Do NOT believe everything you read. There is so much misinformation out there about the Texas power grid and current bills. I do not know everything there is to know about power in Texas but if you do not live there, or have never lived there, chances are you know less than I do.
As part of deregulation and letting the free market have a say in our electric rates and the profits made by companies, we choose our REP (retail electric provider). There are some, but a fairly small percentage of Texas residents who do not get to choose their REP. Co-op members can’t choose but I don’t know who else can’t. I do believe, from the research we did when we were first in an de-regulated area, that there really aren’t that many who cannot choose their REP.
The remainder of this applies to those who can choose. Most have an one year or two year or three year contract. When it’s getting close to time for renewal, we shop for the best rates for us. It isn’t one size fits all. There are all kinds of configurations. Some have high rates during the day but free nights and weekends. Some have the exact same rate all the time. Some have a graduated rate – you pay less for the first so many kwh and then there are tiers. Some have a flat rate per kwh. You pay the same day, night, winter, summer. That’s what we chose. We could get our power for less (during normal circumstances) but we chose the fixed rate because it seemed safer and less stressful.
And before someone says deregulation is bad, most of Texas has very low rates and what happened with the extremely high bills you’re probably hearing about . . keep reading.
There are some that are wholesale rates plus $XX. We have stayed away from those because they are risky so I don’t even know exactly how they work. As best as I understand them, you either pay wholesale plus a few cents or just wholesale plus a monthly fee. It fluctuates and it can fluctuate wildly . . every hour of every day. Suppose the wholesale rate is .02/kwh from 1 p.m. to 2 p.m. The power plants are generating a lot of power and there’s excess and they’re basically trying to shed it . . get rid of it. But then from 4 – 6 p.m., there’s more power being used and less being produced, the rate may go up to .09/kwh. Say there’s an unprecedented winter storm and there’s not enough power to go around and the power goes up to $25/kwh.
Someone using 500 kwh would pay $10 if the rate is .02 but they’re going to be paying $12,500 if they’re paying $25/kwh. It is not price gouging. It is the deal they made.
Here’s an analogy. We buy a house. The fixed interest rate is 3% (I have no idea what it really is) but the variable rate with no ceiling/cap is 2% and makes a $12 difference in my monthly note so my note is $810 instead of $822. Again . . no math, just figures off the top of my head. I make that agreement knowing the risk. Then over a period of a few years, that interest rate has risen to 8% and my note is now $2,000 per month. It is a risk I took and now it’s biting my back side.
Do I feel bad for people receiving outrageous electric bills? Of course I do but, on the other hand, people who made the choice to use those plans were willing to take that risk . . and now they’re not so basically, that puts everyone who chose to go with more reliable plans, and pay a little more . . we’ll be the ones ultimately paying the price because no one can go pick money off trees to help pay these electric bills.
A friend who worked in the power industry in Texas for many years was begging people to switch plans if they were on the “wholesale plus” plans. He started sharing info that it was fixing to get wild at least five days before the storm hit. People didn’t listen or didn’t pay attention or had no idea what COULD happen on those plans. Even some of those companies were advising people to switch plans. Some did. Some waited til the crisis had arrived and then the more reasonably priced companies were not in a position to accept new customers. Some flat out never saw it coming but they’re the ones screaming that this isn’t right!
I’m not saying turn off their power and let them pay the price for the rest of their lives . . I’m saying . . do not believe everything you hear about price gouging. It is not happening! People who are yelling price gouging are a lot of the same people who made a very bad choice about their provider.
Here’s an email we received from our REP yesterday:
The more reliable companies, like the one we use, use historical data and contract their power prices months, if not years ahead. They offer us a fixed rate because they know what they’re going to be paying for the power they send to our homes.
Yes, bills will be higher because we used more power.
Here are my bills in MO. I had not paid a bill from August to December because of the solar panels. In December, I owed $37.64. You see January and February. The February bill cycle ended before the extreme cold. I fully expect the bill I receive in March to be over $500. It isn’t because of anything except I used way more power.
It’s the same thing as saying I spend $50 a month on gas for my car but the reality is that I make a few trips to Walmart, which are about 11 miles round trip and I don’t go very often. Then I drive back to Texas and spend $75 for gas in one day. That isn’t price gouging. It isn’t anything wrong with my car. I simply used more gas.
Reading some of the things people are writing has convinced me that (1) there is no commonsense left in this world and/or (2) people will say anything, whether they believe it or not, just for the sake of an argument.
The other day, someone in Brownwood sent out a note saying there was a boil water advisory for Brownwood. I had just read that the officials were saying “Despite what people are saying, there is no boil advisory for Brownwood.” I told her . . there is no advisory. Please confirm that what you’re saying is true. Her response: “That’s what everyone else was saying!” Repeating a rumor doesn’t make it a fact.
Please . . be the one who checks what you’re saying to make sure it’s true . . whether it’s something you heard on TV, read on FB or dreamed last night!
Paula says
Thank you for this informative post. My son and his family live in Austin and were able to stay with friends for 4 days during the worst cold, when they had no electric, gas, or water. Reading your post helped me understand why not everyone has outrageous bills. They’re on a fixed rate plan and had a normal bill.
Judy Laquidara says
It’s so frustrating to see people post things that just aren’t true and then someone else reads it and posts it and it snowballs. Those plans that rose and fell with the wholesale cost were a bad idea from the start. People have lost their minds. Make bad decisions, you end up in a jam and for the most part, it’s no one’s fault but your own. We can all learn lessons though . . read the fine print and seek advice from those who know when in a position where you don’t know or understand all the ramifications.
I’m so glad your son and his family had somewhere to go and they have a fixed rate.
If they’re somewhere that they can store a small generator, I highly recommend having one or two. They’ll run a small heater on very little power, keep a fridge/freezer going with just a few hours use each day. You never know when you’ll need it . . anywhere you live, and it’s a small price to pay for that security. They do need to be started and run for a few minutes every few months (probably once a month is ideal but that doesn’t happen for most of us). The first thing Vince brought to MO was two small generators and showed me how to use them (though I doubt I would have been brave enough to do it).
Therese says
Thanks for that explanation, Judy. Seems like those of us who have educated ourselves, made reasonable decisions and sacrificed to pay along the way, (like choosing a power provider, planning for college expenses, planning for emergencies, etc) are being asked pay for others’ insufficent planning in too many circumstances! It’s the Ant and the Grasshopper fable over and over.
Patty McDonald in Sounthern California says
It is good to read the explanation behind high prices. Living in CA. we just hear the news of these huge bills and wonder why the electric company is taking advantage. Your explanation was great. We never went for fluctuating interest rates and years ago we had a 9% fixed on a home. The fluctuating ones went as low as 4% and we just kept paying our 9% loan. Eventually, the rate went to 18% and people were screaming how unfair. I agree with Therese that too many want to be bailed out of their poor decisions and sadly the government seems to agree. In the end, we help pay for these terrible decisions.
Judy Laquidara says
Yes, it is not at all like they’re making it out to be and the truth is, about 99% of the news on every channel is that way. Spread fear, hatred, distrust. You’re right. When we got home loans, we would figure out the top amount we could pay and then finance for whatever years gave us that amount based on the current fixed rate.
I don’t want to see anyone hurt but when someone else bails people out of bad choices they’ve made, I don’t think they learn and often go on to make more bad decisions that require more bailing out. I always practiced tough love with Chad. Sometimes I’d go in my room and cry when I had to say NO or “You got yourself into this . . you get yourself out of it” but I think that’s part of what made him who he is today.
Some people’s mamas didn’t teach responsibility!
ruth says
I remember when we bought a house in Ft. Worth at about a 7% rate. Friends of ours bought a few months after, and the rate had dropped by one percent. They chose an adjustable rate mortgage (ARM), and for a few years their mortgage payments were lower than ours. They kept suggesting that we change to an ARM. We chose not to. Then the housing interest rates began to climb, all the way up to 16% before it topped out. Our friends nearly lost their home, a small three bedroom like ours, because of the ARM they had chosen. Sounds like that ARM is much like the situation you are describing for Texas electricity now. It all depends on the choices you make.
Judy Laquidara says
Most of the time there are caps on ARMs but, as I understand it, getting into the wholesale market for electricity has no limits . . hence some electric bills near $20K or one month. Yes . . it depends on the choices we make but I wish there was more responsibility and not so much expecting others to share in your bad decisions.
Deborah says
I agree with you, Judy. Don’t believe everything you hear. People who chose variable rates probably didn’t realize the extent of the risk they were taking but still…..I’m not crazy about giving them a completely free pass when they made the decision they made. As I am sure I am going to wind up paying for their decision too. I live in an area where we don’t get to choose our provider. You get what you get and the rates are higher during peak usage times but it’s a fixed peak rate. I sell back solar but of course it’s at a much lower rate than what they sell it to me and ….of course, there wasn’t sun during the snowstorm. However, I heat my house with gas (using an electric thermostat) so you know how that went. Still…..I burned through easily $350 in propane during those few days. It was a costly week. Yesterday, it was 79 degrees. What a rebound. The plants are so confused.
I’m glad I live in Texas.
Judy Laquidara says
To start with, I’m somewhat sad to be leaving Texas but happy to be closer to Chad. I understand. We heat with propane too. Vince used the fireplace to keep warm during the power outage but he doesn’t keep a fire going so I’m sure he burned through a lot of propane. I think he had about 500 gallons and probably needs to check the tanks but he wasn’t going to take it with him so he didn’t mind burning through it . . just doesn’t want to run out or leave the house with none.
Yes, my guess is all of Texas is going to be footing the bill for some bad decisions and those who weren’t watching the weather forecast in time to switch companies.
Joanna says
From a reader in Texas…thanks for putting the truth out there. It’s so frustrating to watch the news as they tell half the story.
Judy Laquidara says
You’re welcome. I think you’re giving them more credit than they deserve because I don’t think we’re even getting half the truth any more . . on anything!
Dottie Newkirk says
From another reader in Texas – thank you for the explanations you provided…..it’s amazing (shouldn’t be since it’s SO commonplace anymore) that people will believe half truths OR no truths because Aunt Suzy heard it from Jim Smith who heard it from his next door neighbor who KNOWS someone that works at XYZ corp.
Judy Laquidara says
I know. I think about all the things I hear on the rare occasions I hear the news and now I don’t trust anything and myself coming up with stories about what the REAL truth might be. Based on the very few things I hear on the news that I actually have some knowledge of and KNOW the truth is distorted, I believe nothing I hear and feel very bad for the people who live their lives with the news constantly on and believe everything they hear.
I feel the news media has become a tool to divide us all farther.
Dottie Newkirk says
TRUE!!!
Twyla says
They add fuel to the fire.
Sandi B says
Thank you for this information, Judy. I have a friend who lost her house due to an ARM loan – even though we kept telling her at the time to pay a little more with a conventional loan. Some people just aren’t willing to listen.
Tough love is hard, but extremely necessary.
I rarely watch the news. I try to unplug from much of social media. I am terrified at what I see ahead – especially with all of the corporations joining with the current administration to “Build Back Better” with the Great Reset, as detailed in the World Economic Forum. I try to stay in my happy place…
YOU are a breath of fresh air!
Susan Nixon says
Good advice. Thanks for explaining how this works, because I’ve only ever lived with a company which charged what it charged. With SRP, I had time-of-day differences because I chose that. It was cheaper at certain times of the day, but more expensive during the hours when it wasn’t cheaper. I controlled my bill through when I used high-energy appliances and when I didn’t. That’s the only variation I’ve known. In the same town, some people lived where they had the APS power provided by nuclear and their bills were higher than mine. It sounds like people didn’t pay attention to the fine print in what they chose in Texas.
Sibyl says
So often people only see the easy way out on this–they think oh look at me, I’m getting electric so inexpensively–you should join me–oh it won’t get out of control–why are you paying such a higher rate–just because you want it at a fixed rate. Then the bottom falls out–like you explained with ARMs. There were people wondering why we didn’t do that either. I am not willing to take risks like that–and seeing what happened with the electric companies that sold it to consumer at “wholesale” prices that fluctuate. Not a good thing. I just read an article with Lt Governor Patrick–he was saying he really blames it on the consumer for not reading the fine print. He is going to investigate. I hope they don’t try to have us bail out these people for the mistakes they made. No one has bailed me out for mistakes I’ve made–well maybe my parents helped when I was much younger–but not to the point of the government bailing us out—like they tend to do now days.