Showalter

Tired of endless commentary on politics and the virus? Me too, so I turn your attention to the fascinating topic of deregulated electricity markets.

Almost 20 years ago, Texas got rid of old-fashioned public power companies and introduced a free market system for buying and selling power.

Rather than purchase power from a single tightly regulated public utility, consumers were given the opportunity to comparison shop from a wide variety of retail electric providers.

In theory, competition would drive down prices while increasing the supply of energy, which would power our growing economy.

In some ways, competition has worked out well, but in other ways, competition has failed.

Power customers in Harris and Dallas counties have a wide variety of choices, but they actually pay more for electricity than residents of Austin or San Antonio. The two latter cities stuck with the old public utility model, and consumers have benefited.

This may seem counter-intuitive, but public utilities have the advantage of predictability. They can plan years in advance and purchase power cheaply on long term contracts with electricity generators.

Free market electricity rates fluctuate with the immediate supply of power, and prices can spike severely in the hot summer months. The price of uncertainty and unpredictability is passed along to customers.

Regardless, there are still ways to reduce your power bill, but it requires some homework and deciphering some fine print.

Power to Choose is a website run by the Texas Public Utility Commission, and it provides a dizzying number of companies and plans. It can be overwhelming, so you need to do a few things to prepare.

First, look at your power usage each month over the last year. Second, look at how much you pay per kilowatt hour or KWH.

Most homes use between 1,000 and 2,000 KWH per month, and most customers pay between 8 and 11 cents per KWH. So, if you use 1,0000 KWH at a rate of 9 cents, your bill will be around $90.

You will get a better rate if you lock into a one or two year contract. That will fix your rate and bring predictability to your bills. If you opt for a variable or month-to-month plan, expect to pay as much as 14 cents per KWH. Using my previous example, that is an extra $50 per month for the same amount of juice.

Next, pay very close attention to the Electricity Facts Label. The EFL is very confusing, but it reveals hidden fees, potential rebates, and charges based on usage. 

The EFL rate is based on 1,000 KWH or more, but most plans charge a higher rate for using less than that. That is why you need to know the amount of power used each month.

Beware of low teaser rates. Some companies sell for 6 or 7 cents per KWH, but if you use more than 2,000 KWH, they will sock you with a hefty rate increase or a punishing surcharge.

Free nights and weekends are also kind of a racket. You might save a little money running the clothes dryer at night, but you will pay a much higher rate for running the air conditioner during the day.

Basically, the power companies are hoping that you sign up, get confused by the fine print, and forget to renew at the end of your contract. Then the month-to-month rate kicks in and you get taken to the cleaners.

Let the buyer beware.

 

Dr. Steve Showalter is a government professor at Lee College in Baytown.

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