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How to Get the Lowest Electricity Rates

January 1, 2014

You probably don’t think much about electricity – you flick a switch and it’s there – until you get your monthly bill. Utilities are readily available for most customers, but not many people know that you can switch companies in Texas, to get lower electricity rates.

Utility companies set their prices to recoup their costs for producing or purchasing electricity for their customers, in addition to the money it costs them to deliver the power to your house or business. Of course, there are profits to be made, as well.

Before deregulation, the power companies were monopolies in their given areas, and could pretty much charge whatever they wanted for electricity, as long as the regulatory commission approved the rates. Now, people in areas of Texas can choose their own utility company, and lock in the lowest electricity prices.

Other things fall into the pricing structure used by power companies. They have to pay to build and maintain power plants, and the prices are different when comparing fossil fuel with nuclear plants. Companies also charge for distribution and transmission lines for their customers, states Weltman.com.

The type of fuel that is consumed in order to generate power factors into the electricity rates that a utility company charges its customers. Extreme weather can also increase electricity demand, and push prices higher.

Most utility companies charge higher rates for their commercial and residential customers than they do their industrial customers. It costs the companies more to get the power to numerous, smaller locations than to a large industrial building.

The pricing of electricity as determined by electric utilities is complicated, and many factors do impact the pricing structure. They must make enough income to completely earn the rate of return they desire, after their maintenance and operating costs.

In areas that are not deregulated, power companies may recover from their customers their operating expenses and a return on their investment in utility infrastructure. Utility companies have other factors that determine their electricity rates, including the cost of providing the service itself, the maintenance of equipment and infrastructure and the depreciation on the same. Profits are used to pay to shareholders of the utility companies.

Electric companies in most other states are regulated by public utility commissions, which weigh the utilities’ interest and those of the consumers. This is how rates are determined in those states. In Texas, where consumers can select their own utility company, they have the advantage of locking in the best electricity rates in the area.

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