Hunting for the right electricity plan can be an intimidating proposition. Confusing rates, lengthy legal documents, and perplexing fees can lead to spending more than you intended on your electric bill if you take the wrong step.
This is why learning to read and understand an Electricity Facts Label (“EFL”) is so important for Texas electricity customers. Your electricity plan may be great, until it isn’t, or it could cost you an arm and a leg to leave it behind. You’ll know exactly what to expect once you’ve read and understood this important document.
What is an EFL?
EFLs are standard disclosures required by the Public Utility Commission of Texas (“PUCT”) for every electricity plan offered by retail electric providers (“REP”) in the state.
Fortunately, the information required on EFLs is standardized by the PUCT. Although it might seem like a lot of paperwork, these are important documents made to protect residential and small commercial customers from dishonest practices and unexpected surprises on their electric bills.
When your energy charge is exactly what you expected, you’ll be glad you checked the EFL before you signed up for a new electricity plan. That’s the goal of the electricity facts label, anyway. Better-informed customers are happier customers.
What’s on the EFL?
EFLs are clogged with information, from the rate you’ll pay for electricity to disclosures about the plan. Obviously, the most important section is the pricing disclosure, but you need some knowledge before diving in.
Prices are shown for 500 kWh, 1000 kWh, and 2000 kWh usage levels. These prices are calculated average kWh rates that include an energy charge, a delivery charge, and, occasionally, a base fee or minimum use charge. All of these fees are disclosed on the EFL.
The prices listed for 500 kWh, 1000 kWh, and 2000 kWh are not ranges of pricing, or even unit prices. These prices are simply examples. This is what you’ll pay for electricity if you use exactly that much power. For more information, see Why Does Texas Have Three Electricity Rates?
Other important disclosures included on the EFL are contract length, type of plan, additional fees (like cancellation fees) that may be charged, and the percentage of renewable content. Provider contact and state certification information is included in this document as well.
How is the average price per kWh calculated?
Every EFL displays the average price per kilowatt hour for 500 kWh, 1000 kWh, and 2000 kWh usage levels. So if this isn’t a unit price for electricity, what is it? It’s a calculated rate for all utility delivery and energy charges based on the kWh used in a billing cycle.
There are 3 primary fees that make up this calculation: energy charge, Transmission and Distribution Service Provider (“TDSP”) fees, and other fixed monthly charges. Some REPs combine the energy charge and TDSP fees and call it a ‘Bundled Energy Charge’. Other REPs may disclose a bundled energy charge but break out the Advanced Meter Fee which is a piece of the fixed TDSP fee. All of the fees for these components are disclosed on the EFL.
The energy charge is the price you pay related to the generation of the electricity that you use. It is the price that your REP charges for your electricity.
The TDSP fee is a tarriff established by the PUCT and it is regulated. No matter which REP you choose, this fee is a pass-through charge and it is the same for everyone. These fees are periodically evaluated by the PUCT and can change on March 1st and September 1st of each year. The TDSP fee is the price you pay to have electricity delivered to your home. There are 2 components to this fee: a fixed monthly charge, and a variable monthly charge based on your kWh usage. Texas deregulated TDSP’s include CenterPoint, Oncor, AEP Central, AEP North, Texas New Mexico Power, and Sharyland.
Other Fixed Monthly Charges
Other fixed monthly charges may include a monthly base charge, minimum use charge, or daily use fee. These charges are fixed monthly fees that are billed by your REP. They are common but not required fees. A minimum use charge will only apply if you use less than a certain amount of electricity. These fees are clearly disclosed on the EFL.
Electric Bill Calculation
A typical electric bill calculation with information from the EFL looks something like this:
(Energy Charge x kWh used) + Fixed TDSP fee + (Variable TDSP fee x kWh used) + Other Fixed Monthly Charge = Estimated Electricity Bill
To calculate your average price per kWh:
Estimated Electricity Bill/kWh used = Average $/kWh
It is very important to understand how your electricity bill is calculated so you won’t be surprised at the end of the month. Be aware of usage credits, tiered energy charges, time of use factors, and minimum use fees (to name a few) that are disclosed on the EFL. These credits or charges could cause your energy rate to be much different than expected depending on your energy usage.
Understanding EFLs Prevents Electric Bill Shock
If reading and understanding EFLs is your thing, then you’ll quickly realize that even though the PUCT requires certain disclosures, almost every REP has their own way of doing it. We don’t expect you to be an EFL expert. At ElectricityPlans, we have combed through the EFLs for every plan we offer. The Plan Details and Pricing link on the plan shopping page displays the important EFL details about the selected plan and presents these details in a consistent manner. We clearly outline the components of your electricity bill calculation so that you can accurately estimate your monthly bill. We’ve read the EFL for you and extracted the details you need to make a well-informed decision about your next electricity plan.