Understanding Electric Rates in Texas

by admin on February 24, 2009

Providers Like to Give You Confusing Rate Products

If you have a commercial or industrial business in Texas you can understand your electric rate you are being charged by your current electric provider by comparing it with several other large reputable electric companies in Texas. There are more then a few electric companies in Texas that are quite large. Many of these electric providers not only sell electricity service but also own several power generation facilities. A low cost competitive electric provider does not have to own power generation facilities to price competitively to be a stable reliable energy company but it does give that provider a little extra clout. In the big scheme of things it is mainly important as to what that Texas commercial electric providers credit rating is. If the energy provider has a low credit rating they likely cannot put together a true fixed electric rate for large industrial and commercial businesses. They are limited as to what energy they can sell as the interest to take on credit to sign a large commercial facility could be in the neighborhood of 14% right now.

It just does not make sense for several large energy companies in Texas to pursue signing large industrial and commercial facilities if they have to pay 14% interest to hedge the fixed price energy they sell these facilities. What does this commercial energy provider issue mean for the commercial energy consumer? You may be sold a promise on what your electric rate will do that is not accurate. If a Texas commercial electric provider cannot offer a long term fixed electric rate because of their own credit issues they will attempt to sell you energy where you take on most of the risk if fuel prices go back up. Right now prices are very low on fuel that Texas uses to create electricity in the power generation facilities throughout the state. Natural gas is one of those primary fuels we use in Texas to generate our electricity power. If a commercial energy provider sells you an energy contract that stipulates that they can raise your electric rate higher if fuel prices go up they are selling you a variable electric rate. The saleman may call it a fixed electric rate but the contract terms say different. It is important to investigate if what the sales guy is telling you lines up in the contract terms and conditions. Some electricity providers have gotten very creative in their contract lingo because of the credit crisis. Getting on a variable electric rate like heat rate, natural gas, or MCPE is many times the right thing to do for a commercial business but you need to know the risks and know that you need to be paying attention to the energy market in order to protect against that kind of risk. The energy markets are very volatile and your electric rate could double or triple in price if you do not take appropriate action.

Credit Issues Even Facing Texas Energy Companies

Without naming names it is worth mentioning that some of the most well known companies and brands in the commercial energy business have below average credit ratings. A year ago no one would have guessed certain energy companies would be below par with credit. In fact many of these Texas energy providers were partially owned or relied upon credit facilities and investment banks that are now in talks to be bailed out by the federal government. The most prominent electric company in Texas was bought out in the biggest leveraged buyout in US corporate history. Some of the investment banks, currently being bailed out, loaned the money in this leveraged buyout. If the economy is bad now wait until a couple of the big 3 Texas electric providers fail to be able to pay back their loans. This could spell disaster all over again. Hopefully this will not happen and we are not predicting that it will. It is worth making note of to hopefully give a heads up to those in charge to make sure the energy providers are being responsible with their money. The government hand outs have to stop at some point or corporations giving 10 million dollar year end bonuses to their failing executives may start to be the standard mode of operation.

How can a Texas energy consumer pick a quality provider with honest easy to understand terms and conditions in the contract?

By working with a Texas energy consulting company you can compare electric rates across the board from several stable electric providers offering standard energy terms and conditions in their contract. Any hidden fees or weird legal jargon have been crossed out and renogotiated by the energy consulting company so that what you are left with is the best possible rate, contract, and term that you could negotiate. A Texas energy consultant places a commercial or industrial company in a reverse auction to obtain the cheapest electric rate possible. The electric companies bid down the energy price to its lowest point. Once as much retail margin has been stripped from the energy price a detailed proposal is put together comparing the electric rates in a side by side comparison. Many people call this type of energy proposal an “apples to apples” comparison. The proposal shows the bottom line dollar savings against the commercial businesses current electric providers rate. Fixed electric prices as well as variable MCPE, natural gas and heat rate energy products are presented for a commercial or industrial business to see all available electric service options they could potentially contract on. The Texas energy consulting company explains why one product would make sense over another and how risk can be managed. An energy consulting company like TCE can properly manage the risk involved in a variable rate product by showing ways to blend fixed rates with variable rates based on how that business uses their electric load.

To learn more about how TCE can assist your Texas commercial or industrial business with negotiating a discount electric rate please feel free to click on the contact us link above. You may call or email us with your questions.

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