Long Term Contracts Require Thought

Were you guided into a long term contract decision by your electric provider? Did you make a wise decision or a decision based on advice from your current electricity provider who had their own self interest involved? Excellent questions.

Answers

In my blogpost Truth About Power, I mentioned that if a Retail Energy Provider (REP) is pushing fixed price deals, it's usually in their best interest, not yours. If you are one of the unfortunates who locked into one of these long term arrangements, you are dissatisfied and may want out.

Why Do You Want Out

Why would you want out of a long term fixed contract? Because you can save money over the course of the year with variable rates. Variable monthly wholesale prices beat fixed priced deals historically, time after time. How much money are we talking about? That depends on several variables including what you are paying now relative to market prices. (To understand this, see my blogpost Alphabet Speak: MCPE).

The chart I've posted above shows possible savings over the last six months relative to the Market Clearing Price for Energy. (Click it to magnify it.) If you are locked into a Fixed Rate, use the numbers above to determine if you are paying more than you should be. The amount under Savings is what you could be putting back in your pocket every month.

Read Your Electricity Contract

Read the contract carefully and focus on the termination clause. What is the length of the contract? What's the cancellation penalty in terms of dollars? If the contract does not allow early termination prior to expiration, there is not much you can do. Sorry! (Contact me when it's getting ready to expire, and we'll see if I can save you money.)

If the terms allow you to cancel early, there is usually a cancellation fee stated. If not, you can easily calculate the dollar amount it would cost to terminate the contract early using the terms of the cancellation clause.

Once you have figured out what the cancellation dollar amount is, compare it to what you would save each month with a variable rate contract. The difference will show you whether it's worth canceling early.

Here's How

Check your monthly bill Energy Charge to get a good idea of your average kW usage. Use your average kW usage times (x) the MCPE rate. Then multiply that number times the remaining months on the contract to get a fairly close estimate of saving. The decision should become very easy whether to cancel the contract and switch to a Retail Energy Provider (REP) who bills out at an MCPE rate. I represent a REP who does not charge penalties or have a cancellation fee. How refreshing!

Bringing Meaning To Madness

Remember, when using MCPE rates in Texas, your electricity bills should reach their highest prices in late July to early September during peak air conditioner load and then possibly again in late December to mid February with the winter heating load. Savings really are possible.