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Avoid Pitfalls when Shopping for Electricity

The old saying goes that if something appears too good to be true, then it probably is. This is especially true when it comes to residential electricity rates. Natural gas prices may rise in 2017 and 2018 but they have kept electricity rates low and stable for the past year or so.  While cheap electricity is great for consumers, it poses a marketing challenge for energy providers.

Texas electricity companies attract consumers using everything from renewable energy plans to charitable contributions. Some companies offer heating and air conditioning services, home warranties, and smart thermostats. Then there are the time-of-use electricity plans that offer free nights, free weekends, and peak saver incentives. These are all good and honest approaches to appealing to consumers and adding value to basic electric service.  Unfortunately, some electricity companies resort to teaser rates and gray tactics to win customers.

Ultra-Short-Term Rates

Ultra-short-term rates are fixed price electricity offers with terms of less than 6 months. The lure of 2 to 4-month plans can be hard to resist. However, these attractive rates are usually due to the fact they only cover lower-priced months in the spring and fall.

These offers often pop up toward the end of the winter and summer seasons. Because electricity is typically cheaper during the off-peak months, short-term rates are optimized to take advantage of this seasonal quirk.  These rates allow you more flexibility by not tying you down to a longer-term fixed price electricity contract.  However, if you sign up for a short-term electricity offer, you will have to start shopping for electricity again relatively soon.  In addition, the electricity deal you find will have to include those higher-priced winter and summer months you avoided last time.

Highly Variable Rates

If you need flexibility and cannot commit to a fixed term, a variable rate electricity plan may be the way to go. There are two categories of variable rates.  The first type is an index rate.  An index electricity rate varies monthly based on a specified formula and a published commodity price.  For example, TXU has residential electricity rates tied to the price of natural gas.  These index rates are great in that there is no room for any shenanigans.

The more common type of variable rate changes monthly based solely on the whim of the electricity company. Some electricity companies have a good history of changing their monthly rate to approximate changes in wholesale power costs.  Other electricity providers, however, engage in less noble approaches to variable rates.  These are the dreaded teaser rates.  You get one or two months of unbelievably cheap electricity and then they turn up the heat gradually.  Sometimes, the rate increases are anything but gradual. Before choosing a variable rate product, be sure to ask the electricity company to provide 12-months of history on how the rate has varied.  Most of all, pay attention to your bills and make sure the monthly rate changes do not sneak up on you.

Be Rate Smart

Teaser rates and other questionable tactics often rely on you, the consumer, going to sleep at the wheel after enrolling. The electricity company is willing to sell at or below cost with the idea that they will recoup their profits from you later.  ElectricityMatch does not display fixed price electricity plans with terms of less than 6 months.  In addition, we do not include variable plans from providers with a history of using them as teaser rates.

Be vigilant and check your electricity bill every month. Make sure you are being charged at the contracted rate.  When you sign up for a plan, make a note on your calendar or create a reminder about when it expires.  Then be sure to go shopping again to get the best electricity rate for your home.

About: Suzanne Hewitt

Suzanne Hewitt has extensive experience in the energy industry ranging from oil and gas exploration to coal mining. After raising 2 daughters and managing the family finances for over 26 years, she knows the importance of being energy wise at home. Suzanne has a BS in Geological Sciences from UT Austin (Hook 'em) and a MS in Oceanography from Texas A&M University (Whoop!).

1 Comment on “Avoid Pitfalls when Shopping for Electricity”

  1. Thank you for your tip on Ultra Short Term Rates. When our current term is up I will keep that in mind. I ultimately want to find the best price and this is great advice, thanks.

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