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Friday, April 20, 2012

Power To Choose - A Scientific Approach

Here in the great state of Texas, we are able to chose our electricity provider. Sounds great, right? Yeah, it sort of is... but just like anything where you have a choice, that just means, well... that just means, you have to chose. And THAT my friends, is when the analyst in me comes out. Notice the first 4 letters of the word 'analyst'... yeah, I'm about to take it there. It's about to go from zero to full-on-nerd by the end of the next paragraph. 

So here's the thing about the whole "power to chose" scenario. Me as the consumer gets the choice in which electricity provider I use, so that means there's a bunch of competitive offers out there to chose from. My contract is up with my provider in May, so it was time for me to figure out what my next move would be... Either stay with my current provider or change to a new one. I received 2 offers in the mail for $100 and $150 rewards to switch, so I decided to assess what the best option was. 
There's a website called that lists all the different contract offers by each electricity provider. The main thing to look at is what each provider is offering for price per kilowatt hour (kwh).  I'm no electrical engineer, but a kwh is the measuring unit that tells the electricity company exactly how much electricity you used per month. So the total price of your bill is the pre agreed upon price per kwh multiplied by how many kwh you used. Allow me to show you in an equation. Let's pretend your rate is 10 cents per kwh.

Total Price of bill = 10 cents/ kwh * 1000 kwh

Allegedly, this bill would be about $100 for the month. Right? 


Yeah WRONG. Big fat WRONG!!!!!!!!

Why? Because there are tons of other loopholes and stupid 'gotcha' charges that have to be taken into account.
Let's talk about the first 'gotcha'. This is where the advertised price per kwh only applies when you use 2000 kwh per month. So don't be fooled by the advertised rate... In the last 3 years in this 2500 square foot, 2 story house, keeping the temperature at a balmy 73 even in the hottest months in freaking HOUSTON... I have NEVER EVER used more than 1300 kwh in a month. So this means that attractive advertised "low" rate is totally inapplicable to my situation. 
So what does one get charged instead of that nice low advertised rate? Good question. The answer is A WHOLE LOT MORE. 
Yay! Being green is awesome and it saves me a lot of money! NOT
In order to figure out exactly how much you're getting charged, you must open up the fine print, which is located on the power providers' websites. You'll see that there's a much higher penalty charge for using 500 kwh per month and a slightly higher charge for using 1000 kwh per month. 
Moving on to the next 'gotcha'. That would be the fee for using too little electricity per month. Yes, really... there's a fee for not using enough electricity.
Being green is good.... Being green is good.... Being green is good.
Maybe if I say it enough times, I'll believe it.
This fee ranges from as little as $5.95 to $10.95 per month depending on the provider and is for using anywhere from under 500 kwh to 800 kwh per month. A few providers just charge a flat fee regardless of the usage. Just a data point, I use less than 500 kwh per month about 6 months out of the year, so this fee would apply to me about half the year.
So now that I have explained the loopholes and fees, we can move on to the next topic: the historical electricity usage in my home. I have made a nice little chart for this.

So you can see in the hot months, the price goes up to around $120 per month, and in the cool months, it's around $50. Also, a little over 50% of the time, I paid my electricity provider's fee of $6.95 if my usage was under 500 kwh. 

For the next part of my assessment, I averaged the kwh usage over the course of the last 3 years. And I used that average to project my usage for the coming year. 

This first assessment is if I stayed with my current provider, Amigo.

So you see here that Amigo wants to charge me 9.8 cents per kwh if I used 500 kwh and 8 cents per kwh if I use 1000 kwh. Oh, and that fancy "low rate" they advertise? That was 7.7 cents per kwh. See what I mean about not really getting the promised rate? 
Another loophole that applies to this contract is that they want to charge me $6.95 if I use under 800 kwh a month. I've highlighted in yellow the months that I think this will apply. I've also added into that fee the $3.40 meter fee that every provider now charges each month. This is a fee passed onto the consumer from the power company because of the smart meters that were installed last year. You can read more about it here:
Don't even get me started....

So based on previous years' usage, you can see my projected monthly bills in the pink column as well as the "real price per kwh", which includes all the fees and the actual price per kwh that I will be charged. I did not include the taxes, since they cost like $1.50 each month and I don't know how to figure out how much they'll be. That my friends is called a "negligible" expense. Then in comparison to last year, I've done a comparison where I show the delta between what I paid last year and what I project I'll pay this year, if I chose Amigo. Note: "Delta" is an engineer's way of saying "difference". You're smarter now for knowing that.
Ok, so it looks like I'll actually be saving money this year if I chose to stay with my current provider, and I expect to pay around $847 for the next year. 

Moving onto the next provider... Green Mountain sent me a solicitation and said I'd get $100 if I switched to them. Here's my analysis for Green Mountain:

As you can see, Green Mountain's price is a bit higher per kwh, and they charge a $5.95 fee each month regardless of usage (plus the $3.40 meter fee that everyone charges).  The total electricity cost for the year is $971, putting it around $120 more expensive for me to switch to Green Mountain, even if I add in the gift card they were offering.

Lastly, I did the same comparison for Reliant, another company that offered me $150 to switch.
Reliant's cost was slightly lower than Green Mountain for 1000 kwh usage but wanted to charge me $9.95 if I used under 800 kwh (vs. Amigo, who's fee was $6.95 for under 800 kwh usage). Reliant was also going to offer me the largest incentive to switch, but as you can see by looking at the total price, I would only save $1 in the long run. 

In the end, I decided to stay with my current provider. And while this assessment did take a little while to do, I can be confident with my decision. Another plus is now I have it already built, and so next time I want to analyze my electric provider, I can just plug in the numbers to my spreadsheet.

What I learned in engineering school was right.... Don't be swayed by what seems like right answer. Do your work... let the numbers speak for themselves. 

Advertisements don't always tell the full story, but math never lies!

Peace, love, and happy calculations,

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