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What Do Direct Energy Listed Rates Mean?

The 'average rate' you see on your Direct Energy bill and in the advertisements includes several different charges - there are per-kWh energy charges, per-kWh TDSP charges, monthly TDSP fees, monthly administrative fees from the provider, and various other utility fees and taxes. Becuase some of these costs vary with usage while others do not, the 'average rate' you see on your bill will ironically be higher when your usage is lower. That's because the fixed monthly fees are spread over a smaller number of kilowatt-hours (kWh).

ERCOT requires each provider to display the average rate at three different levels of monthly usage: 500 kWh, 1000 kWh, and 2000 kWh. Generally, the average rate will be highest at 500 kWh and lowest at 1000 or 2000 kWh. If the 500, 1000, and 2000 rates are all the same, then your average rate on your bill will not change much. If the rates vary much, then your average rate on your bill will shift up and down depending on how much electricity you use.

Why Do Direct Energy Rates Vary Across the State?

That's a great question - why is power typically cheaper in Dallas than it is in Houston? There are good reasons for those differences.

As electrical systems were built out in the early 20th century, different areas built a variety of generating plants, transmission lines, substations, and infrastructure. As a result, some areas of the state may have newer, more efficient plants, and others might have older, less efficient plants that cost more to operate for each unit of electricity they create. Then there are differences in the voltages and capacity of the transmission lines which cause more variation in the efficiency of the distribution system. Finally, different parts of Texas have different TDSPs (the companies responsible for maintaining electrical distribution infrastructure), which each have their own shareholders, costs, and management.

Ultimately, these regional rate variations are not the fault of Direct Energy or any other Retail Electric Provider (REP) and they are certainly not due to anyone trying to cheat or gouge consumers. The decisions the generators and TDSPs have made over many years as the power grid was constructed have resulted in an environment where it might cost 1-3 cents less to create and transmit one kilowatt hour of electricity to a home compared to another region. It just depends on the costs that were incurred to create the infrastructure in that area, how densely populated the area is, along with the decisions that were made over decades about what kinds of power plants to build and where to put them.