It happens all the time. You’re browsing online for energy plans and spot a low electric rate on top of the page and quickly sign up for it thinking you got a good deal. Then once the electric bill comes due, you’re hit with additional hidden costs that are passed on as separate line items. Once you add up all the charges, you soon realize the energy plan you signed up for is much more than you anticipated.
Unfortunately, this is a common occurrence. The energy market is a competitive environment and energy companies may advertise rates in a way to make it look lower than their competitors. It is important to read the terms and conditions of every energy plan before signing up to make sure you’re comparing apples-to-apples!
Understanding the Electric Bill
If you live in a deregulated electricity market, then you have the power to shop for an alternate energy supplier and save money on the electric bill. The electric bill has two main sections that include the delivery and supply charges.
- Delivery Charge – The delivery charge represents the regulated section of the electric bill. This is the cost of delivering the power from the local utility company to the point of service, whether it’s a home or business. A customer can’t change utility companies for the delivery service
- Supply Charge – The supply charge represents the deregulated section of the electric bill. This is the cost of generating the number of kilowatt-hours the customer consumes during a period. Deregulated electricity markets allow customers to shop for a lower supply rate per kilowatt-hour of power consumed.
When you sign up for an energy plan that includes all the charges in the supply rate, then the supply section of the electric bill will look something like this:
Generation Charge: 1,200 kWh x $0.065 $78.00
Subtotal Supplier Services $78.00
Common Hidden Fees in Electricity Rates
Monthly Base Fee Charge – One of the most common additional charges for residential electricity rates include a monthly base fee charge. Energy companies may refer to this charge as the monthly meter fee. Depending on the energy plan, this additional fee can cost between $5-10 or even more! Typically, the lower the supply rate being advertised, the higher the monthly meter fee.
Bill Credit Special – Energy companies may also advertise a low rate that requires the user to consume a specific number of kilowatt-hours each month to receive a monthly bill credit. Oftentimes, the supply rate is advertised to include the bill credit. Unfortunately, if the customer does not meet the monthly usage requirements, then the supply rate will be much higher. Sadly, this is often the case.
Early Cancellation Fees – Most energy plans will include an early cancellation fee if the customer changes electric suppliers before the end of the agreement. The early cancellation fee is often not advertised on the price. Early cancellation fees can cost up to $300 so make sure you are at the end of your agreement before changing energy suppliers.
Read the Electricity Facts Label (EFL)
If you’re living in the state of Texas, it is required by the Public Utility Commission of Texas (PUCT) that all energy suppliers must provide their customers an Electricity Facts Label (EFL). The EFL will lay out the details of the energy plan including early cancellation fees, monthly base fees, and any other additional charges. Reading and understanding the EFL will save you from unwanted surprises that may show up on the electric bill.
If you’re living outside of Texas, then this is commonly referred to as the terms and conditions. Every energy plan will include the terms and conditions. If you want a true apples-to-apples comparison, then it may be wise to take the extra time to read the terms and conditions before signing up for a new plan.
Choosing the Right Energy Plan
If you’re searching for energy plans and come across a supply rate that seems too good to be true, then it probably is. Avoid the hidden costs associated with electricity rates by reading the plan’s details. If you receive a soliciting call from a salesperson advertising a low electric rate, then ask for the terms and conditions. If they are unable to deliver the terms and conditions in fine print, then this should be a red flag. It is best to avoid choosing an energy plan from a salesperson over the phone.
There are several price comparison platforms advertising electricity rates. Oftentimes, the lowest rate appears at the top and can be easy clickbait for those looking to save money. To avoid being a victim of unwanted surprises, always assume a rate has additional charges until proven otherwise. ElectricRateSelect.com can help you choose the right energy plan based on your individual preferences. Our goal is to keep customers for the long run and not make a quick buck by advertising deceitful rates. If you’re in the market for a new rate plan, then feel free to reach out to one of our energy advisors today.
