You often hear that the electricity energy coming to your home is all the same so it really doesn’t matter which electric company you choose. This opens up the window for the sales person to then tell you that the most important point is to pick the cheapest electricity company since the energy is all the same. I agree with this to a point.
A problem comes in when a customer approaches the Texas energy service shopping process in this way but fails to understand the rate. Another problem can crop up if the customer chooses an electricity company that is new to the market, has undercut almost all established Texas electric providers, and has a small amount of capital backing. A small energy company that comes in and all the sudden is offering the cheapest electricity rate causes some of the larger energy suppliers to salivate. Why is this? The smaller company is in danger of going out of business and having the PUCT take all of their customers away from them and giving them to what is known as, “The Provider Of Last Resort”.
Based on rules created by the PUCT any qualified Texas electricity provider can become a POLR operator. If your electric company goes out of business it doesn’t matter how good your energy price was you will have to go to the POLR. Some ask the question, well will the rate be comprable to the discount rate I had with the cheapest electric provider at the time? The answer is overwhelmingly no. When a small no name electric provider in Texas goes out of business in this situation it is almost always related to a wrong bet on the balancing energy market known as the MCPE index.
Texas electric companies buy their energy as well as sell excess energy on this ERCOT managed energy market. The MCPE market is like a clearing house to allow suppliers and generators to buy and sell energy. Some of the more reputable established electric companies in Texas will buy their energy on this market but will hedge the price. Hedging the price of the energy you sell is considered smart business among retail electric providers. By hedging your energy you are not exposing your capital investment in your provider to risk. If the MCPE market were to double or triple in price a provider who only bought but did not hedge may be subject to releasing all of their customers to the POLR by mandate of the PUCT.
When the balancing energy market doubles in price in a given month it will usually send these smaller electricity companies that did not hedge out of business and their customers over to the POLR provider. The electricity prices for Texas energy consumers during this time will be much higher than what the discount electric company was able to offer them a few months earlier. These customers end up much worse off than when they began.
I am not saying don’t choose the cheapest electric company in Texas I am just encouraging you to do a little check on the company to see who they are and how long they have been in town before deciding for sure. The situation I bring up happened a couple summers ago when Riverway Power and National Power were selling without hedging.
Beyond operating an electricity company in an unprofessional manner like this you may also find that a new recent start up is not able to bill you correctly. You may have some initial billing problems as the electricity provider attempts to work out the kinks in their new system. If you do go with a recent energy service company start up pay close attention to your electricity bill each month and make sure it is accurate. One way to do this is to contact the poles and wires company in your area and ask for your usage data file every 3 to 6 months. Use this file and compare it with what you were being billed during those same months. ALso compare the TDSP charges in the file with the TDSP charge line item on your bill. Make sure the dollar amounts line up.
Beyond billing and the danger of being sent over to POLR you will receive a cheap electricity rate if you choose the cheapest electric company and it will be just like the energy that passes through the wires from TXU Energy to the house next door. Hopefully your billing will be accurate and the company will stick around.
One last problem, there is still usually a trade off when it comes to customer service. You may have difficulty reaching a live person in a reasonable amount of time to ask a question of your electricity service company. In this case be sure to check their website for a customer service support email address. Smaller electricity companies usually are good about responding quickly to email requests while their phone lines are tied up. If this is your only problem you are in good hands. Sure you might not be able to talk to a customer service person every time you would like but you do have the cheapest Texas electricity rate.