As you probably know in Texas we have the choice of who we want to use as electricity providers. The state provides a web-site (www.powertochoose.org) where energy providers compete for your business. So, if I go to the website and put in my zip code, 285 providers appear with offers. Now, as you can imagine,
there is a lot of competition for your business. So, let the marketing trickery begin!
Energy is priced cents per Kilowatt hour. For example, you will see .5 cents per kWh. So, human nature being what it is, most people would start looking at the lowest providers to get the “best” deal. This could be a costly decision. Once again, these companies are all working with the same energy costs structures. Thus, the hidden fees tell the story of who is giving the better deal. The entire cost is the important figure. Thus, it comes down to cents per kWh PLUS all of the fees. You can afford to quote a low cents per kWh if the plan is loaded up with fees to make up the difference.
Here are some of the potential challenges with low cost providers:
- Different price structures depending on how much energy you use
- Monthly charge for just using their service
- A minimum usage fee if you don’t use enough in any giving billing cycle
- There are variable rates versus fixed rates in the contract and it is not clearly stated
- Penalties for late payment or any type of contract violation are steep
- Customer Service could be horrible since they are charging so little for electricity – you don’t want customer service problems with an energy provider
Then my favorite are the promotions. Reliant is the king of sneaky promotions. They run a promotion every year where they offer one month free after you are with them for 12 months. So sign a 12 month contract and get the 13th month free. Well, they only offer this promotion when the 13thmonth lands around April/May. This is the one time period of the year where most people use the least amount of electricity. It might be different if you were getting your “free” month during the high usage summer months. When you look beyond the “free” month the terms and rates are not very good at all. As long as they have you distracted by what looks like a good deal, the consumer will probably look beyond the higher rates.
Also be leery if your energy provider offers you to lock in your rate for the next two years. They are basing that offer off of your usage history. They know what a good deal is for them. Be careful and read the fine print.
So, how do you tell if you are getting a good deal or not? It really comes down to usage. How much electricity are you historically using during the year? With that information, you can start to decipher which is the best deal. That is the key component of pricing. The reality is that what is offered as a .05 cents per kWh deal might turn out to be .11 cents per kWh once you figure in your actual usage and fees.
If you want to see how that works, go to Currentchoice.com. This is a site that provides total cost per kWh. They figure in the kWh by looking at actual cents per hour and fees.
Remember, consumer principle #1. When there is large field of companies competing for your business, always look beyond the marketing and focus on the fine print. Also remember consumer principle #2. Companies aren’t going to lose money or greatly reduce their profit just to give you a good deal.