FAQs
Frequently asked questions about Texas energy.
What is an LOA?
A Letter of Authorization allows an energy broker to obtain usage from a utility. This is a simple form that does not commit a signer/customer to any obligation. The usage that is supplied by the utility will show the preceding 12 months of usage data. This includes everything from the demand, kWhs used each month, service periods and more. This data is used by retail electric providers to analyze a load and understand how to price accordingly. Additionally, this file can be used to spot anomalies. For instance, Power Factor ratings and, therefore, potential Power Factor penalties can be identified.
What is an LOE?
A Letter of Exclusivity is a letter provided by a customer that allows the broker to exclusively get pricing with specific Retail Electric Providers. Exclusivity is normally granted by default to the original broker who first priced an account with a particular provider. Therefore, the LOE will grant account access to a customer’s preferred broker, overriding an established precedent that would prevent access. The preferred broker can now assist in all dealings with the REP and request pricing.
What is the difference between the utility company and a retail electric provider (REP)?
The utility company owns and operates the general infrastructure of the grid and delivers electricity to the meter. The REP bills for electricity usage each month corresponding to the usage data that it receives from the utility. A customer cannot choose their utility but can choose their retail electric provider in deregulated markets. A deregulated electric bill will arrive from a REP and contain all relevant charges for a normal billing period, that would include the utility charges, REP charges, regulatory costs and taxes.
What start date should I choose for my electricity contract?
For new service, a customer should select the date they prefer their electricity to start flowing via a move in order. Scheduling the utility may require up to a 10-day lead time to start service. A priority move in order, as opposed to a normal move in order, can effectively move the order to the earliest opportunity with the utility for an additional fee. This fee will be billed by the retail electric provider. If a customer is renewing their current electric service with a new provider, they will need to select between two options: a meter read date or a self-selected start date. The option chosen should correspond to the termination of all previous electricity commitments. Often the electricity bill will contain the current electricity contract’s expiration date, or it can be found in the service contract. This, however, will not reflect any other future commitments that may be in place. If additional future renewal electricity contracts exist, those commitments are still valid and likely will not show up on the current bill. The expiration date will either specify a specific day or will reference expiring on a meter read date. The renewal should correspond to the relevant expiration.
What happens if I choose an incorrect start date for my renewed electricity service?
If a start date is selected that is too early or too late, than there may be adverse consequences. If a contract is renewed on a start date earlier than the previous expiration date, it could cause a premature termination of the previous electricity agreement. This likely will cause an early termination fee that will be assessed according to the terms in that provider’s contract. If a contract is renewed on a start date later than the previous expiration date, it will cause the customer to be out of contract for the period of time between service contracts. Unless a customer specifically cancels service with the current provider this will not interrupt power. However, it will cause the price to change to a market rate. The current provider will have defined market rate terms for post-contract charges. Depending on the current supply and demand, bills can be greater or lower than the previously expired contracted rate. A market rate will effectively put the customer on a variable rate. This can be financially dangerous during times that have a higher demand. Variable rates (market rates) can climb to ERCOT’s current market cap on wholesale pricing of $5,000 per MWh / $5 per kWh. Although this is not a normal price for electricity and would only reach these prices during the limited times of high demand, variable rates can expose customers to prices that could dramatically exceed normal conditions.
What is a Market Securitization Charge?
A market securitization charge is a new line item created to address the financial crisis caused by the winter storm of 2021 that affected all of ERCOT’s grid. This charge will finance bonds that paid down the extensive debt incurred by market participants who defaulted on payments during the event. Moving forward, all ERCOT electricity users will pay a fee that is either a line item on their bill or included in their rate until this debt is eliminated.
After I sign a renewal agreement should I cancel my previous service?
No. Do not cancel your service from your previous provider. The switch order will transfer billing at the utility level from your old provider to your new provider. This will happen seamlessly in the background. If you were to cancel service from your previous provider, you could create a lapse in service from the point of your cancellation until your new service becomes active.
Should I take advantage of an electricity rate from a non-legacy provider?
All retail electric providers can offer value to customers, but some may be newer to the market. ERCOT has seen its fair share of providers come and go. This can become problematic for a customer depending on how that provider leaves the market. If the provider is bought out, the customer’s billing will switch to the new provider, who may operate differently but likely with your contract terms intact. If the provider fails, the account will go to POLR (provider of last resort) which would most likely eliminate the previous contract and immediately switch to a market rate. This may create an event where the customer will pay more due to the variable nature of the billing for this period. Ideally, the load will need to be contracted to avoid market rates but may still be subject to a higher fixed rate than your previous contract had in place. The winter event of 2021 in ERCOT is a great example of a time when some REP’s failed and some customers saw extreme charges from variable rate exposure. A fixed rate with a solvent provider (most mainstream providers) highly insulates a customer from these potential pitfalls.
What is ERCOT?
The Electricity Reliability Council of Texas is the organization that operates the grid for the majority of Texas. ERCOT maintains the stability of the power grid, administers retail switching, integrates generation, and manages the wholesale market.
Why do blackouts or brownouts happen?
A blackout is a prolonged loss of power over a large area of the grid, and it happens when grid systems fail. Due to the constant monitoring of the grid, it takes extreme conditions to create an environment where a grid would fail. Primarily, extreme weather and equipment failure are the most common causes of a blackout. The electric grid operates within an electrical frequency that has its limits. When those limits are surpassed, generators and other assets will trip off to prevent damage. If things happen too suddenly or grid operators do not take measures to prevent further failure, then one generator tripping off can exacerbate the issue leading to more generators going offline. An out-of-control loss of generation can cause a sweeping blackout. Brownouts are a deliberate curtailment of delivered power to control grid conditions. This is often done to directly prevent a blackout from occurring.
How do I obtain a 100% green electricity contract?
Renewable Energy Credits (REC) have become the industry’s way of selling and giving credit for the use of the renewal energy produced on the grid. Typically, you will not see a claim to green or renewable energy as a percentage of the grid generation for your consumption without these RECs. A company who wants to “go green” can sign a contract with RECs attached to their load, or can purchase these after the fact, to achieve their sustainability goals. Please contact us if you would like RECs to be integrated into your next electricity contract.
Should I cancel my current plan to get a better rate?
In most cases no. We will never suggest that a customer cancel their contract to obtain a new “lower” rate for many reasons. The primary reason is that the customer’s early termination costs are calculated in a way that will likely eliminate any savings and that fee would be paid immediately, making it a less desirable outcome. Additionally, the provider that was dropped in favor of a new provider may opt to not offer services to that customer in the future, limiting options moving forward. This is a decision that rests solely with the customer and often can have a downside with costs (like an early termination charge) that may not be clear at the time, despite what any third party may suggest.