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Do you know what you’re really paying for electricity?
Buyer fee-ware!

Posted by Bobby Dornbos on 03/07/2012 at 6:00 PM

Along with spring showers, baseball practice and the return of mosquitoes, there’s one more thing that announces the arrival of spring: advertisements from retail electric companies. While low-low advertised rates look tempting, you’ll want to be sure to read the fine print to make sure you know the true cost of your electric plan before you buy. Here are some tips to help you uncover some hidden costs:
 
1. Look for “non-recurring” fees
 
When you sign up for an electric plan there are not-so-obvious, potential fees that are often referred to as non-recurring fees because they are not charged every billing cycle, like the charges you pay for the transmission and delivery of electricity. And although you must agree to these terms before signing up for a plan, you may not notice these fees at first glance.
 
Where are the fees shown?
 
To make fees more transparent, the Public Utility Commission of Texas requires electric providers to make available to their customers the Electricity Facts Label (EFL) for each plan. The EFL will disclose, among other things, all charges billed to a customer, and any minimum contract term or early cancellation fees.  If you look at any of the EFLs publicly available at individual providers’ websites or on PowerToChoose.org, the potential fees are typically contained in a “Disclosure Chart” area, as shown here:

User-added image

Image sampled from a publicly available EFL on PowerToChoose.org
 
This “Disclosure Chart” shows you the most pertinent fees. Additionally, any non-recurring fees not shown on an electric provider’s EFL disclosure will be covered in the pricing section of your Terms of Service (TOS) agreement with the electric provider.
 
2. Pay close attention to cancellation fees
 
The most common non-recurring fee that you could see is a cancellation fee. Depending on your plan, this fee may be flat or it may vary based on how much remains on your contract at the time you decide to cancel. Understanding how this fee is calculated is important when deciding if switching to a different plan before your contract is up makes sense for you.
 
3. Know your average AND minimum electric usage
 
Knowing your average usage can help you  know if switching plans makes sense, even if you have to pay a cancellation fee. Someone who uses an average of 2,000 kWh per month, for example, could save $360 per year if they switch to a plan that’s 1.5 cents cheaper per month (not counting taxes and other fees.) So it may make financial sense to switch even with a cancellation of fee of, say, $100.
 
Knowing your minimum usage is important in order to understand the possible impact of usage-based fees. The common usage-based fee is listed at the very top of each EFL, in the “Electricity Price” section, and is often called the “monthly customer charge,” “monthly service fee,” or “base charge,” as shown here:

User-added image

Image sampled from a publicly available EFL on PowerToChoose.org
 
This $5-$15 monthly fee (depending on your provider) is only charged if a certain base or threshold amount of kWh usage is not met during a billing cycle. In the example above, this provider will charge $8.99 if you don’t use at least 1,000 kWh in a month. While the dollar amount may not be that significant to you, knowing about the monthly customer charge might make you want to find a plan better suited to how much electricity you actually use each month.
 
4. Don’t forget any other one-time or on-demand fees
 
You may be charged fees based on how you like to interact with your electric retailer. Do you want to receive paper bills? Do you like to call when you have questions? Do you sometimes make a late payment? Here’s a list of other fees you should keep an eye out for:
 
User-added image

You can always find details regarding non-recurring fees by contacting your current or future provider, or simply referring to the EFL and TOS documents. Better information leads to better buying decisions.
 
Bobby Dornbos is a rate analyst for CenterPoint Energy Services and contributes to the CenterPoint Energy Electric Index.

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