Prepay Electric Choice Comes With Risks

by admin on October 3, 2012

I moved in to a new apartment the other day and paid a $500 deposit and established cellular service in my name as well around the same time. The mobile phone company wanted a $600 deposit so I bought a prepaid phone which allowed me to pocket that $600.

I ended up paying $100 upfront for a phone instead of a ridiculous $600 in cash. Next thing I needed to do was establish electric service in my name but over 5 different electric providers asked me for a deposit exceeding $500.

I decided to check and see if their were prepaid options for electric service like there are for mobile phones and what I found was great news.

There are many prepaid electricity service companies out there and they all allow you to establish electric service in your name with no credit check, licence number or social security number.

I was able to hold on to an additional $500 that would have gone to keep my lights on at my new place.

With prepaid providers I discovered a weird thing though. Many of these companies offer their price as a “start-up fee” rather than a per kilowatt-hour rate so I have no idea what the price really is.

This start-up fee marketing strategy had me confused for sometime because when I called the providers they were quite general about what the rate would be. It became hard to find out what the entire per kWh rate would be when you add in all fees and charges.

From my understanding there are also pole and wires charges and some other miscellaneous charges that some providers leave off their price and so I needed to confirm if these additional fees were averaged into the price.

What I found out is that the sales people on the phone seemed to be coached on how to talk about the price without actually making it clear if these additional charges are averaged in their price or not.

After much questioning they did explain that the TDSP charges are separate from their price. So as any normal person would do, I asked them what the TDSP portion of the bill would look like .

The prepaid provider could not correctly explain to me what the TDSP charges would be on the bill and so I was left wondering this even after ordering electric service from them.

Later on I found out that a portion of what this company called TDSP charges were actually a fuel surcharge that the prepaid electric utility actually did have control over. The surcharge could be changed at anytime all month-long.

If this company wanted to they could raise the fuel surcharge indiscriminately based on any weird reason they wanted to and justify it because of the way in which they purchase energy.

In a way the surcharge was an easy way for the provider to pass on any bad bets and risk the company had onto the customer. This scheme allowed the provider to make risky energy buying decisions that could potentially profit them big time.

At the same time, if the profits did not come in big there would be the opposite scenario where the bets did not pay-off and they were left facing serious debt.

I ended up being in the serious debt scenario with this provider where they passed on their bad debt as an electric rate for the month that was double what I originally signed up for.

Since I ordered electric service with this prepaid electric company the laws in the state of Texas have made it harder for companies to pull off schemes like this.

These providers are supposed to disclose the entire rate including all fees and TDSP charges in something called the Electricity Facts Label.

I used this label to compare prices this last year and have been on my new provider for a year now with no problems.

For anybody concerned about a new electric company that may be trying to hide the truth simply ask for their electricity facts label and you can read all the nitty-gritty details about your new price there.

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