Tag Archives: deregulation

I Want a Pay-as-You-Go Electricity Plan and it’s Not What You Think.

I’m not broke. I have pretty good credit these days and I can afford to pay once a month for power. I have a social security number, a co-signer if I needed one (thanks, mom!) and access to all kinds of post-paid electricity products. So why the heck do I want to try a “pre-paid” or Pay as You Go plan for my very own home in C-Town, USA?

The story starts with two Payless Power employees coming into the office this morning to chat over coffee about why Pay as You Go is a great addition to our site. We already wanted it. My (albeit simpler) thinking was that there is a whole world out there of folks with no credit and that a no-deposit, cash option, pre-pay, or pay-as-you-go electricity plan would be a good option for those folks… but now I want it for my family, and its not JUST because you get a cool text each day to tell you how much power you use or because you can call customer service for free and talk to a real person. It might actually be great for our planet. (Plus you get a cool text each day and get to talk to a real person for free.)

Phillip Armenta, Director of Sales at Payless Power mentioned explained the process to me. He explained that it isn’t really pre-paid anymore, “Literally, it is paying as you go one day to the next based on household needs and customer awareness.” He went on to explain that his customers get notified of their consumption via text, which means that, “with real time readings, I could make changes immediately that I can see within a day or two.” Therefore, pay-as-You-Go users are engaged and cognizant of their usage and so they use less power over all. It’s like they put a little pink post-it on your phone every morning.

Little pink post-its

 

Phillip says their pay-as-you-go plans offer “real time readings for real time savings.’” Of course!

Many of us want that magic pill right? If I am going to lose weight, I do not want to eat less food or move my body, I wish for a pill to make me not only thin but toned too. If I want to pay less for power, I don’t want to watch consumption (turn the bathroom light off, Terra!), I might prefer to just find a cheaper electricity rate. Sometimes the obvious way seems….hard. But Pay as You Go option makes it all seem pretty simple.

Candidates for Pay as You Go plans may not have access to the lowest electricity rate in town so what do they do? They use less power. THEY USE  LESS POWER!

These savvy customers may find that their bills are equivalent to that fancy post-paid plan holder’s bill AND they are helping the grid by conserving energy. Doesn’t seem like a “second rate” rate after all, does it?

 

 

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“Forget electricity rates. What can you do about these PASS THROUGH CHARGES?!”

The one question I hear every week looks like this: “What can you do about my pass through charges?! They are so HIGH!” Or “My delivery charges are more than my electricity supply!” A quick look at your usage file (ordered from your local utility) can tell you if the pass through charges on your bill match the amounts charged by your utility for the delivery portion of the bill. The chatter about suppliers ‘pulling a fast one’ regarding delivery charges is a result of all the fear in the electricity marketplace and here at Shop My Power, we get it. We try to ease that fear whenever we can by educating our customers, so let’s talk about what it all means.

There are a number of items that can be called “pass through charges” so let’s get clear on that first by understanding a function of your retail electricity supplier. In Texas, your supplier is like a collector for three separate parties. Think of it like your water/trash bill at home. You might pay one bill and the city will divvy it up, right? It’s similar with your commercial power bill. Most folks get one bill for their business electricity from one entity (usually the retail supplier) and on it are three separate sections: Taxes, Delivery and Supply. You pay the bill, then the supplier pays the government their taxes and the utility for the delivery of your power. This is why business owners cannot “shop” their taxes or delivery charges. And YES – quite often businesses pay more for the delivery of their power than they do for the power (or supply,) especially now while electricity prices are so dang low! Unfortunately these two sections (taxes and delivery) are what most folks are talking about when they say “pass through charges”. You cannot shop for better tax or delivery rates as there is no competition for your government or your “poles and wires” company (your local utility). What you can shop is your supply (the amount you pay per kWh – i.e. your RATE.) But rates are not presented to you apples to apples. Oh no, there are pass through charges in rates from suppliers too, and those are the pass-throughs we can manage together.

Think of it like mailing letters. You cannot do anything about the cost of the stamps (delivery) but you can sure go buy cheaper stationary (supply). At Shop My Power we help you weed through the supply rates (which can be about as clear as mud) to find a bill you can fully understand and feel good about.

What’s the difference between the suppliers who supply power and the utilities who deliver it?    In order to wrap your head around what is arguably the first important “get” when shopping for electricity in a competitive market, you need a small history lesson (sorry) here goes. I will make it quick.

 Deregulation; a history lesson: The electricity market before deregulation and retail electricity suppliers existed: (This is General as all states are a little different.)

For many years, electricity was produced and delivered by the same company. This company can be called a Utility. Here are some examples of those utility companies:  ConEd in New York, ComEd in Illinois, ONCOR and Centerpoint in Texas, JCP&L in New Jersey. These utilities historically provided both these services: Supply and Delivery:

  • Supply – Think of power plants generating power. This power itself, the electrons, is the electricity supply.

  • Delivery- Look outside at the poles and wires delivering your power and the people reading your meters. This is a delivery system. The utility still oversees delivery exclusively.

What is electricity deregulation? Before deregulation, there was no choice as to whom we could buy our power from, hence power supply and delivery were both regulated. About 14 years ago, the laws began to change in certain states. These changes in law allowed business owners to choose who they bought power from. Today, almost half of our United States is deregulated for the supply portion of either natural gas or electricity. In two words, deregulation means: ELECTRIC CHOICE. Delivery is still regulated. When deregulation laws were passed, that did allow for customers in deregulated territories to purchase their power (supply) from anyone they liked (Retail electric Service Providers or REPS), however the delivery of that power is often still managed, maintained, and billed to you by your utility company, depending on your state.

The Birth of Retail Electricity Providers (REPs) and ELECTRIC CHOICE:

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Retail Electricity Providers (REPs):  When deregulation laws passed, utilities were forced to sell their generation (power plants). These plants were bought by retail companies that planned to sell the supply (electrons) from those power plants to customers in that territory. It is their prices for power that Shop My Power will present to you. Why pay more for the same electricity?

These new supply companies have many names; in the south they are called REPs (Retail Electricity Providers), in the north they are called ESCOs, and in the Midwest they are simply called suppliers. Some examples of suppliers: Direct Energy, Constellation New Energy, Just Energy, and Liberty Power. There are hundreds of these REPs in every deregulated state. How will customers know which one to choose?

Energy Consulting: With so many REPs to choose from (none of them presenting pricing, contract language or fees the same way,) it became very confusing for business owners to shop rates for their supply, compare apples to apples offers, and read contract language. A professional community emerged to simplify the process for business owners. We call this community the ABC community: Aggregators, Brokers, and Consultants. The ABC community helps business owners by finding them the best deal for their electric and natural gas supply. In the more mature markets like Texas, over 60% of commercial businesses recognize the value of utilizing an electricity professional to shop for their power. Shop My Power is ready to simplify your procurement today.

 

Not all Electricity and Natural Gas Suppliers are Money Grubbing Jerks.

Hang ups about swithchingNot all electricity and natural gas suppliers are money grubbing jerks.

At Shop My Power, we have certainly run into them. But just as often you find the supplier whom, as a company, is willing to be honest, take less profit exchange for client loyalty, and do what they think is the “right thing.” Let’s talk about supplier disclosure, because contract language is a great way to tell the good guys from the bad guys.

I have found our customers prefer full disclosure. Here is an example of full-disclosure you will find on the more about us page: “Shop My Power is a broker. Like all brokers and electricity sales people and supplierreps, we get paid by the suppliers we pair businesses with. In fact, the payment is rolled into your price. It is a fraction of a penny per kWh and we work very hard to earn that fraction of a penny. This fraction of a penny per kWh (or therm) payment will go to either to the supplier’s direct sales rep, the door knocker, straight back into the retailer’s pockets, to some desperate guy who you will never hear from again (usually a door knocker or multi-level marketer) or to someone like us, the power broker. The amount will be the same no matter which supplier I pair you with so that keeps me unbiased in the arena of commission. Of course I am biased against money grubbing jerks but will still present you with their offers if you want them. You should do business with good brokers because that is where your money is best spent. I can generally get you better rates, terms, and contract language than you could ever hope to get on your own. Plus, if you have any trouble, credit issues, want to add locations, move, or have trouble making ends meet? I am here for you. We are customer advocates.”

There. Now don’t you wish your electricity contracts were that clear?

Like, this clear (below is what a average supplier’s contract might say if they were being completely forth coming):

 Thank you for becoming our valued (treasured?) customer. By signing below you agree that you will pay 5.5 cents per kWh for electricity supply. This price is fixed; a fixed price cannot change no matter what between now and January 1 2016 unless something really crazy happens like a zombie apocalypse. What is included in this price is:

  • Energy
  • Capacity
  • Line losses

What this rate does not cover is

  • DELIVERY charges from your utility. Often your delivery charges cost more than your supply. These charges come from another entity entirely: Your utility. In Texas for example, you pay suppliers the supply portion, the taxes and the utility portion, then we suppliers pay the utility and government their cut. In New York, you might have a bill for both. One from say the utility Coned, and another from us. Some folks pay both supply and delivery to the utility (opposite of Texas) and the utility sends the suppliers their payment.
  • TAXES unless you are a not for profit – and even if you are there are still some taxes. Taxes come from your local, state, or federal government.
  • Meter Fee – There is a 10.00 meter fee per month. We charge this amount to small customers who use less than 100,000 kwh/year because in the months that customers use little or no power, we can keep paying our electricity bills. Also, some customers cost more for us to service than we earn from them in profit. This meter fee will cost 120.00 a year.

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You will be bound to this rate for 12 months. This is a contract and it is binding. If you break the contract, you can cost our company money and we will do what we can to recover the loss, from you. This way we can keep rates low for other customers. Early termination fee is $100 for each remaining month on the contract for this account, or not to exceed $500.00.

 

Your start date is January 1 2015 and ends January 1, 2016.

If you use more or less power than we expect you to, there will be no additional charge.

This is the number you call if you have billing problems.

This is the number of your broker.

This is the number you call if you have an outage.

This is the number you call if….you get the picture.

 

The above example “faux contract” from an average supplier is meant to explain some key matters of contention on a contract… and it sounds a little harsh right? Well it may not be. Take a look how the truth-elixir-induced full-disclosure contract would (and often does!) read from a bad player:

 Thank you for becoming our victim. We may not be in business next year because we do not hedge properly. This is how your price is 3.4 cents per kWh. This price is energy only. It does not include other cost components and will be more expensive than you can imagine next summer. It is fixed as long as you use 15,000 kwh/month. If you vary from that by more than 10% either way, we can charge you something different. If you break this contract, we will charge you the cost of all the power you did not use at 250% of market price. If you do not send us something in writing 63 days prior to contract ending that you want us not to renew you per this contract, we will automatically renew this contract for 12 months at 150% your current rate….

 

You get the picture. Now the first company does not seem so corrupt, does it?

The Connecticut PURA is proposing a really straight forward kind of contract summary that will eliminate the question marks around contracts. The template looks like this (although it is still in the making.) We think that is pretty cool. It will tell you what you need to know about the deal you just signed!

 

Sample_CT_Contract

Maybe we are looking at the future here, eh? Until the world becomes better, try to remember there is a cost to doing business. There are employees to pay, overhead to pay, risk in the marketplace to bear. There must be a profit. That is the whole point of business. If you are like us, you want to do business with companies that do good business. You might want to commit to  those who will be around for you, who will speak plainly, and tell you what the heck they mean. Contact Shop My Power today if you think we can help point you in the right direction. We know who the good guys are.