Here are answers to some of the more common questions about purchasing electricity for your business. If you don’t see your question below, please contact us and we’ll be glad to answer it for you!
1) What is deregulation?
Electricity deregulation in Texas was the result of Texas Senate Bill 7 on January 1, 2002. According to the law, deregulation is to be phased in over several years. As a result, most Texas power customers (those served by a company not owned by a municipality or a utility cooperative) can choose their electricity service from a variety of “Retail Electricity Providers” (REPs) which includes the incumbent utility (usually a subsidiary thereof). The incumbent utility in the area still owns and maintains the local power lines (and is the company to call in the event of a power outage) and is not subject to deregulation. Customers served by cooperatives or municipal utilities can choose an alternate REP only if the utility has “opted in” to deregulation. To date, only the area served by the Nueces Electric Cooperative has chosen to opt in.
Since 2002, approximately 85% of commercial and industrial customers in Texas had switched power providers at least once. Approximately 40% of residential customers in deregulated areas of the state have switched from the former incumbent provider to a competitive, notable retail electricity provider.
2) How does electricity get to my business?
Electricity starts at the power plants. There are hundreds of these all over the country and take the form of traditional coal-fired plants, Natural gas-fired plants, Wind generation, Water generation, Nuclear generation and Solar generation.
Since most power generation plants are miles away from the areas they serve, high voltage electrical transmission lines must be run. It’s not uncommon for these lines to run for hundreds of miles before reaching their service destination.
These high voltage transmission lines crisscross the country originating from about 10,000 power plants creating what is commonly known as ‘The Grid’. According to the U.S. Department of Energy, America operates approximately 157,000 miles of high voltage transmission lines. Many of these lines transmit electricity in excess of 230kV (or 230,000 volts). There are three major ‘Grids’ in North America. They are The Western Interconnect, The Eastern Interconnect and the Electric Reliability Council of Texas (or ERCOT).
Once the transmission lines reach their destination they are received at sub-stations. It is at the sub-stations that the electricity is transformed down to a much lower voltage for distribution around a city or town. And, although it is a much lower voltage (13 – 17kV typically) it is still much too high for home or business use. These distribution lines are usually run through neighborhoods on tall wooden poles.
We finally get to your business. From the distribution pole before power can be sent to your building the voltage must once more be transformed down. This is either done with transformers mounted on the pole itself or via a ground mounted transformer on your property. The final voltage entering your building will vary depending on what type of building it is. Commercial buildings many times are served with 480/277 volts, which is typically a 3 phase system not suitable for dwelling buildings. The local power utility provides the power from their transformer to your electric meter.
3) What is the role of a Retail Electricity Provider (REP) in deregulation?
As a result of deregulation, a Retail Electricity Provider (REP) is a company that sells electricity to retail customers where the sale of electricity is open to retail competition. A REP buys, sells, and brokers electricity in order to provide the best possible energy rates for customers, both new and old.
A Retail Electricity Provider is different from a Transmission and Delivery Utility (TDU). The TDU is the company that owns, maintains, and reads the lines, poles, and meters in a given service area. The TDU for a given area brings the electricity to the homes and businesses.
The functtion of the two are as follows:
- A REP sells electricity to the customer.
- A TDU delivers the electricity to their customers. It also charges a customer to provide service for the electricity used. “Service” includes delivering energy to the customer’s home or business, reading the meter to determine energy usage, fixing a downed pole or power line to correct an outage, and other such operations.
In short, deregulation means that you – the customer – get to choose the REP you want from a group of competing companies, but you do not choose your TDU.
4) Why should I use an Energy Broker to purchase electricity?
Another question might be – why can’t I purchase it on my own? Energy Brokers provide a valuable service to customers as they are the key avenue to the “Retail Electricity Providers”. What business has the time to investigate and search out the numerous REP’s that are available? How does a business know if in fact they are getting the best bid or price available? This is one of the key services that an Energy Broker provides. An Energy Broker like Integrity 1st Energy Consultants is currently contracted with 12 REP’s in order to research the best price available.
Most Retail Electricity Providers prefer to work with an Energy Broker to reduce their cost and overhead and thereby offer lower prices to brokers than they would to customers directly. With an Energy Broker providing several offers each month to the REP’s, providers are able to offer “volume discounts” to the broker versus an offer directly to a customer. The Energy Broker is then able to take these bids from all the REP’s and provide the customer with the best price and contract available.
5) Why do I have to sign a contract to get electricity for my business?
A Retail Electricity Provider require a commitment from a customer in order to offer the lowest price they can. Having a contract allows the REP to forecast revenues which is critical for making sure they can fund their operations. Having a contract is just as good for the customer–without a contract you pay more than you need to and if a natural disaster or shortage occurs your electricity cost could skyrocket overnight.
6) Why do electricity prices change every day?
Much like the stock market, the prices for energy and its sources change every day based on several factors. As Energy Brokers, we are able to get daily pricing from the Retail Electricity Provider which we use to provide you with a custom quote. This year, electricity prices are extremely low historically, but again, these prices could go up at any time. The customer’s DECISION is to determine the risk factor that they want to take in order to choose the best possible price for their business. It is your decision as to when you lock in the electricity price in your contract.
7) Should I break my existing electricity contract in order to take advantage of a low price offer?
Breaking your existing contract is never a good financial decision. The fees for early cancellation are usually very high and it would cost you less to just ride out your existing contract. The good news is you don’t have to wait for your contract to end before locking in a lower electrical rate/price. Most Retail Electrical Providers allow you to sign a contract 1 to 2 years in advance. If you receive a price quote that would benefit your business, it may be a wise decision to lock in that price for the future.
8) What are the TDU charges on my bill?
TDU stands for Transmission and Distribution Utility. This is a state regulated unit that takes the electricity from the provider and connects it to the customer. In Texas, we have 5 of these: AEP Texas Central, AEP Texas North, CenterPoint, ONCOR, Sharyland Utilities and Texas-New Mexico Power. These regulated companies add their charges to your electricity bill. These charges, set by the TDU, cannot be changed and are the same for all electricity providers.
9) What are NODAL charges?
NODAL charges are a result of electricity congestion within a certain area. As of December 2010, TDUs monitor electricity usage within 4000 different ‘nodes’ throughout Texas. If a node shows excessive congestion in the area your business resides, the TDU will add a charge to your bill IF your contract does not cover NODAL charges. This is why working with an experienced Energy Broker is critical because you can sign a contract for what seems like a really low price and then actually spend more because of unexpected NODAL charges.
10) Will my service change if I change Retail Electricity Provider (REP)?
Not at all—the only thing that changes when you switch providers is the amount you pay and who the bill comes from. Electricity is electricity–there aren’t different flavors or types. The same TDU will deliver the electricity to your business and if you have any outages please call us or your TDU. If you have any questions about your REP or your electric bill, please call us or your REP.
11) Who do I call if my power goes out or I have a problem with the wires or meter?
Please call us or you would call your TDU (AEP Texas Central, AEP Texas North, CenterPoint, ONCOR, Sharyland Utilities or Texas-New Mexico Power).
12) What if I need to close or move my business?
Contact us as soon as possible if you need to move or close your business. We’ll help you navigate through the process of shutting off or moving your electricity. It is important to contact us to avoid possible early termination fees (ETF) which may result in thousands of dollars.
13) I’m in an electricity CO-OP–can I change providers?
Generally speaking, you do not have a choice if your business is located within a CO-OP area. The only know Electricity Co-op in Texas is Nueces Electric Cooperative (NEC) which has agreed to deregulation.