The Watchdog: Texas electricity companies profit from fees that some call ‘money for nothing’

Most Texas electricity companies charge extra fees on customer bills that have little to do with electricity. These companies slide through giant loopholes in state law that often shock customers when a monthly bill arrives.

For instance, an electric company serving North Texas customers pays Oncor Electric Delivery only $2.30 to disconnect a household from service and $2.70 to reconnect.

Yet one company stated that it charges $15 to disconnect and $50 to reconnect — or $100 if a customer wants an immediate reconnection called “expedited.” Another company charges $45 to disconnect and $15 to reconnect. Still another charges $5 when it sends out a disconnection notice and $65 to reconnect.

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Those are hefty profits for what essentially, in the age of smart meters, amounts to pushing a few buttons by Oncor. No longer must a service tech travel to a residence to turn electricity service on or off.

“These fees are money for nothing,” says Carol Biedrzycki, head of Texas ROSE (Ratepayers’ Organization to Save Energy). She’s the leading state critic of such costs, complaining that companies “have done absolutely nothing to earn” these fees.

Here’s another: The Watchdog constantly receives complaints from Texans who can’t understand why they are urged to conserve electricity, yet when they do, they get penalized.

According to a 2013 survey by Texas ROSE shared with The Watchdog, 29 of 44 retailers charge $7 to $20 a month in penalties — called “minimum usage fees” — if a customer uses less than 1,000 (or in some cases 800) kilowatt-hours per month.

Some companies that have no minimum usage requirements, according to the survey, are Entrust Energy, Apollo Power & Light, First Choice, Green Mountain, New Leaf and Summer Energy.

Biedrzycki tells me that a few years ago only a few companies charged this penalty. When I asked one company why these charges are dumped on Texans who try to conserve, Will Huffman, director of customer experience for Ambit Energy, explained: “There’s a lot of risk that we have to undertake as retail providers to procure the power. If we buy too much or don’t buy enough, there’s always a risk associated. So you’re helping offset some of that risk.”

Public Utility Commission of Texas spokesman Terry Hadley calls the slew of extra fees “just another pebble in the pile.” He explains that “to whatever extent a provider has fees, they have to spell it out in contracts and their notifications” to customers.

These fees are allowed “in general,” he says. “It just emphasizes the importance of people understanding this. In the long term, do you want a provider that piles on these types of fees? That’s something a customer has to decide.”

Biedrzycki says, “These fees are a profit center. At a minimum they should be reporting how much they made on these fees. Airlines are deregulated, but we know how much they make on baggage fees.”

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More than a decade after Texas deregulated electricity service, there are more fees than ever.

Green Mountain, for example, bills itself as “the only power company in Texas dedicated to clean energy.” But there’s a cost for that. A customer is forced to pay $5 for copies of billing records, $15 if a customer makes more than five payments in a single month, and $5.95 if a bill is paid with the help of a live agent.

That last is one of the more irritating fees. According to the Texas ROSE survey, some companies charge about $5 if payment is made with a live agent. One company doing this is called Compassion Energy. No kidding.

Here’s another unusual fee structure: Texpo Energy offered a rate of 13.2 cents per kwh for an average monthly use of 500 kwh (in 2013), 10.6 cents for average monthly use of 1,000 kwh and 10.3 cents for average use of 2,000 kwh. But get this: If a customer doesn’t use the company’s AutoPay E-Plan — automatic payments from a bank account — the company tacks on an extra 5 cents per kwh. That means 10.3 cents per kwh jumps to more than 15 cents.

Note that The Watchdog isn’t pointing to various early termination fees enforced by most companies because a signed contract makes those fees clear. Neither am I noting the many fees charged for late payments, bounced checks and other collection fees, because when someone misses a bill, a penalty is expected.

Nor am I pointing out fees that are state-approved such as an Advanced Metering Charge and an Energy Efficiency Cost Recovery Factor. All companies are allowed to charge these fees. Some list them separately on bills; others don’t.

What’s important here is there’s no standardization for fees in either their presentation to customers or actual charges. It’s quite willy-nilly. Let the buyer beware.

The only way to figure out what the real costs are is to study each company’s Terms of Service and Electricity Facts Label, available on a company’s website and also on the state-run powertochoose.org website. It’s a shopper’s nightmare because customers often must wade through dense legal language to figure it out. In a few cases, fees are not even reported.

Customers must be thorough when asking questions before signing contracts. It’s easy to forget to ask the right question. Sometimes, customer service reps give wrong answers.

The only way to fix this problem is to beef up state law and rules so a standard set of fees applies across the board. That would make it easier for Texans to shop and understand what they’re actually paying for.

State law and PUC rules in the deregulated marketplace don’t go far enough, says Biedrzycki, who has been fighting this battle, mostly alone, for several years. There’s no reason for consumers to get zapped in so many jolting ways.

Follow Dave Lieber on Twitter at @Dave Lieber.

CONSUMER TIPS: Educate yourself

Know when your electricity contract expires.

Be prepared to sign up with a new company about a week before a contract’s expiration date.

Use the powertochoose.org website to shop. Then check a company’s own website to verify the accuracy of the terms offered.

Another website to check is texaselectricityratings.com.

Study both the Electricity Facts Label and the Terms of Service before signing a contract.

Ask questions of customer service reps on the phone before signing.

Make sure you understand the extra fees before committing.

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The Watchdog: Electric bill may come as jolt

In the confusing and sometimes deceptive Texas residential electricity market, certain monthly charges called delivery fees are often more frustrating than a brownout.

Some electric companies list them in marketing materials and bills. Others don’t.

Delivery fees can add as much as 30 percent to a bill. But some electricity sales people only sell customers on the kilowatt-hour rate and leave out the delivery fee when closing the deal.

There’s only one place to learn the true kilowatt-hour charge, and The Watchdog will tell you where that is.

power consumption

Delivery fees cover the cost of moving electricity through power lines, a different cost than how much electricity is used each month. In North Texas, it’s the Oncor charge because Oncor Electric Delivery delivers the juice on behalf of dozens of retail companies that compete for business.

Delivery fees are a standard charge for everyone. Electric companies pass them through to customers.

Confusion abounds because of how the fees are presented. Companies can do it one of two ways. Companies can bundle the kwh rates and delivery fees into one lump sum, or they can split them out as line items.

How do you shop companies when some list their prices with fees and others don’t? Sticker shock hits later when monthly bills come in at a higher rate than what consumers were led to believe.

Another reason for confusion: The same fee has different names. Aside from Oncor charge, other names used are Transmission and Distribution Utilities recurring fees, TDU fees and TDU delivery charges.

Customer Justin Brower of Dallas said that when fees and taxes were added, his bill was 60 percent higher than he expected.

“It is extremely misleading to not show the customer which plans have the charges bundled vs. the ones which are unbundled,” he said.

One reason these monthly fees have moved front and center is because some of the larger retailers decided to break them out as a separate line item. It makes sense since the fees are outside the control of the electric companies that send the bills.

TXU Energy tells customers on its bills: “TDU delivery charges are regulated fees from your TDU for the delivery of electricity. Previously they were included in your energy rate, but are now itemized separately.”

The fees are set by state regulators. They’ve more than doubled since deregulation began in Texas a dozen years ago. Part of that increase covers smart meter conversions.

TXU provides an excellent breakout of the monthly fees at txu.com/tducharges. They include a 78-cent customer charge, a $2.19 smart meter charge and a $2.28 meter charge for a fixed monthly charge of $5.25. Seven other charges are based on the amount of kilowatt-hours used. All this adds a little more than 3 cents per kwh to a contract’s listed rate.

Champion Energy Services sends emails to current customers accurately advertising a renewal rate for its annual plan at 7.6 cents per kwh. Beneath in smaller print, it states, “Energy price does not include delivery fees. Average price per kwh is 11 cents.” That shows both the base cost and the transmission-added cost clearly.

“The problem,” says R.A. Dyer of Texas Coalition for Affordable Power, “is that a lot of retail electric providers are able to compete using confusion rather than price.”

A door-to-door electricity salesman will probably talk about a low kwh rate and not mention the delivery fees along with other taxes that increase a bill. That keeps an advertised kwh rate low, but it’s an incomplete statement of cost.

I promised to show the one place to learn the true price of an electricity contract. But it comes with a hedge.

By law, an electric company must list its full pricing with fees on the Electricity Facts Label for each offered plan. An EFL can be found on a company’s website and also on the state-run PowerToChoose.org.

Here’s my hedge, or really two of them. First, EFLs are confusing. An average kwh rate is shown and that includes the fees. But different companies present their numbers different ways. Some do it with text, others with numbers and text. There’s not enough standardization.

Randy Evans of Dallas told me he was certain he could shop smart by plugging company numbers from EFLs into a spreadsheet.

“Well, I was wrong,” he says. “Trying to make sure you were gleaning the correct information from these ‘Facts Labels’ was a chore indeed. Not all the numbers are necessarily there.”

That’s my second hedge. Some companies aren’t including the required information. A few ignore the requirement to put numbers in the EFL and instead give a website in the EFL offering further information.

Bottom line: Complete costs must be shown on an EFL. Check an EFL closely before agreeing to an electricity contract. Learn the “all in” rate with everything added up — kwh rate plus delivery charge.

Sounds like it should be easy to find out. But too often it’s not.

Follow Dave Lieber on Twitter at @Dave Lieber.
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More Watchdog Nation News:

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America meets Watchdog Nation/Listen to Fun Radio Interview

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Dave Lieber book that won two national awards for social change.\

Still here? Visit Dave Lieber’s other fun websites:

Personal: YankeeCowboy.com

Hipster site: DaveLieber.org