often provide information only if they have a complaint, and not if they have a good experience
  • On the other hand, be aware that some providers have been known to “game” their star ratings and online reviews, especially smaller providers

COMPARE

Your real cost to the average retail cost of energy in your area of Texas, or compare with your neighbors.

DON’T let your contract expire before having a new energy plan

  • Retail electric providers are required to notify residential customers at least 30 days before a contract expires
  • You can terminate a contract without incurring an early termination fee and switch providers within 14 days of the expiration date
  • If you take no action in response to the notice, your retail energy provider will serve a month-to-month plan, which is usually significantly more expensive than your fixed contract rate

DON’T let your contract expire in the summer (when rates are the highest)

 

  • To avoid summer expiration dates, choose a partial-year contract and get on an contract cycle starting when rates are lower

Congratulations!

You have now become a master energy plan shopper. If you are still having trouble figuring out the best energy plan for you, visit us at Home Energy Club. We offer special discount rates from trusted name brand providers, and we vet each plan using our TrustPlan process to make sure that it’s “gimmick free”. We do the homework, so you don’t have to!

As a last but very important piece of advice, remember:

Don’t let your contract expire without renewing or switching to avoid a rate spike


Fixed rate plans are less likely to cause billing surprises


Beware of gimmick plans with rates that are too good to be true


Go to HomeEnergyClub.com for discount plans you can trust


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