Despite the lowest electric rates in Texas in more than five years, many Texans are still overpaying for electricity because they haven’t checked their energy rate, and compared it with competing energy suppliers.

If you haven’t checked your energy rate since 2008, when electric rates reached historic highs, you’re probably paying too much for electricity.  In the summer of 2008, spiking natural gas prices and record usage pushed Texas electric rates above 20¢ per kilowatt-hour.  To avoid further price spikes, may customers locked-in rates of 17¢, 18¢, or even higher, to give themselves some price security until the markets calmed down, and prices started dropping.

But many Texans haven’t compared their energy rate as prices have fallen over the past two years.  As a result, even though most Texans can find a low, fixed rate in the 9¢ per kilowatt-hour range, millions of Texans are paying inflated rates of 15¢ per kilowatt-hour, if not more.

Another reason many Texans are overpaying for electricity is that they’ve never checked their energy rate since competition started in 2002.  They’ve always stayed with the successor to their old monopoly utility: the so-called “incumbent” provider like TXU in the Dallas area, or Reliant Energy in the Houston area.  For these customers who have never shopped, the incumbent providers typically charge higher rates with more built-in profit — typically at least 5¢ per kilowatt-hour above the lowest rate they offer to new customers — because they don’t expect these non-shoppers to compare their rates against competitors.  These higher incumbent prices can raise bills by over $50 per month, or $600 per year. 

That’s why you need to check your energy rate and shop for a lower rate using SaveOnEnergy.com, which provides Texans with the simplest way to compare the lowest energy rates in the market.  If you’re paying more than 12¢ per kilowatt-hour, you are simply paying too much money for electricity for no reason.  Even premium products like renewable energy or plans that guarantee price security for an extended 24 months are below 12¢ for most parts of Texas.  You can still enjoy the same reliable service from a vetted and screened energy provider when choosing a lower energy rate using SaveOnEnergy.com, all while saving hundreds of dollars per year.

Spring officially starts in a few days, and it means it’s time for Texas electric customers to shop for a low electric rate before prices start rising with the summer heat.  SaveOnEnergy.com offers customers a quick and easy way to find and compare the lowest electric rates in Texas, so customers can take advantage of the low energy prices that come with spring. 

Spring has always been one of the best times to shop for a low electric rate in Texas, for several reasons.  First, the spring months of March and April are known as “shoulder” months in the electric industry, during which time customers use less power.  Moderate spring weather means customers are not heating their homes for as many hours as they were doing in the winter, and thus are not using as much electricity, or burning as much natural gas (which drives energy prices).  But temperatures are also cool enough so that customers aren’t running air conditioners all day long, which spike electric usage during the summer months.

Since customers use less power during the spring, demand for electricity is lower during the spring, and prices fall with lower demand.

Because Texans use less power during the spring, there’s also less “congestion,” or traffic, on the state’s electric grid.  During the summer, Texans are using so much electricity for air conditioning, the state’s transmission wires bottleneck like a freeway during rush hour, and the cheapest electricity — such as from wind farms in West Texas — can’t make it into the areas where people consume the most power like Houston, Dallas, and Corpus Christi.  However, because there’s less traffic on the grid during the spring, all that cheap wind power from West Texas can flow east to the large metropolitan areas of the state, and thus lower the energy prices available to customers during the spring months.

Of course, this spring is an even better time to shop for a low electric rate as Texas is seeing its lowest power prices in years.  Reduced demand for electricity and gas due to the recession, coupled with the normal spring price decline, has cut Texas electric rates in half versus the prices seen just two years ago during the spring of 2008.  Texas electric rates are even lower by 10-15% versus the historic lows seen in 2009.

All and all, it makes it the perfect opportunity to lock in a low electric rate before the summer, using SaveOnEnergy.com to find the lowest rate available.  SaveOnEnergy.com screens and reviews the hundreds of electric offers available to Texas customers, and only recommends the lowest rates with the best electric companies, so Texans get the highest value out of their energy dollar.  Finding a low electric rate takes just a few minutes on SaveOnEnergy.com, and can save Texans hundreds of dollars per year.

With customer choice forcing Texas electric companies to compete for customers’ business, Texas electric rates have gone from above the national average before competition, to below the national average.  However, that’s not the story that’s typically reported by the media, because the federal Energy Information Administration is using flawed data which underestimates the significant decline in Texas power prices since the start of competition, according to a new study by the Texas Public Policy Foundation (TPPF).

“Most competitive prices are considerably lower than what is reported in the federal government’s data,” said Bill Peacock, Director of the Foundation’s Center for Economic Freedom. “In fact, the average competitive price is below the national average, and consumers who exercise their choice can easily find rates that are lower than in our neighboring states.”

TPPF found that the average electric rate offered by electric companies in the competitive regions of Texas in December 2009 was 11.01 cents/kWh, while consumers could choose offers as low as 8.52 cents/kWh.  However, the federal Energy Information Administration (EIA) reported that Texas consumers paid an average of 12.26 cents/kWh in October 2009 (the most recent month of data).

For 2009, the EIA data shows a national average price of 12.06 cents/kWh.  According to EIA, the average Texas rate is 12.26 cents/kWh, but in reality, the average Texas rate in parts of the state open to competition is actually lower — only 11.01 cents/kWh.  Texas energy prices are thus below the national average in areas where Texans can choose their energy provider. 

Why does the EIA data show a higher Texas electric rate?  There are a few reasons, but one of the biggest reasons is the EIA blends rates from parts of the state open to competition with higher-priced rates at some of the monopoly utilities and cooperatives, some of which, as previously noted, have higher rates than competitive areas.

Not only are competitive Texas electric power rates lower than the national average, but competition has actually reversed Texas’ relative position versus the national average.  For instance, in 2001 just before competition started, the regulated average energy price in the parts of the state that would later be opened to customer choice was 15.8% higher than the national average, at 9.98 cents/kWh versus the national average of 8.62 cents/kWh.  Today, however, the average competitive price (11.01 cents/kWh) is 8.71% below the national average, while the average of the 15 lowest Texas offers (9.27 cents/kWh) is 23.13% below the national average.

The data shows that, over the past nine years, competition has kept Texas electric rates in check, resulting in Texas rates rising more slowly than the national average, and turning Texas from a state which had above average power prices to below average power prices.

Texas’ competitive electric rates also compare favorably with several neighboring states, as the average price of the 15 lowest offers in Texas is lower than the average price in New Mexico, Oklahoma, and Arkansas.  Furthermore, Texas power prices are lower — significantly in many cases — than the average price in the other four of the five largest states, such as New York (19.17 cents/kWh) and California (14.08 cents/kWh).

“Perhaps the lower price of electricity in Texas is one reason it has recently moved past New York and California as the home to the most Fortune 500 companies,” Peacock said.

The Electric Reliability Council of Texas (ERCOT), which runs about 85% of Texas’ electric transmission system, said recently that the state is projected to have enough power through 2013.  Starting in 2014, based on current projections, the state could dip below a minimum 12.5% “reserve margin,” or the amount of extra power the state requires in excess of projected demand as a safety net.  Currently, the 2014 reserve margin is forecast at 12.3%. 

The reason for the drop is the delay of a new power plant that was originally scheduled to come online in 2013, but has been pushed back due to economic considerations.  Specifically, the Cobisa Greenville Project, a 1,792-megawatt natural gas-fired plant, won’t go into service in 2013 as originally planned.

One of the main reasons for the delay in new power plants is the low energy prices currently being enjoyed by Texas electric customers.  While the economic recession and competition among electric companies have pushed rates below 10 cents in most areas, the recession has also stalled many power projects as developers wait until Texas power prices rise with the economic recovery before moving forward with their projects.

However, while the reserve margin is projected to dip below the minimum level needed for reliability after 2013, there is no cause for great alarm, because there is sufficient time for power developers to respond to market signals and build new generation in time to meet reliability needs.

In fact, it is typical for power projections five years out to show capacity below the minimum reserve margin.  For example, in 2007, ERCOT projected that for 2010, reserve margins would be only 8.3%, well below the minimum of 12.5%.  However, as 2010 grew closer, generation developers responded to market signals and built new generation to meet the projected demand.

Here is a look at how the forecast reserves for 2010 increased over time, as new power plants were built in response to the forecast demand.

Date of Forecast                         Projected 2010 Reserve Margin

May 2007                                  8.3%

Dec 2007                                   14.0%

May 2008                                  17.3%

Dec 2008                                   21.2%

May 2009                                  20.1%

Dec 2009                                   21.8%

As can be seen, while 2010 supplies were projected to be below the reserve margin three years ago, new projects came online to meet, and exceed, the forecast demand.  This market response is one of the many benefits of the competitive Texas electric market, as customers no longer pay for extra power that isn’t needed.

Under the traditional monopoly system, power plants were planned years in advance, based on forecasts of demand, which, like any forecast, were simply educated guesses.  That often meant more power plants were built than were actually needed.  But customers still had to pay to build those power plants because monopoly utilities were guaranteed a regulated rate of return.  Another problem often encountered was known as the “gold plating” of the electric system — or building many more power plants than needed to serve customers to increase a utility’s regulated rate base, on which it made profits.  With competition, generation developers do not earn a guaranteed rate of return, which means customers only pay for plants that are actually used, saving them millions of dollars annually.

The California electric utilities have given the first indication of how many customers will be able to shop for a lower electric rate under the state’s expansion of electric competition, known as direct access, which is subject to a cap. 

In filings with the state’s Public Utilities Commission, the three largest utilities reported, according to statutory criteria, their proposed cap levels for the amount of business customer load able to be served on direct access:

Pacific Gas & Electric: 9.5 billion annual kilowatt-hours

San Diego Gas & Electric: 3.5 billion annual kilowatt-hours

Southern California Edison: 11.7 billion annual kilowatt-hours

These cap levels must still be approved by the Public Utilities Commission.

Since annual electric usage among business customers varies wildly from millions of kilowatt-hours for heavy industries to just a few thousand kilowatt-hours for small businesses, it’s impossible to place any meaningful estimate on the number of California businesses that will be allowed to shop for a lower electric rate under the cap.

However, according to the Energy Information Administration, the average electricity use of a California industrial customer is nearly 650,000 annual kilowatt-hours.  At that rate, the number of customers allowed to shop for electricity at Pacific Gas & Electric would be limited to 14,000 customers out of about 1 million non-residential customers in its service area (or just 1%). 

Because the largest electricity users are always the first to shop for a lower rate (since electricity is a bigger cost for them), the shopping cap in California could quickly be reached as several very large industrials with extraordinarily large power usage take up all the room under the cap.  That could leave mid and small-sized businesses unable to shop for a lower energy price, even though they could save thousands of dollars from being able to shop.

That’s why customers need a partner like SaveOnEnergy.com to take advantage of their ability to shop for cheaper electricity as soon as it is enacted, which is expected in April 2010.  The experts at SaveOnEnergy.com can not only help your business find a low electric rate, but can streamline the shopping process so you can submit your switch to a new energy provider as soon as you are able, maximizing your chance to be allotted space under the direct access cap, and realize the savings available from shopping for electricity.

More California businesses will soon have an opportunity to save money on their electric bills by shopping for an alternative energy provider, thanks to legislation passed in the last session.

Since 2001, only a limited amount of California businesses and residents have had the ability to buy electricity from a competitive electric service company and save money on their power bill.  Due to the energy crisis, “direct access,” or the ability to shop for your energy supplier, was suspended for new customers.  Customers who were buying electricity from a competitive supplier at that time were grandfathered, and have had the ability to shop for a lower electric rate since that time.  That has given some businesses a competitive advantage, because they could lower one of their largest costs, energy, by having different electric companies compete for their business.

More businesses will soon have this ability to lower their costs by shopping for their electricity supply thanks to SB 695, passed during the most recent legislative session.  The bill requires the California Public Utilities Commission (PUC) to expand the number of business customers who are eligible to shop for an alternative power provider, subject to a cap.  Under the new law, the PUC must phase-in new, higher caps on the number of customers who may shop for electricity, with the caps specific to each utility service territory.  The cap of kilowatt-hours served by competitive electric companies shall be equal to the maximum total kilowatt-hours supplied by competitive providers in a utility service area during any sequential 12-month period between April 1, 1998, and the effective date of SB 695.  The phase-in will occur over a period of three to five years. 

The PUC has not yet started a proceeding to implement the expanded electric choice for business customers.  However, if experience in other states in any indication, business customers will want to be ready to strike once the PUC sets out a process for new shoppers, to avoid being shut out of shopping for electricity due to the cap.  In Michigan, a 10% cap on electricity shopping was instituted in 2008.  At Consumers Energy, the cap was hit in just seven months, leaving all remaining customers paying higher utility electric rates, instead of shopping for a lower rate from a competing energy provider.  With California’s high energy prices, businesses will have to act fast to ensure they don’t get shut out of their opportunity to shop for a lower electric rate.

More Pennsylvania businesses are realizing they have to shop around for a better electric rate to avoid impending rate increases at PPL Electric Utilities that will be as high as 36% starting January 1, 2010.

Shopping, however, can be a complex and time consuming process for business owners.  For example, the Sunbury Daily Item takes a look at how the Keystone Forging Co. in Northumberland is looking at their electricity rates.

Keystone President Joe Cipriani is still examining options to decide which energy provider is right for Keystone.

“Right now, we’re working on getting specifics — whether we want to go with a contracted rate or a market rate,” Cipriani said.

The type of electric rate to choose is one of the toughest questions for business owners.  No longer are businesses stuck with a plain vanilla rate that’s designed around a class average load shape, and doesn’t meet the unique needs of business customers, each of which uses electricity differently.  With competition, businesses can get customized rates tailored to their individual load factors and usage patterns, which can save them money.

Unlike under the monopoly utility system, where rates routinely fluctuated depending on the cost of fuel and wholesale power, businesses can now get fixed rates for 12, 24, or even more than 36 months, which are especially attractive now due to low energy prices caused by the recession.  These fixed rates, aside from locking-in today’s low rates, provide budget certainty for businesses planning their operations in the coming year, something that was impossible prior to competition.

Businesses wishing to take a little more risk can opt for a variable or “market” rate that fluctuates with wholesale energy prices.  The variable rate allows businesses to take advantage of any future drop in energy prices, but also places the risk of any future increase in rates on them.  However, energy companies have come up with innovative ways to mitigate this risk while still allowing their customers to take advantage of any drops in electric rates, through sophisticated products that lock-in certain costs but “float” other costs.

Such “blended” products take a variety of forms.  For example, one common product may fix the price of costs that are more volatile and risky to leave open — such as capacity and ancillary services.  However, the product will allow the “energy” rate, which reflects the cost of actual electric supply from the wholesale market, to vary depending on market prices. 

Another blended variation may fix the price of a base amount of electric usage, and price any usage above that threshold on variable rates that float with the market.  Still another blended option may impose a cap or “collar” to allow the customer’s electric rate to vary, but only within a predefined range.  This collar allows customers to enjoy the benefits of any price drops while limiting their risk exposure, and still giving them some budget certainty by ensuring that their electric power rate never exceeds a set cap.

So which type of electric rate is right for your business?  It’s a tough question, especially for Pennsylvanians who are shopping for electricity for the first time.  That’s where the industry experts at SaveOnEnergy.com can help find the best energy price.  Not only does SaveOnEnergy.com pit up to eight competing energy companies against each other to get you the lowest rate, its experts can help find the right type of rate for your business.  They can take the confusion and complexity out of shopping for an energy supplier by matching your individual usage and characteristics with the right electricity product, so you save the most money on your electric bill.

“Retail electric providers in Texas’ deregulated market are offering residential rates that in many instances are lower than those of some municipal power companies, electric cooperatives and investor-owned utilities that are still under rate regulation,” the Forth Worth Star-Telegram confirmed in a new survey. 

Noting that Texas electric providers have sharply lowered rates in response to a plunge in prices for natural gas, the Star-Telegram reports that, “many consumers in Dallas-Fort Worth and other deregulated markets have been entering into fixed-rate plans of one year or longer to lock in lower rates before natural gas prices bounce back, as energy analysts have forecast will occur once the economy rebounds and gas supplies tighten.”

In a recent review of energy prices, the Star-Telegram found that the average rate for customers in the Dallas-Fort Worth area was 10.64 cents per kilowatt-hour, and that the average rate for the 50 cheapest plans was 9.62 cents per kilowatt-hour.  Five plans were under 9 cents, the Star-Telegram reported.

The Star-Telegram found 110 different electric rates and products available for customers in the Dallas-Fort Worth market.  That kind of clutter can be intimidating to a customer shopping for a first time, and why customers can use SaveOnEnergy.com to quickly and easily compare rates.  SaveOnEnergy.com screens the lowest rates from Texas electric companies and only recommends providers high levels of customer service, so customers can have peace of mind when choosing a new energy provider.

“Many of those deregulated rates are lower than rates offered by some munis, co-ops and IOUs [investor-owned utilities] operating outside the deregulated market overseen by the Electric Reliability Council of Texas,” the Star-Telegram noted.

The Star-Telegram survey showed average rates of 9.58 cents for five regulated IOUs; 10.43 cents for six munis; and 10.88 cents for six co-ops.

But customers have to switch electric providers and shop for the best rate to save money, the Star-Telegram noted.

Many customers who never have switched from their longtime “legacy” electric utility might be paying 14 cents or more, Tim Morstad, associate state director for AARP Texas, told the Star-Telegram.

In other words, shopping for a lower electric rate could save these customers as much as $50 per month, or $600 per year, based on average residential usage of 1,000 kilowatt-hours.

“Some people have just cut the same check to the same company for so many decades they’ll keep doing that,” instead of switching, Morstad said.

That’s why customers need to compare electric rates on SaveOnEnergy.com, to ensure that they are paying the lowest rate for electric service.  SaveOnEnergy.com lets customers compare rates anytime day or night, with just a few clicks of the mouse, to make finding the lowest electric rate simple and easy.

Energy prices have cratered, and competition is passing savings along to electric customers.  Electric rates in Connecticut, Massachusetts, New York, Maryland, and Texas, to name a few, have all fallen precipitously because those states have competition in their electric industry, meaning customers can choose their energy supplier and reap the benefits of lower prices. 

Even though natural gas fell to a mere $3/MMBtu last week — the first time gas has been this low since August 2002 — and even though wholesale energy prices from Delaware to Michigan have fallen 40% percent, there are still some states actually seeing record increases in electric rates.

One of them is Michigan, where for a decade competition kept rates in check, as the threat of losing customers to alternative energy providers kept the state’s monopoly utilities from raising rates.  But last year, the monopoly utilities won a major coup — a state law that rescinded competition, and capped the amount of customers that could choose a competing supplier at 10%.

What has happened since?  Predictably, rates have skyrocketed, now that utilities have an uncontested lock on 90% of electric consumers in the state.  Utilities immediately filed for rate increases (even though they had just won approval for increases in 2008), and thanks to another new law, they can “self-implement” higher rates before the Public Service Commission even rules on their desired prices.  The utilities are also charging customers more through line-item fees and other “add-ons” that aren’t part of the volumetric rate.

Those price hikes have sent customers into the market to choose another provider.  Electric choice is so popular right now that the 10% cap on choice has already been hit at one large utility, Consumers Energy.  That means, as The Grand Rapids Press put it, “If you have a business and want to shop around for electricity rates lower than what Consumers Energy offers, you’re out of luck.”  Customers will be stuck paying whatever price the utility wants.

The Grand Rapids Area Chamber of Commerce noted that because businesses and manufacturers will be stuck paying the utility’s higher rates, their ability to compete will be harmed.

What does this mean for Pennsylvania customers?  Like Michigan, Pennsylvania is about to end it’s “transition” period with electric choice for many parts of the state.  During this transition, rates have been capped, and there have been limited amounts of switching in most areas of the state (although thousands of business customers are saving money by choosing a different provider, particularly in the Pittsburgh area).

Like Michigan, some Pennsylvania politicians want to end choice when the rate caps come off, meaning the customer could only buy from the utility.  What’s happening in Michigan right now shows why this would be a bad idea.  Energy prices are falling in about a dozen states with electric competition, including Pennsylvania.  The lack of choice in Michigan is resulting in higher electric prices despite a weak economy, lower electric demand, and plummeting prices for fuels and wholesale energy.  Pennsylvanians need to stand up for competition and make sure they have the right to shop for a lower electricity rate.

As noted by former U.S. Energy Secretary Federico Peña:

“[Michigan] Customers, including many businesses as well as state and local government agencies, schools, universities and others struggling in today’s challenging economy, are now locked out of lower-priced electricity options available in the competitive marketplace … Other states contemplating a return to the monopoly model should learn from Michigan’s experience and not shut the door on competitive choice for consumers.”

Customer benefits in Texas’ competitive electric market continue to grow, the state’s Public Utility Commission said last week, drawing attention to lower prices available and additional discounts for qualified low-income customers.

“I urge Texans to take advantage of every opportunity to reduce their electricity bill this summer,” said Barry Smitherman, Chairman of the Public Utility Commission of Texas (PUC). “Customers need to be aware of these programs at a time when we’re using more electricity than ever.”

A reduction in energy prices over the past year is reflected in current price offers by retail electric providers, the PUC noted.  Most of the competitive areas, including the Dallas-Fort Worth Metroplex, have several offers below 10 cents per kilowatt-hour (kWh).  That’s less than $100 a month for customers using 1,000 kWh, a benchmark for monthly residential usage.

The prices mean that the current Lite-Up Texas discount for low-income customers goes even farther — but only if customers switch to a lower-priced plan.  Under the Lite-Up Texas program, customers receive a cents-per-kilowatt-hour credit off every kilowatt-hour they consume.  For August, the discount is about 3¢/kWh, meaning if a customer switches to a rate plan that’s 10¢/kWh, the customer will effectively pay only 7¢/kWh for all of their electricity, a discount of 30%.

However, the Lite-Up Texas program is one of several consumer protection and assistance measures only available in areas of Texas open to competition.  Customers who buy electricity from municipal or cooperative utilities, which aren’t regulated by the PUC, are not eligible for the Lite-Up program.

Making your energy dollar go father is easy thanks to SaveOnEnergy.com, which takes the hassle and confusion out of finding a low electricity rate.  Customers logging onto SaveOnEnergy.com simply select their service area and have immediate access to comparisons of electric rates from pre-screened energy suppliers.  Finding a low rate for under 10¢/kWh is as simple as a few clicks of the mouse, meaning customers can save time as well as money using SaveOnEnergy.com.