Recently Reliant Energy announced a new electricity plan for Texans, the Reliant Predictable 12 Plan. As the Houston Chronicle outlined, the plan calls for customers to sign a one-year electricity contract at a flat, monthly rate, regardless of electricity usage. This kind of plan is normal in other industries, specifically cell phone service providers, but it is the first of its kind in the Texas electricity space. I’m no stranger to questioning some of Reliant’s past electricity plans, so I figured it was worth the time to take a closer look at this new “unlimited plan.”
On the surface, the plan is pretty straightforward. Customers will pay a flat fee to Reliant every month to receive unlimited electricity service. So whether they use five or five thousand kWh in a month, their bill will be the same. The appeal (or the demographic Reliant claims to be appealing to) might be older folks on a fixed income, or perhaps younger college graduates who have to make very careful budgeting plans each month. Customers visit Reliant’s website, input their address, and select the Reliant Predictable 12 Plan. They will be then be given a monthly estimate, presumably based upon the historical usage of the building in question, and possibly some other factors. Easy enough, right?
I’ll caveat this portion by saying two things: 1) The price given by Reliant Energy when I input my address is very likely just an estimate of my monthly rate 2.) It’s impossible for me to know what anyone else’s estimates would be without putting in their addresses. That being said, what I can certainly do is analyze that plan with my own address. I live in a two-thousand square foot town-home, fairly new construction, and with a 2 year old A/C unit that is on the lower end of energy efficiency. Here were my results:
Your Predictable 12 amount is $150.00 per month.
|Average Monthly Use||5000 kWh||4000 kWh||3000 kWh||2000 kWh||1000 kWh||500 kWh|
|Average Price Per kWh||0.03||0.04||0.05||0.08||0.15||0.30|
Now, lets explain what that means. The math is simple, just multiply the kWh by the Average price to get your monthly average. The first thing that should jump off the page is that the 1000 kWh plan is LITERALLY the exact same price per month as the 500 kWh user. Use 500 or 1000 kWh? Who cares, pay Reliant $150. In fact, if you stretch the math onward, you’ll see that 4 of the 6 possible rates per usage come out to…exactly $150. The other two come out at $160. So basically, Reliant is going to make sure they are making $150 a month on these customers, whether they’re living in a 1 bedroom studio the size of a broom closet or a 5,000 acre compound with a private zoo.
I suppose this should immediately disabuse anyone of the notion that this kind of plan makes sense for a budget conscious retiree or recent college graduate. The .3 rate they quote for someone using 500 kWh is more than three times the cheapest plan available on Power To Choose, and double the most expensive fixed rate plan in the 500 kWh range. In fact, it’s more than twice as expensive as all but one of the five Reliant plans listed on Power To Choose. Personally, I don’t think it’s very budget friendly to charge double or triple rates just so you know exactly what your monthly bill will be, but that’s just me.
And it gets worse. Again, I can only compare this bill to my own historic electricity usage but I pulled my bills to make a comparison. Thanks to Reliant’s easy math, my yearly bill on their plan would be $1800. But looking at my past 12 bills, I can immediately tell this is a bad proposition. Over the past 12 months, I had exactly one bill that was higher than $150. My bill for last July clocked in at $157. So one bill, in the hottest month of the year, topped the $150 Reliant would look to charge me every month. Of course, I also had 7 bills less than $100, including 5 bills under $60. The total cost of my last 12 months of electricity was $1148.45. That’s $651.55, or 36% less expensive than Reliant’s Predictable 12 Plan. That seems like a pretty expensive premium to pay just to know exactly what your electricity bill will be each month. Anyone who can afford that probably isn’t worried about budgeting their monthly bills in the first place because they are affluent, and the irony is they can still get a better deal simply by doing nothing.
The price tag alone isn’t the only thing to consider. As we’ve demonstrated above, despite being tagged as a “budget friendly” plan, this isn’t a plan that makes sense for anyone who is financially concerned about their budget. On the lower end of the spectrum, the plan is extremely expensive.
There are also a couple energy efficiency points. First off, it appears that Reliant is estimating the monthly rate at least in part on past usage. But what happens if someone were to spend money outfitting their home with new energy efficiency appliances? Any possible energy savings or improvements would be lost on their bill simply because the plan doesn’t take into account actual usage. And in this day and age we’re making improvements on the energy efficiency of home appliances and electronics by leaps and bounds. But none of that would matter to any customer on this electricity plan.
Another energy efficiency point to consider is responsible conservation. This plan doesn’t exactly encourage customers to be on their best behavior. It doesn’t really matter if they would leave their electricity on all hours or run their A/C at 65 degrees in the middle of August…because no matter what the bill is going to be the same. So in that regard if someone is looking to raise a dozen penguins in their home year round, well, this is the electricity choice for you! That’s hardly a positive considering the state of Texas is facing an uphill battle to build new electricity generation plants even as our population continues to boom. Of course, Reliant likely doesn’t care about that since their parent company, NRG, currently owns a huge percentage of Texas’s electricity generation and can only make more money from any electricity shortages.
I think it’s safe to say that Reliant Energy’s Predictable 12 Plan probably isn’t the best option for anyone even remotely concerned with their monthly electricity bills. For all but the largest users of electricity, the rates are extremely high. Anyone who can afford $1800 a year on electricity service probably doesn’t have to concern themselves much with their monthly utilities budget. However, for a small niche of customers wealthy enough to want to build snowmen in their living room year round this plan might make good sense. But an average customer like myself can save more than $600 a year just by paying for the electricity I actually use.