Cottage industry rises from complexity of choosing electricity plans
When Texas deregulated electricity markets 16 years ago, the Public Utility Commission created the website Power to Choose to help consumers through the power buying experience. But what was promoted as an easy, free way for Texans to pick electricity providers has turned into a such a complex and confounding experience that it is spawning a cottage industry to help consumers navigate the scores of companies and hundreds of plans available.
At least five companies in Texas are providing both free and paid services aimed at helping consumers in Houston and other deregulated markets decipher confusing electricity offers such as free nights and weekends, multitiered pricing plans, and credits for high electricity use.
The companies have built computer algorithms that try to ferret out the best deals based on factors such as past electricity consumption, home size and the number of people living there. In some cases, it’s just a matter of plugging in your monthly electricity into a website calculator. Others provide more comprehensive services, charging a monthly fee to advise customers which plan will save them the most money and then monitor the market so if prices fall, consumers can switch.
This kind of hand-holding is akin to car buying services, which save customers the time, energy and aggravation researching models, doing comparison shopping and negotiating prices. But unlike cars, there’s no difference in the electricity provided by different retailers, making the emergence of these power buying services a sure sign of the complexity of the system.
“The third party guys demonstrate the consumer is getting ripped off by the Power to Choose artificial configuration that the Public Utility Commission has rammed down the throat of Texas consumers,” said Ed Hirs, energy economist at the University of Houston.
The Public Utility Commission recently recognized the shortcomings of Power to Choose, with chairman DeAnn Walker criticizing retail electric providers for misleading pricing plans. Those plans offer rock-bottom rates at 1,000 kilowatt hours, but if consumers use just one kilowatt hour more, the price per kilowatt hour can jump as much as 10 times.
Andrew Barlow, spokesman for the Public Utility Commission, said the buying services are a welcome addition to the competitive market, rejecting the idea their emergence represents flaws in the workings of power deregulation.
“We think it’s great these companies are in the game of helping consumers,” said Barlow, who likening electricity buying services to subscription services such as Consumer Reports, which helps consumers find the best deals on a wide range of products. He added that power buying services compete against each other, adding to the vibrancy of the market.
Finding an opportunity
Some analysts, however, have suggested that it’s time for the commission to revamp Power to Choose by making it more like shopping for Medicare coverage. Seniors, for example, can put in the names of the drugs they take, and the health care website will tell shoppers which Medicare plan covers those drugs at the lowest cost.
As it now stands in Texas, private companies have stepped in to do the calculations to help people buy electricity.
Jesson Bradshaw, a power industry veteran, saw an opportunity when his friends and family asked him which company they should sign up with for electricity. He sent them to Power to Choose, but he quickly heard complaints.
“I saw how confusing it was,” said Bradshaw, who worked as a power trader and owned the retail power company Amigo Energy until he sold it to Just Energy in 2011.
Four years ago, he and a partner launched the buying service Energy Ogre. The company charges customers $10 each month to find the lowest price plan and monitor rates to see if it makes sense to switch mid-contract. It doesn’t take commissions from power providers.