Thanks to Texas electricity spikes, variable rate customers about to get burned

Nearly every day in the Texas summer of 2011, warnings come about overuse of electricity. As readers of the Fort Worth Star-Telegram Dave Lieber Watchdog column first learned, those customers on variable rate plans could get power bills that leave them boiling.

 Ryan Walton may be the canary in the coal mine when it comes to residential electric bills skyrocketing because of the heat wave.

The Arlington man is on a variable-rate plan with Dynowatt, an Ohio company. In June, he paid 9.8 cents per kilowatt-hour. In July, his variable rate jumped to 10.6 cents. But this month, the rate vaulted to 18.3 cents.

His most recent electric bill was for $1,111.

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This has happened before with Texans who chose variable-rate plans. Honestly, I don’t understand why anyone would want to take that risk.

He explains, “Two years ago, we signed a 24-month contract for about 8.9 cents. It was good. When it ran out, we went variable, and the rate actually went down. It went into the 7’s, so I thought ‘Why should I lock in?’ It’s kind of like mortgage rates. If you’re in an adjustable, if it goes up a little, you’ve got time to adjust.

“You figure it will go up 10 or 15 percent a month, and there’s time to look for other companies.” His rate shot up 72 percent on his Aug. 11 bill. “There was literally no warning. That was the big surprise.”

I called electricity market watchers to see whether other customers were having the same problem. Not yet. But sometimes smaller power companies have to jack up variable rates when they get over-leveraged in the electricity market, they said.

A Dynowatt spokesman says that is not what happened here. The heat wave led to “extraordinary volatility” for variable-rate customers.

“I am fully confident that consumers who have selected variable-priced products [with other electricity companies] will see the volatility reflected in their monthly bills,” he said.

Others are not so sure. Texas Public Utility Commission spokesman Terry Hadley recalls how some worried that spikes in power usage during February’s icy days would lead to similar jumps in residential customer rates.

“We haven’t seen that,” he said. “The rates remained low.”

Not for Walton. I checked the PUC’s rules to see whether Dynowatt played fair. State rules say that before a variable rate can go up, a monthly bill must “include a statement informing the customer how to obtain information about the price that will apply on the next bill.”

On Walton’s bill, in small print, this rule is followed: “Your variable rate may have changed pursuant to your Terms of Service. To obtain information about the price of your variable product that will appear on the next bill, please contact us.” The bill gives a phone number and elsewhere, a website.

Dynowatt may not have complied with a second rule that requires companies to include “clearly and conspicuously” these words: “Important notice regarding changes to your contract.”

I didn’t see those specific words on Walton’s bills. He can file a complaint with the PUC, which would investigate whether the company violated this rule. Walton could get a lower bill.

Dynowatt no longer offers a variable-rate plan to North Texans. The company offers several fixed-rate plans and, in its promotions, urges its remaining variable-rate customers to lock in a fixed rate.

Electricity shoppers are often attracted to variable-rate plans because the initial prices are so low. This week, on the state website powertochoose.org, I found variable rates starting at 4.5 cents. The lowest fixed rate was nearly double, at 8.1 cents.

¬†Walton’s case “is a really good reason why people shouldn’t take variable-rate plans,” said Carol Biedrzycki of the Texas Ratepayers Organization to Save Energy. “They’re not predictable. … To me it’s like investing in individual stocks instead of an insured bank account. You have to have the time to watch the stocks. If you don’t have time, chances are good you’re going to lose.”

Walton is chirping like that canary in the coal mine as “a warning to other people out there,” he said. “You need to read the fine print on the bill, which I didn’t do. And if you haven’t locked something in by now, you should.”

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