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Trying to save on your electric plan? It pays to read the fine print
Exploring minimum usage fees

Posted by Shane McLaughlin on 07/24/2013 at 2:59 AM

At TrueCost, our CenterPoint Electric Price Index monitors hundreds of publicly available electric plans, including those not offered on myTrueCost.com. One unusual plan on the market caught our eye. The price looked too good to be true, so we took a look at the fine print and found something interesting:

We will bill your TDU [Transmission and Distribution Utility] price per kWh and a $19.95 base charge per invoice if the amount of electricity used is less than 1,000 kWh.”

The $19.95 base/minimum use charge is the steepest we've seen. The plan is attempting to look really good on the publicly advertised 1,000 kWh price, but the challenge is that assumes the customer always uses 1,000 kWh of electricity every month.

Historical data shows that for CenterPoint Energy Houston Electric’s service territory, the average consumer didn't use 1,000 kWh of electricity in five months out of the year (and two other months were between 1,000 kWh and 1,050 kWh of usage). A  few days of low electricity usage (think being away on vacation or even a couple of rainy days) and this plan could rack up $140 per year of minimum use fees.

The rate structure for this plan results in a four cents increase in the advertised price per kWh when a customer uses between  500 kWh and the 1,000 kWh of electricity. Imagine if someone shops quickly for a plan with the lowest kWh rate, sees that plan, doesn't read the fine print, signs up and uses 999 kWh for seven months. This person will effectively pay $0.14/kWh because of this fee. The advertised price was wrong by more than half!

This is a great example of why we built TrueCost. Advertised kWh rates oversimplify what you really pay for electricity. Not only does TrueCost show you these charges right on the plan details page, but we also include them in the monthly, annual and kWh rates. Even if you're not using your meter data to get price estimates on our site, TrueCost still bases the prices shown on standard usage curves that look like a real Houston customer (more usage in the summer, less usage in the winter).

 

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