The Houston market (along with several others in the state, including the Dallas and San Antonio areas) are the victims of electricity utility deregulation. We have our wonderful friends at Enron to thank for it, too, as they worked and lobbied hard in the late 90s and early 2000s before their collapse to deregulate and essentially rape the consumer market. This was initially touted as a great thing for consumers because there would finally be choice and competition for electricity rather than a government regulated regional monopoly. Sounds good in theory, right? WRONG! So far, it isn't working at all in the favor of consumers - it is only working in favor of the utilities because they are now free to push the prices as high as the market will bear. While consumers in deregulated areas now have a plethora of providers to choose from, the prices have been doing nothing but going up. Why? Who the hell knows. The generators say the price of fuel to generate energy has gone up. I'll agree with that to some point. But why have the still-regulated areas not experienced the same price increases we have? I'm all for choice and a free market economy, but this is ridiculous! As far as electricity goes, I liked the regulated, monopolistic setup because it ultimately saves me money!
The proof is in the pudding here. When we moved into my previous house in Katy, I selected TXU as the energy provider. I didn't initially keep track of my billing and utilization, but when I became interested in the skyrocketing utility bills, I was able to go back and retrieve billing information from their website for a period of a couple of years. As a point of reference, I looked at what I was paying back in May of 2005. That month I was paying 11.84 cents per kilowatt hour (KWh) average (the average includes their fees, taxes, etc.). That month I consumed 2,740 KWh, so the bill was $324.36. Compare that to May of 2006: I consumed 2,910 KWh and the bill was $463.63. That works out to 15.93 cents/KWh. So in the span of a year, we were paying 4.09 cents more per KWh. OUCH! I know it doesn't seem like a lot, but when you're talking in the thousands of KWh consumed, it adds up - quickly. During the summer of 2006, which I consider May through September, I had three months of electric bills over $500, and one of them would have been about $620 had I not changed providers. Keep in mind, this all happened before the energy markets went completely crazy. Also, the house where these bills were received was a 25 year old house with 3,413 square feet, and it was not very efficient.
Changing providers. For many people, I've found that's a scary thought. With me, it conjured images of those get-rich-quick people doing the Amway-style pyramid thing with these smaller, no-name or startup energy companies. I know some of my acquaintances hit me up for it a few times within the past few years, and I didn't do it because a) I'm not down with those types of businesses, and b) I had the same misconceptions as many consumers and thought I wanted a major provider. Well, what does that really mean?
To the best of my knowledge, here's how the whole electricity thing works - at least in Texas and the Houston area. The governing body is the Texas Public Utilities Commission, or PUC. They are ultimately responsible for the oversight of the power generators, the power distributors, and the power resellers. They're also responsible for that monstrosity known as the power grid. All of the power generators plug into the power grid. Some companies and co-ops have their own co-gen plants and feed their own grids, but there are interconnects into other grids, too, for surplus power transmission to other grid sections or for the consumption of power from other grids beyond what their facilities can provide.
Let's bring this whole thing to the house now. You have your generation plants and your power transmission lines (buried or on power poles), and the power is ultimately delivered to your house. Is the power you consume at your house really generated and delivered by the company to which you pay your bill? Back in the old days of regulated power, the answer was probably yes, mostly. Now, that isn't the case anymore. If you're a Reliant or TXU customer, some, but not all, of your power is generated by them. Some of it will come from other generation companies and energy sources (i.e. coal, nuclear, wind or other renewable resources, etc.). The transmission lines to your house? They're owned, operated and maintained by Centerpoint Energy in the Houston area, and they're responsible for fixing outages and other problems. So even if you're a Relaint or TXU customer, Centerpoint is still the company dispatching trucks and repair crews. Enter the smaller providers. What happens here? The only things that change is who you pay your bill to and how much you pay for your electricity. Have a power problem? Guess who gets sent out to fix it, no matter who you pay your bill to? You guessed it: Centerpoint. The generation and delivery mechanisms are the same - you get the same supply current you've always gotten (and that your neighbors get) - but you now get to choose who you pay your bill to and how much you pay for electricity. That's all that changes.
The problem, at least down here in Houston, is that the "Big Two" providers - Reliant and TXU - have unbelievably deep pockets (because they charge so much for electricity) and have been engaged in massive TV and radio advertising campaigns to convince people to switch to them or stay with them. They offer rate lock-in plans that entice people to use them by saying their rate won't change for 2 years. And, not to mention, our NFL venue here is named Reliant Stadium and Reliant Park - guess they're still trying to pay for that thing. Anyway, what do ignorant, uninformed customers do? They go with the names they know and pay too much for their electricity. Most have no clue - or gross misconceptions - as to what deregulation is all about and the choices it offers.
Towards the middle of July 2006, after doing some analysis and research, I determined that I was getting screwed and paying way too much for electricity, so I decided it was time to shop it around. If you live in Texas and think it is time to do the same, you need to go out to www.powertochoose.org. This is the site where I shopped for a new electric provider. Again, all that changed was who I paid my bill to and how much I paid for my electricity. Here's a quick analysis: My former provider was TXU. As of August, 2006 I was paying 15.95 cents/KWh - only very slightly lower that Reliant's "price to beat." Since I don't need any frills or anything - I just want electricity as cheap as I can get it - I chose Spark Energy. According to PowerToChoose.org, they were at the time I switched the cheapest electricity reseller at 12.9 cents/KWh. They offer multiple contracts, and I chose one that required a 12-month contract. That locked the rate in for 12 months. At the end of the contract, it is important to remember to shop around again. For me, it is all about obtaining electricity at the cheapest possible price, and I have no loyalty toward any specific provider. It will be somewhat of a pain in terms of time spent shopping (the switch itself is transparent and painless - you never loose electrical power or anything like that during the switch), but it will be worth it for the extra money saved. I highly recommend that you shop the different providers available if you live in a market where electricity has been deregulated. As an example of how much you can save, when I made the switch, I immediately knocked $100 off my bill. The savings won't be that profound for everyone, though: it all depends on your usage and consumption, which is directly related to the overall efficiency of your home.
You do need to shop carefully if you're going to switch! There are numerous retailers here, and their offers all differ. Some offer higher or lower prices than other resellers. Contract lengths vary, and so do the contract termination fees that accompany those contracts. Payment options vary as well. Just because I chose Spark doesn't mean you should, too. Spark is so much cheaper than other resellers because they have minimum overhead. They do not mail paper statements, they only e-mail electronic billing notifications. The only forms of payment they currently accept are credit cards and direct bank drafts. And 99% of their business is conducted via the Internet - I never talked to a person as I was doing my switchover. Everything I did happened over the Internet. Minimum overhead means lower prices. I was willing to do it they way they offer it, and they were the cheapest, so I chose them. The other thing you need to worry about is the financial solvency of the provider you choose. This has been a recent development in 2008 - some of the providers have gone bankrupt. Their consumers were then switched over to the provider of last resort, and they really sting you with their prices. Many times you don't even know it has happened until you get a huge bill. So make sure you do a little research and know that the provider you choose will be around.
In the end, the only voice consumers have with the electricity providers is our pocketbooks. Shop the resellers, weigh all of the pros and cons of each of them, and then decide if you're going to switch. Switching away from the higher prices is the only way we as consumers have in a deregulated environment to control what we pay for electricity. So switch to a lower cost provider if you find one with an offer package you like, save some money, and tell the big names you don't want to pay what they're charging for electricity! Don't want to switch from your current provider, but are tired of paying higer prices? Call them up and negotiate with them for a lower rate. I know of a few folks that did this and had their rate lowered by a couple of cents per KWh. You probably won't get the degree of savings you might from switching, but every little bit helps. Why pay them more than what you have to?