💡 EnergyScout Insights 💡

We collect a ton of data about the residential power market. In this article, we're going to dig into the data and hopefully demystify some of the craziness that drives our electric bills.

2023 Power Prices - A Volatile Year

Let's start with the forces driving prices changes this year. At the start of 2023, many of us felt the pinch of some of the highest fuel prices in the last decade, which of course drove up the cost of electricity. Fortunately, as summer approached, fuel prices returned to more manageable levels. However, this relief was short-lived due to an extremely hot summer and regulatory changes that pushed wholesale power prices sky-high. Meanwhile, the Texas state government has been proposing and debating sweeping reforms to the wholesale market that are likely to increase costs for everyone in the near future.

Annual Seasonality

We wrote a bit about some themes behind residential energy prices in Texas here. In particular, we mention seasonality. We show here that a month-to-month will often times be cheaper than a 12 month plan. The problem is that when you get to summer and January/February, you're going to get hit with the highest prices of the year.

That might seem like a good trade off - you get more months of savings, right? But all months are not made the same. Using my own home as an example, 60% of my consumption came from June/July/August/September over the last twelve months.

Sometimes for some homes for some people, it can make sense to go with shorter plans and ride the seasonality. It is one of the things that we consider when we're making our recommendations, but for most cases locking in a longer rate and getting the price insurance is a better value in the long run. Just ask the people who bought a short term plan in January 2022!

Long Term Savings

In the last graph, we're focusing on the short term plans vs the 12 month plans because I think the 12 month plan serves as most people's default choice for a contract. Most of the time, our recommendation engine suggests plans longer than 2 years. This graph shows a big reason why that's the case. Not only do you get the lower prices, you also get the long term price insurance through the cancellation fee!

Texas has its own way of doing electricity, different from other places in the US, thanks to its unique energy rules. This makes buying electricity a bit tricky but also gives you lots of options. This article will help you understand what affects the price you pay for electricity at home, how wholesale prices play a part, and why prices change with the seasons.

Wholesale Prices: Where Retail Prices Begin

Wholesale electricity prices are what retail electricity providers pay to buy the electricity that they sell to you. These prices change all the time based on how much electricity is available and how much people want. Retail providers add their own costs and some profit on top of the wholesale price to get the retail price.

When lots of people want electricity, or there's not much available, wholesale prices go up, and so can the price you pay, especially if you have a plan where your rate can change.

What Changes Your Electricity Price

1. Supply and Demand: Prices can go up when everyone wants to crank the AC during hot Texas summers or heat their homes in cold winters.

2. Fuel Costs: If natural gas or coal prices go up, so can electricity prices.

3. Regulatory Charges: Some fees are set by authorities and are part of your electricity price.

4. Transmission and Distribution Costs: This is the cost of getting electricity from the power plants to your home.

5. Retailer's Business Costs: The money spent on running their business and advertising is added to your price.

Seasons and Power Prices

Be cautious with short-term plans that skip the summer months when prices can skyrocket because of high demand. For example, a plan from October to April might look cheap but come May, prices can jump because of the Texas heat.

Cutting Your Electricity Bill

1. Choose Fixed Rates: Pick a fixed-rate plan to avoid price jumps during high-demand seasons.

2. Energy Efficiency: Get energy-saving appliances and good insulation to use less electricity.

Rethinking How to Lower Your Electric Bill

When it comes to picking an electric plan, most of us are tempted to go for what appears to be the cheapest electric plan. But what if there's a smarter way to save? We’ll discuss how choosing a long-term electric plan, with an eye on the cancellation fee, can be a more cost-effective strategy.

The Game-Changer: Cancellation Options

Let's talk about a feature in long-term electric plans that many people overlook: the cancellation option. Sure, there's a fee if you decide to cancel early, but this fee can be a ticket to greater savings down the line.

Why Cancellation Fees Can Be a Good Thing

Think of the cancellation fee as low-cost insurance for your electric bill. With a long-term plan, you lock in your rate for a couple of years. This means if electric rates go up, you're already set with a lower rate. But what if rates go down? That's where the cancellation fee comes in. You can opt out and switch to a cheaper plan, making that fee a worthwhile investment.

A Real Example: Savings from Summer 2022

During the summer of 2022, an interesting situation came up. Let's look at the numbers that I saw for my home:

• 12-Month Plan: 20+c/kwh, or $4,000 for the year for my home.
• 5-Year Plan: 14.1c/kwh, totaling $2,820 for the first year.
• Cancellation Fee for 5-Year Plan: $175

If I had gone with the 12-month plan, I would have spent $4,000+ over the twelve month term. But with the 5-year plan, even after paying the cancellation fee, I spent about $3,000 for the exact same electricity. That's $1,000 in savings!

I want to emphasize that this is what we were actually recommending to our customers! We made this recommendation over and over again to every user that summer - and while energy prices have mostly normalized, we are still finding our users the best deals day in and day out.

Market Factors and Limitations

While the logic behind leveraging long-term plans with cancellation options seems sound, it's crucial to acknowledge that this strategy depends on several factors:

• Market rates for electricity
• The specific cancellation fee associated with your plan
• Regulatory changes that might affect electricity pricing

Let EnergyScout Guide You

Navigating the complexities of electric plans can be daunting. That's where our services at EnergyScout come in. We analyze market conditions, cancellation fees, and other variables to provide you with personalized recommendations for the most cost-effective electric plan. Make the smart choice today and let EnergyScout help you find the cheapest electric plan tailored to your needs.

Electricity billing can often come across as a labyrinth, especially in the Electric Reliability Council of Texas (ERCOT) region where the structure is quite unique. While you may have a clear understanding of your contract with your Retail Electricity Provider (REP), there's another element on your bill that might have left you puzzled: the Transmission and Distribution Service Provider (TDSP) charges. In this post, we'll demystify TDSP charges, explain how they impact your electricity bill, and why, unlike retail plans, you don’t have a choice in who your TDSP is or what they charge.

Understanding the Dual Pricing Structure

Your electricity bill in Texas comprises two main parts: REP charges and TDSP charges.

REP Charges:

These are the rates you agree upon with your REP for the electricity consumed, which remain fixed throughout your contract term. With a variety of retail plans available, you have the flexibility to choose a plan that suits your budget.

TDSP Charges:

Unlike REP charges, TDSP charges are non-negotiable fees for the physical delivery of electricity to your premises, maintained and adjusted bi-annually by regulatory authorities. These charges remain consistent regardless of your chosen REP.

The Inescapable TDSP Charges

TDSPs are the entities responsible for the physical delivery of electricity through lines and poles to your home or business. They maintain the infrastructure, ensuring that power is transmitted reliably and safely across the network. The charges incurred in this process are what constitute the TDSP charges on your bill.

Why Can’t I Choose My TDSP?

Unlike REPs, TDSPs are regulated entities. Their service areas are carved out geographically, meaning you are served by the TDSP that operates in your region. The regulation also extends to the pricing, which is evaluated and adjusted twice a year—in March and September.

How Are TDSP Charges Determined?

The Public Utility Commission of Texas (PUCT) oversees the regulation of TDSPs, ensuring that the charges are just and reasonable. The charges are primarily based on the costs incurred by TDSPs in maintaining and upgrading the electrical infrastructure, emergency repairs, and other operational costs.

While you might be enjoying a competitive rate from your REP, the TDSP charges are a fixed play on your bill, with no room for shopping around. The only consolation might be that these charges are regulated to prevent exorbitant pricing.

Navigating Through Your Electricity Bill

While TDSP charges may seem like a rigid component on your electricity bill, understanding them better equips you to navigate the Texas electricity market. It’s essential to factor them in when calculating your overall electricity costs, especially when comparing different retail plans.