How to Compare Electricity Rates

When the Texas legislature deregulated the electricity industry in the State of Texas, they opened the floodgates for a host of electric providers to compete for your business. Although the original utilities still provide the electricity through the existing lines, poles and electric equipment, the new providers are responsible for billing and customer service for all of the accounts that they service.

When shopping for an electricity provider in Texas, there are a number of things to take into consideration. Because a large number of providers are vying for your business, they offer a wide array of services, rates, contract terms, incentives and other promotions in order to be competitive. Unfortunately, while these varied offers, incentives and bonuses can be quite attractive, they make it rather difficult to do an effective rate comparison from one provider to the next.

Determine Your Preferences

Since there is such a wide variation in rates, the first thing to do before attempting to compare electricity rates is to determine your preferences. Do you prefer a fixed rate or a variable one? A fixed rate, as the name implies, remains fixed throughout the term of the contract. While this gives you the security of always knowing how much you will be paying for electricity, it can have disadvantages in that if the electricity rates drop significantly, you will not be able to take advantage of the savings. Conversely, if they go the other direction, you will not have to pay any more.

Fixed rates usually have longer term contract requirements, as much as a year or longer, while variable rates are available on a month-to-month basis. While providers usually offer the best rates on a longer term contract, you should beware of an artificially low "introductory" variable rate, which may go up significantly after the first six months.

Bundled and Non-Bundled Rates

Another variation on billing is bundled versus non-bundled rates. Some electricity providers will break out their various monthly fees in order to offer the lowest per-kilowatt-hour rate, which at first glance may seem much more competitive than another company's bundled rate. A bundled rate includes all recurring monthly fees in order to provide transparent pricing to the consumer. If a rate is non-bundled, you need to estimate your monthly kilowatt-hour usage, multiply that by the rate provided, and then add in the additional monthly fees to get the exact pricing. It may be difficult to determine all of the additional fees until you receive your first monthly bill, however.

In summary, in order to compare electricity rates in your area, you will need to determine which type of rates you prefer in order to do a correct, apples-to-apples comparison. While the rate structure may seem confusing at times, the choice is still much better than the alternative.

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