By Mitchell Schnurman
Star-Telegram Staff Writer
Here's something that Texas residents haven't pondered for a while: a buying opportunity in electricity.
It's not like the good old days of regulation, when the state had some of the lowest electric rates around. But the marketplace in North Texas is looking better for consumers than it has for a while.
Monthly electric rates are near their lowest level in two years, after natural gas prices fell and cooler, wetter weather dampened energy demand. Competition is flourishing, too: Electric retailers are offering 90 residential plans for North Texas, and several have variable rates for less than 10 cents a kilowatt hour -- one-third lower than TXU's price-to-beat a year ago.
It's also notable that investors are betting that natural gas prices will rise sharply in 2008; prices on the futures market are 24 percent higher than today's. If such an increase occurs, electric rates will rise sharply, and many residents will wish they'd locked in when the getting was good.
How to decide whether to lock in electric rates for a year or two, or to float with market prices? Usually, the call isn't clear-cut, because gas prices rise and fall based on many unknown factors, from winter temperatures to hurricanes to the economy.
Like an adjustable-rate mortgage, the best choice may depend on your personal situation and risk tolerance.
John Bick, who tracks electric and natural gas markets every day, recently opted for a variable plan for his Arlington home. That means his rate rises and falls every month, in tandem with natural gas prices. If the cost of that commodity starts to spike, he figures he can react quickly and sign a longer-term contract.
But he urged his parents to select a 12-month deal. They're retired, living on a fixed income and use a bank draft to pay the monthly bill.
"For them, there's a lot of value in having peace of mind," said Bick, president of Choose Energy, whose Web site sells electric plans for residents and business.
What's certain is that more people should check their electric bills closely and make sure they have a competitive plan. Most often, it doesn't pay to break a contract early and face a cancellation fee. But many people are on month-to-month deals or may have contracts that expire soon.
Since 2004, roughly 200,000 North Texas residents a year have changed from the legacy retailer, TXU.
When a current contract expires, they shouldn't assume that it will roll over to a money-saving alternative; that may or may not happen, depending on the provider and the deal's fine print.
The state has some consumer protections, including requiring a 45-day notice before the contract expires. But it's up to the customer to shop around.
My current plan, for instance, expires next month and, if I do nothing, it will switch to a monthly rate that's 10 percent lower. Sounds good, except that if I'm willing to accept a variable plan, three retailers in North Texas are advertising prices that are 20 percent lower than my current deal.
As a consumer issue, electric prices lost some intensity this year, after the cooler weather. Total electric usage in North Texas declined 9 percent from May through August. And July, typically a peak demand month, saw usage fall almost 13 percent.
At the same time, more retailers were offering lower rates. A household that used 1,500 kilowatt hours a month, close to the average, could easily have saved $25 a month this summer.
From July to late September, an additional $9 could have been shaved off the bill.
In the past few weeks, rates have ticked up slightly, amid concerns that a hurricane could push up gas prices. They may fall back, if conditions are right. But compared with the past year, they're still near a low point.
"Unless you're in the middle of a contract now, it's a great time to switch," says Deryl Brown, chief executive of Hudson Energy, which offers four electric plans in North Texas.
On chooseenergy.com, the Web site has a forecasting feature and a chart of electric prices for the past three months. Current rates are near the bottom of the trough, and the site recommends buying now.
"Rates are low and holding steady," it reads.
A year ago, TXU's price to beat in North Texas was 15 cents a kilowatt hour. On Friday, TXU offered a variable, month-to-month rate at 9.7 cents -- assuming that natural gas prices are $5.43, near their September low.
If gas goes back to $7, close to the average for the year, the TXU rate jumps to 11.5 cents a kilowatt hour.
Or you could lock in at 10.7 cents for a year with Amigo Energy, according to powertochoose.org, the state site that lists dozens of retail offers. To extend the contract to two years, Amigo's price is 11.6 cents.
Want more price protection? Star Tex Power offers a three-year contract at a fixed rate of 12.9 cents.
The longer lock-in isn't a crazy thought, considering that many big-time investors are betting on higher energy prices over the long run. Boone Pickens recently predicted that crude oil would hit $100 a barrel, and the private equity buyers of TXU based their deal on a very bullish view of natural gas.
Brown, whose Hudson Energy is in Irving, suggests a 12-month contract for most homeowners.
He says that strikes a good balance between immediate savings and long-term flexibility.
"And you don't have to run out to your mailbox and check your electric rate every month," he says.
Maybe, but don't wait too long between assessments. Good deals are coming up more often.