Excellent DMN Article Highlights Confusion in Texas Electricity Shopping

Posted on Posted in Consumer Advocacy, Deregulated Electricity, PUC/ERCOT, Texas Deregulated Electricity, Texas Electricity, Texas Electricity News

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.

5 thoughts on “Excellent DMN Article Highlights Confusion in Texas Electricity Shopping

  1. Very good article that brings to light the complete scam that is the Texas electricity market. Rather humorous to see the PUC trying to make out like they want a “free market” when they are in the bag on this kind of reporting and fail to even enforce their own reporting requirements.

  2. A true market is not slanted in favor of the provider. For example, I am effectively punished for lower usage by either bring charged a fee or higher kwh rate. Also, why is the consumer charged for smart meters? Why should my bill be based on past usage when there are smart meters? Why, if a provider closes shop, are consumers placed into a plan not of their own choosing? Yes, we should educate ourselves. However,constantly looking over our shoulders for unethical charges, hours on hold for an answer to billing questions when the bills make no sense and the attitude that the consumer does not matter is not a market based. Where is the advantage to the consumer?

    1. Linda,

      You bring up some very true points, several of which I agree with completely. I will clarify a couple points. In regards to the being billed on past usage, I 100% agree with you…however, the estimated usage as the means of choosing what to charge customers is a provider by provider choice. TXU is the provider where I get the most complaints about incorrect bills based on historical usage. But not all providers do that.

      Also, I think SOME of the unethical charges you might be referring to are paid directly to the TDSP (Oncor, Centerpoint, etc), and not the actual electricity provider.

      As for the provider closing shop, I’m not sure how else the system might work. Customers are SUPPOSED to receive plenty of notice when this happens and immediately let out of contracts to choose their own provider. That is how the system is DESIGNED to work…instead of people being placed with a Provider of Last Resort, the alternative would be to just shut off their power, which is not really a possibility.

      But I can’t disagree with you about being charged a lower rate for using more electricity. That, combined with many providers “Minimum Usage Charges” do not exactly paint a pretty picture for electricity conservation. Although I’m sure the alternative viewpoint would be akin to something along the lines of just like buying in bulk at costco, you use more and you get a deal.

      As for being charged for smart meters, that isn’t electricity providers…that is the PUC and TDSPs doing work, and they viewed it as a necessary infrastructure upgrade. That would have gone down (with charges passed onto customers) even if we were still in a regulated part of Texas.

      I would argue that the advantage to the customer is to be able to choose your provider. For example, you reference bills that don’t make sense, or hours on hold, etc. Well, that’s incentive to find a new (better) provider that runs more efficiently. That was the idea of the free market in general. Imagine a situation like you described where a provider was terrible and you didn’t even have the choice to give your business to someone else? Not idea. However, that being said, the way some companies operate to try and gouge customers is troubling, and the market is most certainly not without some pretty big warts.

      Thanks for reading my blog!

  3. I just moved from California and I’m spending way too much time trying to figure this out. This does seem like an organized scam that is: (1) not consumer friendly (2) slated for power companies. Why can’t it be : “this is our rate, here is our competitors rate, all the variable stuff is built into the rate including cancellations, price fluxations,etc, and we use x% renewable energy.” Energy is an *easily substitutable* good and should not have any of this nonsense. They should be begging for my business and not trying to screw me with cancellation fees, minimum usage, etc. because that other power company can offer me the exact same product!!! OR so says economics. But to hell with economics in Texas.

    This is not really a “choice”, this is this baloney.

    Now the question I must ask myself, in which way do I want to screw myself?

  4. I’m like John now. I came across this while doing my research for rates. Great article, however you could have saved a lot of time and just typed the last 4 lines. That is the only reason for the confusion. That and the millions they make.

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