Texas Electricity Consumer Questions—TDU Charges

Occasionally, folks ask some good questions when they’re shopping for electricity. Our Texas Electricity Consumer Questions Series tries to clear up the confusion and answers those questions so you can be a better informed consumer.

Generating electricity is only half its cost. Getting it to you is the other.
Photo by Ladyheart at Morguefile.com

From J. in Sharyland— “Are there any REPs that don’t have high TDU charges?”

We understand your frustration, J., but remember that REPs don’t have TDU charges —consumers do. Here’s why:

TDU’s own and maintain the local network of transmission and distribution lines. TDUs must offer access to their wires to all REPs on a non-discriminatory basis under standard terms and conditions set by the PUC. REPs sell the electricity to their customers.

Electricity consumers live within a TDU company’s service territory and receive their electricity via that utility’s wires. The consumer buys the electricity from an REP but must pay for the transmission and distribution of that electricity over the local wires to their home.

TDU delivery charges depend on where the consumer lives, who their TDU is, and the PUC-approved rate their TDU can charge them based on their electrical usage.

TDU service territories in ERCOT are divided into 5 main service areas which are based on the original investor owned utilities (IOU) from before deregulation. These IOUs are:

Texas-New Mexico Power Company (TNMP)
AEP Texas Central
AEP Texas North
Center Point Energy
Oncor

Sharyland Utilities territory mainly straddles Oncor and AEP Texas North.

Some background—
Back in March 2015, Sharyland Utility residential customers saw a 25% increase in their TDU charges. The increase stemmed from Sharyland’s rate case application to the PUC to increase it’s rates following its merger with Cap Rock Energy. The new service territory was then known as “SU-CapRock”.

Unfortunately, settling the whole mess turned into a game of “kick the hornet’s nest”. The PUC and all concerned parties are still working to sort it all out. Sharyland’s delivery rates remain among the highest in the state.

Celebrate Your Independence —You’re Free to Choose!

alamo-fireworksThis coming January 1 will mark the 10 year anniversary of the end of the reign of the old incumbent Texas utilities and the opening of competition among new retail electricity providers.

That means for ten years, consumers in the Lone Star State have been free to choose what kind of Texas electricity plan works for them. That means for ten years, consumers throughout the ERCOT region haven’t had to wait for regulators and utility bean counters to strike a bargain in a closed room on how much you were going to pay for your electricity. Nor have you had to conform to a one-size-fits-all kind of service. Instead, energy consumers have enjoyed the ability to select plans that fit their needs backed by great incentives and convenient services such as monitoring your usage and paying your bills on-line.

In short, you’re free to choose your electricity plan and provider. Don’t think its a big deal? Just ask consumers in the 35 states that don’t have electricity choice if they like being tied to one utility when rates go up or isn’t interested in improving customer satisfaction. Ask them if they like their utility thinking of them as just one more part of “the load”.

So this July 4, fire up your grills, set off the fireworks, and reaffirm your freedom to choose! Ten years of Texas electricity choice remains revolutionary!

The Texas Flood of 2016 & Your Electricity Bills

El Niños bring cool, wet weather in Texas by blowing persistent and extended Pacific jet stream across the state. While this helps kill off hurricanes, it amplifies storm tracks across the southwest and Texas bringing more rain into the Lone Star State — up to a foot or more on average. And this El Niño has been particularly strong.

However, the real culprit behind the recent flooding was a weak low pressure sauntering across the state, sucking in sea-level moisture from the Gulf. Weather Underground says the low is going to “trudge toward central and eastern Texas by Friday, then stall out before drifting southwest” when it will likely be dragged off by another weather front this weekend. Only then will Texas get a chance to dry out. It may not last long as NOAA forecasts more precipitation moving back into the state from the Gulf by next Sunday.

In the past week, parts of Texas and Oklahoma have received daily rainfalls of 7 to 11 inches —something like 400 to 600% ABOVE NORMAL. The US Geological Services reports flooding in all of Texas’s major river basins. At least three reservoirs are forced to release water due to exceptionally high levels.

Over the next thirty days, southeastern Texas will probably face cooler than average weather and elevated chances for heavy rainfall primarily along Gulf. With soil already saturated, it looks like many parts of Texas could remain soggy through Independence Day.

Apart from inconvenient outages this year’s flooding is unlikely to have an immediate affect on electricity rates. However, since there has been damage to transmission lines, there could be restoration costs that could be passed on in part to customers (see SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS). This expense would show up as future bill surcharges and would be shared by all customers of the effected TDSPs.

Meanwhile, this El Niño is predicted to run of steam. The first signs are already present. In May, a band of cooler water surfaced in the Pacific Ocean at the equator. As more sea surface water cools, the more the El Niño fades, shutting down the rain-maker express. The trouble is that as El Niño fades, its high level eastward-blowing winds will slacken. And it’s these winds that suppress hurricane formation in the Atlantic.

Yep, it’s never dull in Texas! Stay tuned!

Texas Electricity Hits New Wind Milestone on Thursday

The Texas electricity grid is often looked at as the paradigm for wind energy for an electricity grid. And in many ways, that’s absolutely true. Texas achieved another milestone on Thursday night,  Continue reading “Texas Electricity Hits New Wind Milestone on Thursday” »

Texas Deregulated Electricity Primer

I saw this nice little article in the Texas Monthly today as a primer of things customers should know about deregulated electricity in Texas. It’s a great premise,  and the three things they listed are certainly things Texas customers need to understand, but I’d definitely expound on a few things that Texas electricity customers should be aware of when looking for electricity providers. Continue reading “Texas Deregulated Electricity Primer” »

Champion Energy Wins Customer Satisfaction Award for 2015

After falling to Green Mountain Energy last year in the annual J.D. Power & Associates award for customer satisfaction, Champion Energy has regained the top spot in the coveted customer survey. Congratulations Champion Energy Services! This marks Champion Energy’s 5th finish Continue reading “Champion Energy Wins Customer Satisfaction Award for 2015” »

Demand Response Programs and 2015

Now that the new year has been rung in, and everyone is getting back to their regular daily lives, it is time to focus back in on Texas electricity in 2015. I previously wrote about Critical Peak (or Demand Response) programs last July. Now that we’ve rung in 2015, lets take a quick look at the programs. With lots of people shopping for electricity ahead of the summer heat and higher electricity bills, Demand Response programs might be a good way to save money.

In short, a Demand Response program is a plan where when the electricity grid is threatened by potential rolling blackouts (when electricity demand exceeds supply), customers can reduce their only electricity consumption and receive a rebate from their electricity companies. Commercial electricity customers have had the opportunity to do this for years, but only recently has Demand Response become available for residential electricity customers.

Lots of companies offer their Demand Response plans in different ways. Some people offer bill credits, others offer specific demand response plans a customer must order. However, some demand response plans, like Direct Energy, offer their Demand Response programs a little differently. At Direct Energy, customers simply enroll in a Demand Response plan program the same way they’d enroll for something like auto bill-pay. Any plan, and any customer in Oncor and Centerpoint qualify except for pre-pay customers. So if you’re already a Direct Energy customer, simply enrolling in their plan and lowering your electricity consumption on days when you get a notice that it is a Peak Event. By doing that, customers will get a 5% bill credit on their next bill.  As far as Demand Response programs go, it’s the easiest and most seamless one on the market today.

Learn more and enroll below:
http://www.directenergy.com/reduce-your-use-rewards

 

Excellent DMN Article Highlights Confusion in Texas Electricity Shopping

In a recent article in the Dallas Morning News, Mitchell Schnurman does an outstanding job of highlighting several of the existing challenges with navigating the Texas electricity market. As someone who has operated a website for electricity in Texas for five years that prioritizes consumer advocacy, I’ve long been beating the drum that the best way to maximize customer savings is through customer education. Unfortunately, it is shocking just how many people really don’t understand how our electricity market works. This is an article that really helps drive home that necessity.

The Texas electricity market can be confusing, and things like minimum usage fees or the differences between fixed and variable plans can be easily overlooked or ignored by customers shopping for different plans available in the market. That is until their bills hit their mailboxes. Schnurman is correct, many of the fees that customers will be tagged with are hidden in paragraphs of legalese and contract fine print and can be difficult to identify if someone isn’t well informed on exactly what to look for when comparing electricity plans.

For example, I work in this space. I know that when I’m shopping for an electricity plan, I need to look first at the plan’s kWh rate, as well as the length of the contract term (I don’t shop for variable plans). Then I need to check the contract cancellation penalty (just in case I decide to leave). Next on the list is the minimum usage charge, both how much that charge is and the electricity thresholds where that charge activates. Next I check the EFLs (electricity facts labels) to see if the electricity company has any other listed items for which they can charge, as well as the plan’s Terms of Service. After that, I check out company reviews from previous customers and see if anything stands out, such as poor customer service or a company with lots of complaints for not mailing out bills consistently…anything that might be a red flag. Finally, I would see if there are any benefits, such as sign-up bonuses or rewards programs that might sweeten the deal.

That’s a lot of steps for shopping for an electricity plan, and I’m certain that a majority of folks shopping for electricity do not go through as rigorous a research protocol as myself. But they should. It’s just like buying a car, the customers that come in the most informed have a better chance of walking away with a much better deal on an automobile. Which is what makes some of the comments by Kenneth Anderson frustrating in the DMN article.

We’re almost 15 years into deregulation in Texas, and many people still don’t know the difference between the TDPS (companies who are responsible for maintaining the poles and power lines) and REPs (the electricity companies who bill you each month). And while the PUC has a point in talking about not wanting to do anything (such as an apples to apples plan to allow easier electricity comparison) to deter the competition of the market, there are certainly things they can be doing to increasing the knowledge base of Texas shoppers. For example, they could change the rules for how plans are presented, highlighting and forcing companies to put the information that most directly impacts a monthly bill front and center when trying to sell their plans, instead of burying it pages into an EFL or the Terms of Service, specifically Minimum Usage charges and thresholds. Many electricity companies in the past have billed customers based on the historical usage of their addresses, as opposed to their actual usage. Having that information front and center for customers to look up to understand an address’s past usage and how it relates to computing a minimum usage charge would be helpful as well.

The point is, that there are a number of ways to make this process easier to understand for customers and better equip them for taking advantage of everything the Texas electricity market offers. And this can all be done without endangering the competition that makes this market greater. In fact, in my opinion, it is the deep pockets of electricity companies and their substantial lobbying budgets that prevent many changes, not the fear of curbing competition between providers. But regardless of the cause, the best solution is for Texas consumers to educate themselves and find the best deals.

PUC to Vote on Important “Small Fish” Texas Electricity Exemption Rule

ERCOT is set to vote on an amendment to a rule that is commonly known as the “Small Fish Swim Free” market exemption. As much as that might not sound like a big deal, this vote actually should have huge ramifications for the entire industry of electricity in Texas, from the generators all the way down to the average residential electricity customer. So what is this “Small Fish” rule, and how does it affect day to day market behavior and retail consumers? Let’s take a look.

The Small Fish Rule states, in short, that unless an energy generation company represents at least 5% of the total market generation they are deemed by the Public Utility Commission of Texas to “legally” be seen as not having any “market power.” As a result of this Small Fish exemption and legally being seen as not having “market power,” qualifying generation companies can operate according to a different rules than companies such as NRG or Luminant. Specifically, a “Small Fish” company can choose to do things differently, legally. This in turn can cause a chain reaction in elevating the per-unit cost of electricity to retail electricity companies or other firms purchasing power. If an advantageous situation arises where a Small Fish can affect the outcome of the price of wholesale power, it is possible for them to use their actual (although not legally recognized) market power on a moment’s notice. And unbeknownst to all other market participants, raising their offer curves from cost can bump up prices to the price cap of $5000. You can see how the ability to do either could be very powerful if one company had the ability to change the whole-sale electricity prices thousands of dollars at will, depending on the circumstances.

The existing law is dependent on the concept that someone with less than 5% of the total installed capacity indeed has no market power. In other words, nothing they do can affect the whole electricity market in total, particularly in resource adequacy or pricing. Of course, on the face of it, this is a somewhat absurd comment. In today’s ERCOT, 5% of the energy generation on the market comes out to just over 4,000 megawatts of capacity. That’s a very robust amount of capacity, and significantly more capacity than the difference between Texas being put at risk for rolling blackouts and operating with ample breathing room.

To put things in perspective, lets consider an analogy to a gas station after a hurricane. You can have less than 5% market share of a cities gasoline market and during normal times it’s pretty meaningless.  But then a hurricane comes in and devastates the city and suddenly demand shoots up, and then you offer your gasoline at $10 a gallon because you know people will pay for it.  Most of the time it’s meaningless but then sometimes it’s critical. The point is, the notion that something as “small” as 5% of a market has “no power” is a roundly incorrect one. Often times, the amounts of megawatts between $100 and the price cap of $5000 is often in the hundreds of megawatts so the ability to influence prices whenever a generator feels it’s opportunistic to them is a large advantage in a times where markets are supposed to becoming more fair for everyone. Of course, this is only a problem if it’s actually occurring with any kind of frequency. From an article in Platts:

In a presentation about the NPRR to the committee, Patrick de Man, speaking for Raiden Commodities, said that on 17 days from June through early September, such a “small fish” had raised the price on a substantial part of its fleet capacity near the systemwide offer cap, which has been $5,000/MWh since June 1. De Man did not name the “small fish” in question either in his presentation or in his discussion, out of concern that it might be considered in violation of federal antitrust laws. A Platts analysis showed that on nine of the days cited in de Man’s presentation, GDF Suez, which has about 3,957 MW of capacity spread across ERCOT’s Houston, North and South hubs, priced between 564 and 1,332 MW of electricity between $4,900 and $5,000/MWh. De Man said that locational marginal price spikes correlated strongly with the times that the “small fish” in his presentation raised prices on substantial portions of its capacity near the systemwide offer cap. “How can it be a competitive and efficient market if there’s one party who is pushing prices around like this?” de Man asked.

In other words, during the hottest times of the year, one electricity generator listed as a “small fish” was consistently raising their prices near the maximum offering cap allowed, in turn effecting the pricing for everyone when they deemed it was advantageous for them. When speaking with several people who work in trading, they readily admit off the record that this kind of thing happens, that it makes their job nearly impossible to value the price of electricity, and that its most certainly market abuse. Markets need to be fair to create competition and attract capital deployment. When they are in fact not fair, then that said market breaks down. This is what is occurring right now in Texas. In fact, the former Independent Market Monitor, Dan Jones, agrees with the statement about abuse. From the same Platt’s article:

Dan Jones, who heads Potomac Economics’ independent market monitor operation at ERCOT, said his staff would consider the type of activity described in de Man’s presentation “economic withholding.” “But per [PUC] rules, it’s not market power abuse, because you have to be an entity that has market power, and by the rule, entities that don’t have 5% [of total capacity] do not have marketwide market power,” Jones said.   Jones noted that his State of the Market Report for 2012, issued in June, mentioned that a “large ‘small fish’” could be “pivotal.”

So let’s recap: The traders think it’s market abuse, and the former man in charge of making sure there are no abuses believes it would be abuse if it was performed by anyone with 5% of the market. He also went on record saying that a “small fish” could absolutely be, in his own words, “pivotal.”  

So what is left to debate here, exactly? And none of this above even touches on another strategy that can be used in this situation, physical with-holding. Physical with-holding is a strategy Enron used in California to increase prices by making available units unavailable creating shortages in capacity thus driving up prices, and some traders I have talked with have actually filed complaints with the IMM and the PUCT only to be told that any behavior out of one entity in question is not up for discussion as they have immunity. But we’ll look closer at physical with-holding in another article.

There is plenty more we can examine about this situation. For starters, if this is a punishable offense (regardless of the “small fish” rule or not) then why aren’t any guilty parties being punished? By implementing this amendment, it removes the possibility of any of these energy generators from effecting prices in the way they have in the past. It makes the point moot. And besides, why shouldn’t smaller generators have to play by the same rules as the larger generators? What positive purpose does the exception serve anyway? All in all, it just makes sense to create a level playing for all parties, and thus create even more transparency in the Texas electricity marketplace to make sure everything is operating above board.

Champion Energy’s Scholarship Program

Champion Energy, the four time consecutive winner of the J.D. Power Award for excellence in customer service in the Texas electricity space, has announced their new Champion Scholars Program. The program, which continues Champion Energy’s commitment to community service and philanthropy, will award scholarships to one winner ($5,000) and two runners up ($1,000), respectively.

The scholarship application centers on community involvement, including the following essay topic:

“Being a champion is about more than winning or being number one. Sometimes being a champion is about giving back to the community, standing up for your beliefs, or supporting a cause you believe in. What makes you a champion in your school or in your community?

Applications are due by April 1st, and winners will be announced by May 1st. It’s also important to note that the scholarships are applicable not just to college, but also High School scholarships. Anyone interested in applying for the scholarship can get the application at the following link:

Champion Scholars Application Link