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Blog Sep 7, 2020

What is a Good Electric Rate?

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Electricity rate is dependent on many factors such as policy/regulations, weather, fuel cost, transmission, and distribution among others, and therefore, it is expected to change from time to time, place to place, and provider to provider. So, how can you determine a good electricity rate?

In this article, we are going to share with you some important information that will help you differentiate between bad/expensive electric rates and good electricity rates. But before we go deep into that, you first need to know, the main charges that contribute to the overall energy cost. Well, there are two crucial sub-charges i.e. the electricity supply charge and electricity usage charge.

The supply charge is the cost charged for the electricity transmission to your house, while usage charges are the cost of using electricity and is usually charged per kilowatt-hour kWh.

What is a good energy rate?

As stated earlier, a good energy rate is partly reliant on the city or state you live in. For instance, in most parts of Texas, where energy has been deregulated, consumers are enjoying relatively low rates of 8.99 cents per kWh. Other states with good electricity rates include: Louisiana (9.66 cents per kWh), Florida (9.83), Washington (9.87), Arkansas (10.48), Utah (10.56), Tennessee (10.99), just to mention a few.

The average electricity rate in the U.S is 13.14 cents, which means that anything below 13.14 per kWh, is a good energy rate.

One thing you should bear in mind when choosing an electricity plan is that some energy providers balance the low usage rate by increasing their supply rates, and vice-versa. Consequently, if you are looking for the best electric rates, then you will have to watch out for competitive supply charges and usage. For example, if your home power usage is high, you will have to pay more attention to the usage cost, as this takes the highest percentage in your overall energy cost. If your power usage is low, then you will have to focus more on the supply charges.

What is a good price per kWh?

For you to establish a good energy price per kWh, you first have to know your energy consumption rate. An average home in America is reported to use approximately 897-kilowatt hours of electricity every month. However, the prices are different in various regions and states, as the price per kilowatt is different. To calculate your monthly electricity cost, you first have to identify the month’s cost per kilowatt-hour in your state then multiply it by the average home energy usage i.e. 897kWh. For example, in Maryland during the month of May, the average electricity price per kWh was 13.23 cents. This means that the people of Maryland paid an electric bill of around $118.67 (i.e. 897kWh X 13.23 cents) during that period.  

Since the overall electricity bill is dependent on electricity rates, the higher the rates, the higher will be the price. However, the extent of the rise or fall in prices differs from one state to another.

Understanding your electric bill

Understanding your electric bill is a crucial step in identifying areas where you can save costs. An electric supplier can either charge you a variable rate every month, or a fixed rate. Here are some highlights of some of the common electricity plans:

Variable Rate Plan – With a variable-rate plan, there is no fixed rate, which means that the price you are charged for a unit of electricity is not static i.e. It can be expensive one month and cheaper the next. The good thing about it however is that there is no binding agreement to stick with the plan and therefore, you have all the freedom to change the plan whenever you want.

Prepaid plans –This plan allows you to purchase electricity at a set-price before you use it, just like the pre-paid mobile phone. The downside about it is that if you forget to top-up, you might run out of electricity while enjoying that hot water bath.

Fixed-rate plan – With this type of electricity plan, you are charged a fixed price per kWh for a specific period, irrespective of the changes in the market prices. These types of plans are, in most cases, the cheapest compared to others. The only disadvantage about it is that it has a cancelation fee if you opt to terminate the contract early.

Renewable/green plan – This is ideal for environmental conservation enthusiasts. It allows you to choose energy, sourced partially or entirely from renewable energy such as solar or wind. It can either be variable or fixed depending on your preference.

Impact of plans on electricity rates

Getting a good electricity rate is not all about picking the right plan or choosing a plan with the cheapest cost. If that was the case, life would have been much easier, as anyone could simply do research and identify the lowest plan rate. So, apart from the plan, you also need to look at the plan details. What does the plan affect or influence the rates that you pay? Here are some of the details that you need to check:

Contract Length – The plan might be offering the best price in the market, but, have you checked the duration? Does this lowly-priced plan come with a 36 or 48 months contract period that is difficult to cancel? If that is the case, then run. This might not be the ideal plan to choose

Total consumption – Another thing that you need to observe is whether or not the low electricity rate comes with other stipulations regarding the minimum kWh consumption rates. The stipulations some of these plans have are not easily achievable. For example, some retailers set a high minimum consumption rate that most consumers don’t achieve, meaning they are not able to get low rates. They are billed at a higher rate instead.

Electricity Fact Labels or EFL – Ensure you read your electric plan’s EFL. All plans are required by law to have an electricity fact label, as it is this label that gives all the information regarding the plan, including the pricing structure or rates that you are expected to pay. By reading through this information, you can be able to ascertain, whether what is being offered is a good deal or not.

Additional fees – Most plans have a rate per kWh well indicated but they don’t show the extra costs or fees that are charged for utilities. However, if you go through the plan carefully, interrogating every detail, you will be able to get this information which will help you make an informed decision.

What state has the cheapest electric rates?

As stated earlier, electricity rates are influenced by various factors and differ from state to state. The ideal state to live is, of course, the ones with the lowest electricity bills where the monthly charges are below the national average. Unfortunately, this is not feasible for everyone due to various reasons. Apart from geographical location, numerous factors affect the overall electric cost. For instance, there are areas or regions which are within the deregulated markets causing heightened competition which in turn brings about a wide variety of energy cost-saving plans such as free weekends and nights, pre-paid electricity, and green energy. Some of the top ten states with the cheapest electricity rate include: Oklahoma, Nevada, Florida, Texas, Idaho, Louisiana, Washington, Arkansas, Utah, Tennessee, Kentucky, and North Dakota.

Fluctuations of states electricity rates 

Electricity rates are never constant. They are subject to changes that make them move up and down. However, some noticeable trends make them almost predictable. For instance, the densely populated and remote regions are in most cases the ones with the highest electricity rates. However, regardless of where you stay, the electric rate can quickly change as a result of seasonal changes. In most cases, this is usually caused by changes in weather conditions, as regions that experience extreme conditions such as severe cold or heat are more vulnerable to energy-spikes, as a result of the methods used by consumers to counter the extreme climate. These methods could include: the use of electricity either as a source of heat or for cooling purposes. This causes an increase in statewide household/residential energy consumption. 

Another thing that comes from these changes in weather conditions is the adjustments of statewide energy rates which in the long run also affect the nationwide average. An additional factor that contributes to the fluctuations in electricity rates is energy usage i.e. how you use the energy and what time you use the energy. You see, energy suppliers use complex simulations to estimate the demand for the entire year. If for example, you’re using electricity during the period when the demand is high, the supplier is charged more for the energy you are using. You will notice this when you renew the plan.

Who has the cheapest electricity rates in Texas?

Texas is among the states that adopted the energy regulation legislation, although not all parts of Texas adopted it. The sections that have been deregulated have a cheaper electric rate compared to the rest.

Another thing that makes Texas special in regards to electricity and energy production is the fact that it has several different sources of energy. In fact, Texas is well known for its natural gas and oil reserves. It is indeed, the highest consumer and producer of energy in the USA. All these factors contribute to their relatively cheaper electricity rates. If you are living in Texas and you are looking to get connected to electricity, it is essential to first confirm whether the area you are leaving in is deregulated or not. There are several cities in texas that have been deregulated and have cheaper electric rates. This includes Fort Worth, Dallas, Corpus Christi, Abilene, McAllen, Galveston, Waco, Arlington, Alvarado, Bedford among others. Some of these electricity served regions are categorized into 5 Transmission and Delivery Utility Companies (TDUs). That is:

-AEP North

-AEP Central

– Texas New

-Mexico Power company (TNMP)

-Oncor (most

of Dallas and DFW)

-CenterPoint

(Houston and its’ environs)

Conclusion

There is a whole lot when it comes to rates and statewide energy cost incurred per month. Regardless of whether or not you live in a state with a lower electricity rate, it is always wise to understand what might be pushing your monthly electric bills upwards and how are your expenses compared to the rest of the country. By doing so, you may end up appreciating the new insight you’ve attained. Lastly, if you reside in a state where you have been given the freedom to choose (deregulated) such as Texas, Connecticut, California, Illinois, Massachusetts, Ohio, New Jersey among others, you can reduce your electricity expenses by searching for affordable suppliers and rates, and have a plan that best suits your needs.

Remember, understanding your bill and how it’s calculated, will help you to make informed decisions in determining a good electricity rate.

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