How to Read an Electricity Facts Label
An Electricity Facts Label (EFL) is a document that outlines all the specific details of a Texas 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 many of the concerns and frustrations that Texas residents experience happen because they don't quite understand how to compare different plans to find the best one for them. 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.
This area shows the price of the plan, including the energy rate per kilowatt-hour (kWh), base charge and delivery charges.
This is the unit of measuring electricity usage. Most electricity plans charge based on a rate per kWh.
The energy charge is the price you'll pay for each kWh you use. This price is set by the retail energy provider (REP).
The base charge is a fixed monthly fee that helps cover operational costs of providing you with energy service.
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 Energy Price
Energy Charge + Per-kWh TDU Fee + [(Per-month TDU charge + Base Charge)/Usage]
Here is the calculation step by step:
Add the energy charge per kWh and the per-kWh TDU delivery charge.
Add the base charge and the per-month TDU delivery charge. Divide this by the number of kWh used.
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
Some plans, such as our free weekends plans and free nights plans, offer a special pricing structure that's different than regular plans. To ensure customers understand exactly what they're 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.
Other Key Terms and Questions
"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. This area outlines:
- Plan type, which is usually fixed or variable. You'll also see a line item for whether or not the product is pre-pay or pay in advance.
- Contract term length, usually from 1 to 36 months. Month-to-month contracts will be listed as 1-month.
- Termination fee amount if you terminate your contract before the specified term length.
- Whether or not your price can change during your contract period. The "price" here refers to the total price that includes the energy charge, base charge and delivery charges.
- How the price can change, and by how much. Price changes usually come from updates in charges and fees from your TDU or governing agencies. These types of updates are not controlled by REPs.
- Other fees that might be associated with your electricity bill, which are usually non-recurring fees listed as a separate line item on your bill.
This section addresses the renewable energy operations of the REP and renewable content of the product.
- Distributed renewable generation is when individual homes or businesses produce renewable energy. This area tells you whether the REP buys the excess energy they produce.
- Renewable energy percentage and statewide average outlines the percentage of renewable energy content associated with the plan based on the REP's purchase of Renewable Energy Certificates, compared to the Texas average for renewable content.
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.
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 have 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.