Are you spending too much on taxes, airfare, or gas? Most people don’t enjoy paying more than necessary, but making a change can be challenging. It often requires extra effort or specific knowledge to secure the best deal. Even if you manage to make a change, how can you be certain it remains a good deal over time? The same holds true for your home electricity bill.
Understanding Energy Rates in Texas
Electricity rates hinge on various factors, with the weather playing a significant role. In Texas, recent years have seen extreme weather conditions – freezing in February 2021, a hot summer and cold winter in 2022, and one of the hottest summers this year. After examining numerous bills for Quick Energy, it’s evident that weather impacts electricity usage and bills. However, many people find themselves paying more for electricity than necessary. Why is that? Let’s explore.
In spring 2022, natural gas prices surged, causing electricity prices to skyrocket. It marked one of the costliest periods for electricity in a long time, with Texans facing bills double or more than what they were accustomed to.
This surge in energy costs led to a market condition called “backwardation,” where the current price is higher than future prices. However, since we all need electricity, we can’t simply stop using it until prices drop. While not an ideal situation, many people believed that opting for longer-term contracts would help. Due to backwardation, longer-term contracts appeared ‘cheaper’ than shorter-term ones – an apparent choice, or so it seemed.
How Quick Energy Works
However, a problem emerged from the beginning – the longer-term contracts were more expensive than they should have been based on natural gas or electricity futures at that time. The wholesale price was lower than what people locked into with their contracts. Nevertheless, people went ahead and committed to these contracts at the market peak.
Where Are Electricity Rates Now?
Fast forward to today. Based on our information at Quick Energy, many Houston residents are still in longer-term contracts. This is evident from the remaining time on their contracts when they switch to our service. Early in 2022, people had an average of about five months left. However, from August to October 2023, the average remaining time has increased to a year. To compound matters, their old rates are higher than what’s currently available.
On average, those with a year left were paying 18-19 cents per kWh (energy charges plus delivery). In today’s market, you can easily sign up for a new plan at 14 cents per kWh. Those four or five cents can make a significant difference. Consider this – if you use 2,000 kWh a month, you could save $80-$100 each month.
What You Can Do to Improve Your Electricity Bill
In short, if you entered a long-term contract from mid-2022 onward, it’s worth checking the market to see if switching to a lower contract rate makes sense for you. The market has significantly dropped from its peak. Over the past year, many people have found it beneficial to switch to a new contract. However, many people haven’t taken this step.
Why is that? People often aren’t paying attention or are concerned about an early termination fee (ETF). If you’re in a longer-term electricity contract, take a moment to see if a better deal is available. You have the right to pay your ETF and exit your contract at any time.
How do you decide? It just takes a bit of math. Find your termination fee from your plan’s Electricity Facts Label (EFL). Then, explore the market, find a top rate, and compare it to what you’re paying now. Calculate the difference and multiply it by your usage for the remaining contract term. If that’s more than your ETF, switching might make sense. Put simply, avoid paying too much for electricity. For additional details, feel free to explore Energy Brokers in Texas.