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A better way to track electricity prices
The CenterPoint Energy Electric Price Index

Posted by Shane McLaughlin on 11/07/2011 at 12:00 PM

Houston freeways are filled with billboards urging you to “lock in your electric plan now!” and others promising great rates. But you wouldn’t consult a billboard to decide to refinance a mortgage, buy bonds or sell stock; you would do research, consult market indexes or perhaps ask a trusted adviser.
And that’s where CenterPoint Energy comes in. While we don’t sell electricity, we have our finger on the pulse of the electric market. That’s why we’re introducing the CenterPoint Energy Electric Price Index. It debuted in Sunday’s business section and will be featured there weekly as well as on our website.
The Index analyzes a broad range of plans available to Houston-area residential customers. It tracks weekly price changes in the one-year, fixed-rate electricity plans and shows the highest, lowest and plan price averages.
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Also included is a table with the current average prices for six-month and two-year plans, plus the “green premium,” which is how much more you might expect to pay per month for energy from 100 percent renewable sources.
Because we believe that electric pricing should be easy to understand, we present average costs in both cents per-kilowatt-hour and dollars and cents per month. We take the amount of electricity households commonly use and then calculate how much 12-month plans would cost each month based on current prices. For example, for a customer using 12,000 kWh of electricity per year, the average monthly cost of a one-year plan purchased today at 10.01 cents per kWh would be $100.14. The green premium is $5.06. Remember that in Houston consumption (and bills) are typically higher in the summer and lower in the winter. Our average monthly cost is just that — an average.

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We have additional charts tracking six-month, one year and two-year plans on our website. Looking at the second chart, which is taken from our own website,  6-month plans have been the star performers over the last year. While relatively low natural gas prices – the dominant factor in determining Texas electricity prices – have led to stable power prices, six-month plans were the lowest priced plans over most of the year. Even during six-month periods that included Houston’s record-breaking summer heat, the prices for six-month plans essentially matched those of one-year plans. You can read the details about how the index is calculated here.
The prices for one-year and two-year plans have remained relatively stable. By design, these plans provide predictable pricing, but at a cost. Two-year plans for customers using 1,000 kWh per month currently cost around $5 a month more than one-year plans.
So when you see the billboard advertising low prices, be sure to check the fine print. There are likely to be extra fees included in your monthly bill that impact the per-kilowatt-hour price you ultimately pay.
Shane McLaughlin is a manager in CenterPoint Energy Services and produces the CenterPoint Energy Electric Price Index.
CenterPoint Energy does not sell electricity, but purchases about 5 percent of the natural gas consumed in the U.S. each year. The cost of natural gas is the dominant factor in setting the price of electricity in Texas.

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