Gaming the Rankings on the Texas Power to Choose Website

To help provide consumer information on competitive retail offers in the Texas electric power market, the Public Utility Commission of Texas maintains a website at www.powertochoose.org. Enter your zip code, click a button, and it will display the top ten (out of nearly 300) offers.

Because the table shows the lowest priced offers first, with the average calculated assuming 1000 kWh of energy consumption, companies can compete for the front page by minimizing their average price at exactly 1000 kWh. But as it turns out, the low cost offer at exactly 1000 kWh of consumption may not be the low cost offer for consumers using a little bit less or a bit more than 1000 kWh.

For example, when I search for downtown Houston (zip code of 77002) the website tells me there are 290 plans available. Click “View Results” and at the top of the table is Texans Energy’s “12 Month Texans Choice” plan at an amazing 4.3¢ per kWh (for comparison, the U.S. average residential power price is around 11¢ or 12¢ per kWh).

But check the offer’s “Electricity Facts Label”: Texans Energy obtains the top spot via a rate design of 10.8¢ per kWh but tossing in a $65 credit if usage falls between 999 kWh and 1200 kWh during the billing cycle. The usage credit creates a low-price sweet spot at 1000 kWh. (The second result is Texans Energy’s similarly designed “6 Month Texans Choice” plan.)

The rest of the first 10 results work similarly to blend in a bill credit kicking in around 1000 kWh to create a low-price sweet spot at that consumption level:

• Power Express’s “#Super6” rate at an amazing 4.4¢ per kWh, which they produce via 12.4¢ per kWh rate with an $80 bill credit for consumers using more than 999 kWh.
• Pennywise Power’s “Wise Buy Conserve 6 Plus” also showing 4.4¢ per kWh. Their rate includes a usage credit of $25.00 per cycle for consumption between 999 and 2001 kWh.
• Discount Power “Prime 24” showing at 4.5¢ per kWh, obtained with an 11.04¢ per kWh and a bill credit of $65 for consumers using more than 999 kWh in a billing cycle.
• Gexa Energy’s “Gexa Choice 6” showing at 4.5¢ per kWh. The rate includes a “monthly service fee” of $14.95 for consumption of less than 1000 kWh and a “residential usage credit” of $25 for consumption of more than 999 kWh.

Also showing on the first page of the Power To Choose results: The Frontier Utilities “Frontier Credit Back 3” plan similarly offers a $60 credit for usage of more than 999 kWh per month. Our Energy “Our Optimal Residential Plan” also offers an $80 credit for usage greater than 999 kWh per month.

Clearly rates are being designed for prominent position on the Power To Choose website. No doubt these offers are good deals for consumers who regularly consume at or a little above the 1000 kWh level and watch their usage. But because the consumer bill will jump significantly at consumption levels just below 1000 (and in some cases above either 1200 or 2000 kWh), they could be surprisingly expensive contracts for consumers who are not so careful.

The power to choose

But the consumer has the “power to choose.” On the results page the viewer can select estimated use levels of “500 – 1,000 kWh,” “1,000 – 2,000 kWh,” and “more than 1,000 kWh.” The selection re-sorts the results based on average price estimates at the 500, 1,000, and 2,000 kWh usage levels. (The middle is the default.) Consumers who use less than 1000 kWh monthly can easily find a contract good for them, perhaps the Infinite Energy “Conserve and Save 3-month” offer that includes a $9.95 credit for consuming less than 1,000 kWh and averages just 4.2¢ per kWh at 500 kWh!

A little different deisgn is 4CHANGE ENERGY’s “Value Saver 6,” which has a per kWh rate that drops between 500 and 1000 kWh usage, but jumps by nearly 5¢ per kWh at 1001 kWh. The effect is that of a rolled-in billing credit that grows in size with usage from 500 to 1000 kWh. The average rate is 8.6¢ per kWh at 500 kWh, drops to 4.9¢ per kWh at 1000 kWh, but rises to 7.6¢ per kWh at 2000 kWh. Unlike many of the above rate designs, however, the “Value Saver 6” does not have sharp jumps up or down.

Don’t like complications? Maybe Discount Power’s “Saver – No Gimmicks No Minimum Usage Fee – 24” plan is for you. Just as described: no minimum usage fee, just a fixed flat rate that averages about 8¢ per kWh.

Gaming is good

Overall, the competition is good for consumers. These supplier games may create traps for unwary customers, but consumers in Downtown Houston currently have 290 contract offers from over 50 different suppliers to choose among. Most residential consumers in the competitive retail part of Texas have a similar number of opportunities. It is easy to avoid the traps!

These suppliers offer contracts that differ across many margins: fixed price vs. variable, flat price vs. time-of-use, different levels of renewable content, pre-paid or not, terms ranging from 1 month to several years. On the other hand, Texas residential consumers outside of the competitive region (either because outside of ERCOT or because served by a municipal or coop utility in ERCOT that opted to stay out) are lucky to see more than two or three different options from their local monopoly utility. These offers might include a fuel cost adjustment tracking wholesale costs to a degree, and might get adjusted annually. But dynamic? No. Competitive? No.

The competitive retail electric power market for residential consumers in Texas is probably the most dynamic one around. With a little care consumers can avoid the gimmicks and find a pretty good deal.

HT: Big thanks to the economically-savvy anonymous tipster who brought the gamesmanship to my attention.