Fixed Rate Electricity Plans
When Texas first deregulated a fixed electricity rate plan was often advertised and offered to the public. An electricity company would hedge their energy on the commodities market often outsourcing the hedging part of the transaction to a financial company like Goldman Sachs and other large financial institutions. Once the commodity was hedge an electric provider could offer their customers a fixed electricity rate that would not change the entire term of the contract. If the customer did not pay attention after lets say a 1 year fixed electricity rate contract expired then that customer would roll over to a variable electricity rate plan.
Some electricity companies have it set in the contract terms and conditions that if the customer doe snot provide 30 days written notice after their contract expires that they will be switching electric companies than the provider can renew their contract out an additional month. A customer who is not paying attention could get renewed multiple times on high fluctuating variable electricity prices. If the customer then fills cheated and switches while on an auto renewal they can be hit with an early termination penalty even though they came off their original contract and had not signed anything else since.
Many customers find themselves in this situation and have to pay anywhere from a few hundred dollars to several thousand dollars as an early termination penalty. Electricity companies may profit about 7 to 10 times the price of the early termination fee which is easy money to them and a great risk to the customer. Sometimes an early termination fee is justified but the profit margin can be excessive and because of this it is always worth negotiating with your electric provider to get that fee down or even waived. Half of the ETF fee's we see are accidents because the customer did not realize they were still on a contract with their electric provider. What makes most customers the hottest is when their initial energy contact is over but they became auto renewed on a month to month contract that still comes with an ETF fee if they were to switch without giving 30 days written notice. Most customers see this type of ETF fee as a bonified scam by certain electricity providers.
In Texas electricity is one of the biggest deregulated markets and offers the most competitive deregulated market in the world. There are over 50 retail electricity providers in Texas and a couple new electric companies come into the market each and every day. Because of the large amount of providers you will get some comanies that come in with a business model based on deception and confusion. Since there are many customers used to the way the old monopolies operated prior to deregulation an electric company can fashion an electric rate and contract to take advantage of these uneducated customers. It is important to read through the terms of service, determine if any transmission and distribution fees are being excluded from the bundled electricity rate and make sure that the rate advertised includes all fees and charges.
One of the most devious schemes ever devised against electricity customers in hopes of using customer confusion to gain additional profits is the use of an energy surcharge. An energy surcharge was a fee used prior to deregulation and so it sounds official and even mandatory. The problem is that this fee only makes since when offering a variable electricity rate since the electricity price can change. A retail electricity provider has control over the energy surcharge which is usually associated with commodity fuel prices. Most providers hedge their energy and offer a fixed electricity rate with no additional statement in the energy contract that the price may go up in the fuel surcharge portion of the bill if commodity prices increase.
A few electricity companies offer "fixed electric rates" while adding in a fuel surcharge. These electricity companies do this so they do not have to hedge their energy which takes a way the risk on the electricity provider and places it squarely on their customers. So even though an electricity customer with an energy provider like this may think they are on a fixed rate that electricity rate can change as fuel prices go up. Since fuel prices always go up and down it shouldn't be legal to call a variable electricity rate like this a fixed rate but a few electricity companies still continue to do this.
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