In this month’s Energy Trends Watch, we have a buyer beware alert! We are noticing some emerging trends in rate plans in Texas including Block Rate Structure Programs. What are block rate programs? It’s a schedule of prices for electricity wherein the price per kilowatt-hour (kWh) changes at different levels of consumption. For example, the first 500 kWh of use per month is charged at one rate and all use over 500 kWh is charged at another rate.
Energy Ogre CEO, Jesson Bradshaw says these programs can often result in frustration and confusion for the consumer as:
- Consumers will think they are getting the advertised rate when in fact it’s unlikely the buyer will achieve that rate.
- Consumers need to know exactly how much electricity they use to avoid being pushed to the next tier.
Block rate programs are frustrating
People who buy these plans are likely to be disappointed, says Bradshaw. Because effective rate is almost always going to be higher than they think, it’s frustrating. Our Energy Ogre team monitors over a thousand retail energy provider offers daily. We use this knowledge to ensure you are only paying for what you need and nothing more. Therefore, you are left a little less frustrated. Finally, here is an example of a current block rate program on the market.
The first EFL shows 7.9¢ at 500 kWh. If a customer used 250 kWh, they would be paying a 15.796¢ effective rate. Additionally, a customer used 3000 kWh, the effective rate would be 8.9¢, at 4000 kWh the effective rate is about 9.4¢, until the effective rate caps at almost 11¢. Mind-numbing? Yes! That’s why our technology does all this work for you.
Also, if you go to powertochoose.org and search by your zip code, you will see block rate programs. Many show up near the top of the list. This is probably not the best option for most Texans, Bradshaw explains, in this video:
Because of this, Texas consumers need to read the Electric Facts Label (EFL) very carefully before choosing a plan. Block rate programs and plans simply aren’t the best option for the majority.
There should be enough detail in the EFL to help you get a good estimate of what your effective rate each month should be. Certainly, if a rate plan looks too good to be true, this should help prevent you from getting suckered into it.