Do you live in an area where electricity has been deregulated, meaning you sift through hundreds of electricity offers every time your contract is up? From someone who does, I can honestly say that it is both a blessing and a curse. Trying to figure out the best cost per kilowatt in light of baseline fees with varying parameters, mandatory fees versus we-just-like-to-add-this-on fees, and all of the other hoopla that comes with electricity plans is difficult at best. And yet it’s also nice to have a choice.
Electricity Marketing Deals
Electricity is electricity. No matter who you go with, your lights will turn on. They won’t shine any brighter with one company than with another. This means that these companies have to find other ways to differentiate themselves from one another. So they’ve come up with all kinds of crazy marketing ideas, deals, plans, etc. Most of them sound wonderful until you read the fine print. Some of them sound too complicated to even want to get to the fine print. In case you are in an area where sifting through all of these offers is an annual or biannual chore for you, or in case your area is headed towards deregulation but the market hasn’t matured enough yet to come up with all of these marketing ideas, I wanted to go through a few generic plans with you and discuss what makes them helpful or not.
Types of Electricity Deals
Please note that each of these types of deals typically comes with a higher per-kilowatt offering to make up for part of the deal itself. So in cases where it may sound like a good deal to you, you need to check the per kilowatt charge and ensure that the rest of the time you won’t be overcharged on electricity.
- Your 13th Month Free: With this plan, after making 12 on-time monthly payments you get your 13th month free. The problem that I see with this is that they are offering the plan in the winter months here in Houston, which is when we use a lot less electricity (the summers are hot, humid, and AC is practically a necessity). This means that your 13th month will come during the cheaper months. If there is or was a way to sign onto this plan in the summer months to get your 13th month to be an expensive month of the year then that would be great. Except that if you sign up for a contract in the summer months, the per-kilowatt rates are much higher than in the winter months. So it just doesn’t make sense.
- Free Nights: When I first heard about this deal I thought that it would be great. Even though we tend to not use as much electricity when we sleep, we certainly use much more in the evening-night hours leading up to bedtime. However, when I looked into the fine print, it turned out that night hours do not start until 10:00 p.m., and they last until 6:00 a.m. I don’t know about your household, but in ours we are definitely asleep by 10:00 p.m. and use hardly any electricity in the wee morning hours. So this could be a good deal for you if you are a night owl, but otherwise, it won’t be.
- Rewards Programs: My current electricity company offers free movie tickets after a certain amount of on-time payments, a bill credit after a certain amount of on-time payments, and $50 for every referral that I send their way. These are good deals! My only suggestion is to make sure the per-kilowatt rate and/or baseline rate is not inflated to make up for these rewards.
- Prepaid Electricity: This is an interesting new plan that I just ran across while researching for this article. There is no contract, which means that you can periodically peruse offers and switch whenever a low rate comes up instead of being stuck with your current offer. Basically, you pay for the power that you need (or that you think you need) upfront. You receive no bill at the end of the month. And you use that power very judiciously throughout the month because once it’s gone, you have to purchase more or go without. This type of plan coincides with the smart electric meter monitor, which you must have set up in your residence in order to participate. The biggest downfall of this plan is when you buy electricity each month it will be purchased at the current market’s rates. This can fluctuate greatly throughout the year, and will peak in Houston in the summer months.
Tips for Choosing a Plan in a Deregulated Area
After sifting through our own offers for five years now, I have a few suggestions that may help you now or in the future.
- Time Your Entry to the Market: You typically want to be in the market during the months when electricity usage is lowest in your area. This is because the rates for contracts will be lowest. If your current plan expires during a peak-usage month, then purchase a shorter-term contract (say three months) to get your next expiration to be during a low-usage month. For example, here in Houston we always want to purchase a new contract in the winter months, and particularly February. If my current plan expired in July, I could purchase a six-month contract with a company so that my next renewal time would be in February. Then, once you are in or near the optimal time to purchase a new plan, lock it in for a fixed rate, 12-month contract. This way your renewals will always be at the optimal time moving forward.
- Use Aggregator Websites: There are aggregator websites out there that will help immensely when trying to figure out what plans to sign up for. In our area, it’s powertochoose.org. Find out if this one works for you, or if there is one in your area. Ours will allow us to compare offers in exports to excel, and has links to the terms/conditions. Very helpful!
- Check for a Baseline Charge: As a frugal person, I pride myself on low electricity usage. I do a number of things each year to ensure that my usage gets lower, not higher. However, most plans now ding me for my low usage. Almost all of the plans here have what’s called a baseline charge, where if I don’t at least use 1,000 kilowatts of electricity per month (which we typically do not even come close to this), we are charged a fee. My current company charges us $6.95 per month, and my last company charged us an obscene $9.95 per month. When you look at the deals and per-kilowatt quotes, make sure you check the baseline fees if this would be a problem for you as well (talk about getting punished for good environmental behavior!).
Do you live in an area where electricity has been deregulated? What kind of deals have you come across? Do you have any tips for how you sift through all of the offers?
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