Welcome to Energy in Your Twenties! This series will help college students, recent college grads, and young professionals prepare for their first experiences with an electricity bill. Whether it’s figuring out how to choose an electricity provider, how to curb your roommate’s excessive electricity use, or how to make homemade dishes without cranking up your energy usage, this series will tackle the questions and obstacles people face during the first couple of years of paying their own electricity bill.
Choosing your first electricity provider can be a daunting task. Despite the fact that Texas electricity was deregulated back in 2002, many customers – especially first-time buyers – have difficulty understanding the idea of energy choice. Even experienced electricity customers have questions about the process: where to start looking, fixed-rate versus variable-rate plans, what prepaid plans are, and more.
And this potential frustration could leave you overwhelmed and pressured to choose an electricity plan or company that you don’t fully understand.
To help first-time Texas electricity customers learn about their energy choice, we’ve answered some of the most common questions about choosing your first electricity provider!
1) Where (and how) should I start my search?
The best place for anyone to start looking for an electricity provider – whether you’re a first time buyer or not – is a comparison website. Aggregators like Power To Choose, Save on Energy, Vault Energy, and Choose Texas Power list all the electricity plans available to your zip code, allowing you to compare offers side-by-side to help you choose an electricity plan that’s right for you.
2) What should I look for when comparing electricity plans?
The easy answer? Price!
But don’t just choose the lowest price you see. Often, the price displayed is for 1,000 kWh, and sometimes even 2,000 kWh usage. What that means is you pay 8.2 cents per kilowatt-hour (kWh) only if you use over 1,000 kWh that month. If you use only 500 kWh, you may be paying more cents per kilowatt hour. So if you live in a one-bedroom apartment, you may want to look at the 500 – 1,000 kWh usage range as that’s how much energy you’ll likely use every month.
But before you start looking at prices, ask your friends (or just do a quick Google search) to learn about how much energy an average home like yours uses. Next, once you’re on an comparison site viewing the available electricity plans for your home, check the “Electricity Facts Label” (EFL) to see the price broken done by average monthly use. The EFL contains other crucial information about the plan you should consider when making your energy choice:
- What kind of plan it is (variable-rate, fixed-rate, or indexed)
- The term length of the plan (listen in the number of months)
- Whether or not you have to pay a cancellation fee
- Whether or not the rate can change during your contract period
- A breakdown of the price, so you know how much of your rate goes towards energy charge, your utility, and etc.
These are all important factors to take into consideration when choosing the electricity plan right for you. Familiarize yourself with an EFL, and if you need further help reading one, this previous blog post should help!
3) What are all the different types of plans, and which one should I get?
A fixed plan will come with a contract term period, typically anywhere from 3 to 36 months, that locks you into a rate for the length of that contract. Meaning your rate will not change for the duration of your contract. So if you see a fixed plan with 9.1 cents per kWh for 12 months, you will be paying 9.1 cents per kWh every single month for 12 months.
A variable-rate plan (also known as a month-to-month plan) means your rate will change every month. Instead of locking in a rate for a period of time, your rate will last only as long as your current billing cycle, and it will either fall or rise depending on the electricity demand in Texas.
This means that when the electricity demand falls, such as during the fall and springtime, you could pay less for your electricity than your average fixed-rate plan. But, when Texas energy prices rise in the summer and winter, the electricity rate could pay much higher than a typical fixed-rate plan.
An indexed plan means your rate will be based on the closing price of the commodity. Indexed plans can be monthly or on a term basis, and the rate is calculated by a formula, with the base being the public index. Thus, your rate will go up and down in accordance to the cost of natural gas. Always be sure to ask an electricity provider for the formula they use for indexed plans before signing up for one!
As for which plan you should choose, that all depends on your budget, your needs, and what you want out of your electricity provider. If you’d like more control over how much your monthly electricity bill is, then a fixed-rate plan would be ideal for your lifestyle. But if you’re not sure you can commit to a contract, then a variable-rate plan might be best.
4) What is a prepaid plan?
A prepaid plan means you pay how much you want for your electricity bill. Instead of waiting every month for a bill that may come as an unpleasant shock to you, you pay the amount you want upfront. This means you get to budget exactly how much you’ll spend on your electricity bill every month. It also means you’ll often sign no long-term contracts, pay no deposit, and undergo no credit check.
At First Choice Power, we call our prepaid electricity offering Power-To-Go.
5) What else should I look out for?
- Minimum usage fees. Check to see if the plan has minimum usage fees. This means the electricity company will charge you a fee for not using a certain amount of electricity. This information can be found in the EFL. On the other hand, some electricity companies will offer a discount if you exceed a certain usage level.
- Freebies. Some electricity companies will offer a free product when you sign up for a specific plan. While freebies are great, if for any reason you decide to terminate the contract prior its end date, you’ll often have to pay the amount of the product back to the company.
- Payment options. Does the electricity company allow you to pay using your favorite method or must it all be done in only one method?
- Extras. Does an electricity company provide its customers with additional fun perks? Is there a refer-a-friend program? A rewards program? Does the company provide itemized billing that helps you learn how much you spend on your heating & cooling, appliances, lighting, and other home systems per month?
Adulting can be sometimes be hard, but choosing your first Texas electricity provider shouldn’t be! Happy searching!