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.


If you have moved to Texas and own or are renting a home you likely got signed up with electric service. In many cases you default to Reliant Energy or TXU Energy but eventually go shopping and pick a cheaper provider.

What we have seen over the years is that some electric utilities have been charging a sales tax to their residential customers. This sales tax usually comes out to 6.25 % on the bill.

The problem with this charge is that Texas residential energy customers are exempt from state sales tax and so you should not be charged this extra fee.

So what happens to this additional charge you are not even supposed to be paying? The fee is likely going to the bottom line at that providers income and the state never sees  it.

You could say, being charged a state sales tax on your electric service is a tricky way of cramming in additional fees without the customer knowing about it.

Don’t fall for this devious little scam but instead if you see that tax on your residential electric bill go ahead and report it to the Public Utility Commission of Texas and fax in a detailed complaint about it.

When you fax in a formal complaint the PUCT must research and follow up. What you will see is that with a formal complaint registered the provider will likely have to issue refunds to all of their customers they dishonestly charged this tax to.

When you report something like this you are not only helping yourself but likely thousands of other people that fell victim to the same thing.



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