UNDERSTANDING RATE PLAN TIERED STRUCTURE

The PUCT requires all REPs to furnish an EFL (Facts Label) pertaining to each of their rate plan products to all prospective customers either in writing or published online.  The format and content of the form is also dictated.  The division of rates is shown in three levels of usage.....500, 1000 and 2000 kWhs.  This is the tiering the title refers to.

When doing homework involved in the selection of a new REP, the EFL is considered the most important document to review and study.  The data contained therein allows for 'Apples to Apples' comparisons of rate prices.  Of special note is the fact that all rates shown on Power to Choose (PTC) are for 1000 kWh usage.  This is important.  When studying and comparing, keep this in mind.  Usually, the lowest rate cost is shown on the EFL under the 2000 kWh column.  Don't mistakenly compare it to the PTC rate.

Although the EFL format allows for this tiering of rates for the different usage levels, their is no real requirement to do so.  REPs could assign the same rate costs across the board if they wished, and at least one REP for ZIP 77379 currently does.  If all the REPs did this, wouldn't things be simplier and and not so misleading?  Folks, the tiering of rates, in our opinion, benefit the REPS by generating more revenue and higher costs to the customer in the case of the average residential account.  Obviously, the customer using greater than 2000 kWhs for every month is unaffected.

For example, this writer's electric account usage history for a twelve month period shows three months <500 kWhs and only one month >2000 with the balance in the middle.  In general, the account is believed to be typical of an average residential customer. Tiered rates penalize the low user and only provide real savings for the higher usage.  Often, additional monthly service charges are assessed for usage<500 kWhs, therefore the true average costs for those months is increased.  For the average usage customer, a $4.95 service charge adds approximately an effective half penny or five mils cost.  A $9.95 fee raises the cost a full penny.  A quoted $0.10 rate becomes a true $0.105 or $0.11.

The REPs would prefer that this knowledge not become commonplace.  We disagree and think the interest of Joe Homeowner overrides.  Also, the imposition of higher costs for less usage opposes conservation.