How to Read an Electricity Facts Label

An Electricity Facts Label (EFL) is a document that outlines all the specific details of an electricity plan, including the price, contract length and fees.

Electricity choice is great, but it can sometimes be hard to compare one plan or electricity company to another. For this reason, the Public Utility Commission of Texas (PUC) requires all Retail Electricity Providers (REPs) in Texas to provide an Electricity Facts Label for each plan they sell. This is because most of the concerns and frustrations that Texas residents experience happen because they don't quite understand how deregulation works in the Texas electricity market. Companies want to make sure that customers have all the information necessary to answer questions like:

  • How much will I be charged for the electricity I use?
  • Does this plan come with a contract?
  • How long is the contract for this plan?
  • Is there a fee if I break the contract?
  • What else will I be charged by this electricity company?
  • Is this a fixed-rate plan or a variable-rate plan?

While this document offers a useful and structured way to compare plans across companies, it can be difficult to decipher what all that information means for you. We'll take the mystery out of it so you'll know what to expect on an EFL and what the document can actually tell you.

Electricity Price

Charges

This area shows the price of the plan, including the energy rate per kilowatt-hour (kWh), base charge and delivery charges.

Kilowatt-hour (kWh)

is the unit of measuring electricity usage. Most electricity plans charge based on a rate per kWh.

Energy Charge

The energy charge is the price you'll pay for each kWh you use. This price is set by the retail energy provider (REP).

Base Charge

The base charge is a fixed monthly fee that helps cover operational costs of providing you with energy service.

TDU Charges

The Transmission and Distribution Utility (TDU) delivery charges also help cover the cost of delivering electricity to your home. These charges are set by your local utility and are the same for every REP that serves the area. TDU charges include a usage-based (per kWh) and a fixed (per month) component. On the Direct Energy EFLs, these charges are associated with the name of your local utility: CenterPoint, Oncor, AEP North, AEP Central or Texas New Mexico Power.

Average Price per kWh

At the top of every EFL is a chart that lists the average monthly price for usage of 500, 1,000 and 2,000 kWh. The prices listed here factor in all the charges you see on the EFL so you get a better idea of your total per-kWh price based on your usage. These rates vary based on usage because fixed charges get divided up by the number of kWh.

The best way to use this chart is to compare your usual usage to the averages listed on the chart. If you don't know your usage, you can find it on your past electric bills. As the chart indicates, the average price for electricity could vary month to month based on how much energy you use.

How to Calculate the Average Price

Energy Charge + Per-kWh TDU Fee + [(Per-month TDU charge + Base Charge)/Usage]

Here is the calculation step by step:

  1. Add the energy charge per kWh and the per-kWh TDU delivery charge.

  2. Add the base charge and the per-month TDU delivery charge. Divide this by the number of kWh used.

  3. Add the numbers from steps 1 and 2 to get the average price per kWh.

Let's walk through an example

  • Usage: 500 kWh

  • Energy charge: 7 cents per kWh

  • Base charge: $5.00

  • Per-month TDU delivery charge: $5.00

  • Per kWh TDU delivery charge: 4 cents per kWh

Here's how to calculate the energy price for an average usage of 500 kWh:

$0.07 + $0.04 + [($5+ $5)/500 kWh] = 13 cents per kWh

Special Rates

Some plans, such as our free weekends plans and free nights plans, offer a special pricing structure that is different than regular plans. To ensure customers understand exactly what they are paying for, these plans reflect a slightly different layout on their EFLs.

The biggest difference here is that you will see two rates on the "energy charge" line - one for your free hours (0 cents) and one for the rest of the time. Just like regular plans, the chart will factor in every charge listed below it to give you the average rate at those usage points.

Quick Tips on Shopping for a Plan

Think About Total Cost

When shopping for energy plans, it's important to think about the total monthly cost. We make it easy to calculate your average rate and your total estimated electricity cost with our bill estimator. When you shop our plans, just click "Plan Details" and you can view your estimated total charges and average rate for the three usage levels listed on the EFL and for your own custom usage amount.

Use the Energy Charge to Compare Prices

The only charge that will vary among different plans is the energy charge. Our base charge is the same for each plan, and the TDU delivery charges from your local utility are also standard for every plan. So when you're comparing prices, all you need is the energy charge.

Other Key Terms and Questions

In the brief second section, the "Other Key Terms and Questions" will explain information about the average price detailed in section one and encourage you to read the Terms of Service statement for the REP providing this plan.

Disclosure Chart

The third section is called the "Disclosure Chart," and it covers the following:

  • Plan type,
  • Contract term length,
  • Termination fee amount,
  • Whether or not your price can change during your contract period,
  • How much it can change
  • What other fees might be associated with your electricity bill
  • Renewable energy percentage
  • Company contact information

You should always ask for an EFL for any electricity plan that you find interesting, and the REP should always give it to you. With this information, you can always have for an "apples to apples" comparison between electricity plans and companies so that you can make an informed decision as you shop for the Texas electricity company that best meets the needs of your home. By understanding all the information presented on an EFL, you will gain a better understanding of how the Texas electricity market works.

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