How to understand your electricity plan

For business

It’s a task nobody ever wants to do, but everybody should: Read the fine print. This conventional wisdom applies whether you’re picking an insurance plan, downloading an app on your phone – or purchasing a deregulated energy plan.

When you sign up for a natural gas or electricity plan, you’ll be sent a document or multiple documents that detail every aspect of that plan. In Texas, this document is known as an Electricity Facts Label, or EFL. In other states, this information may be split across two documents, a Terms & Conditions document and a Disclosure Statement.

It can feel overwhelming trying to cut through the jargon and the numbers to find the information you need to know – that’s why Choose Energy is here to help. Our goal is to educate customers so they can make informed decisions regarding their energy needs.

Read on for our guidance on how to understand your electricity plan.

States other than Texas

Suppliers who operate in states other than Texas provide plan information in a Terms & Conditions document as well as a Disclosure Statement. In some cases, these documents are combined into one.

Depending on the supplier, these documents may vary on the placement of information, but all should include the following:

Introductory Statement/Background

Specifies the supplier name and licensing information, including the supplier’s license number.

Right of Rescission

The period and method by which a customer can rescind his or her energy contract without being subject to penalties or cancellation fees.

Key Definitions

Defines pricing terms used throughout the contract. Refer to the table below for the most common terms defined in this section.

Distribution Charge The cost of delivering electricity from the electric distribution company to the customer’s home or business. This charge is regulated by the Public Utility Commission and varies based on the amount of electricity used.
Generation Charge The cost of producing electricity. This charge is set by the electric generation supplier chosen by the customer.
Transmission Charge The cost of transporting electricity from the source of supply to the electric distribution company. This charge is regulated by the Federal Energy Regulatory Commission.

Terms of Service/Disclosure Statement

Depending on the supplier, specific plan information will be located within the Terms of Service section of the Terms & Conditions document or within a separate document called the Disclosure Statement. In one of these two locations, you should find the following information about your plan:

Electric Generation Supplier Name and contact information of the supplier
Generation Charge Expressed as cents per kilowatt-hour
Plan Type Specifies whether the plan is fixed or variable rate
Term Contract length
Start Date Contract start date
Deposit Requirements If applicable
Incentives If applicable
Renewal Terms Specifies if plan will auto-renew (many do) and how the supplier will notify you of pending renewals.
Cancellation Policy Supplier’s early cancellation policy and any associated fees
Late/Non-Payment Policy Specifies fees and/or penalties for late or non-payment of electric bills
Electric Distribution Company Name and contact information of your utility

Texas

In Texas, retail suppliers outline plan information in a document called the EFL.

The EFL is split into the following sections:

Header

Includes the retail electric provider name, the plan name, and the contract start date. Contact the supplier if the plan name does not match the one you purchased.

Electricity price

Lists all bill charges including: generation, transmission, and distribution charges as well as fuel costs and customer service fees. Also reflects any promotional incentives.

[500 kWh | 1,000 kWh | 2,000 kWh]: Average price per kWh. The average American household uses about 900 kWh per month, but the average Texas household consumes around 1,130 kWh per month. Check your most recent electricity bill to find your monthly usage.

[List of utilities in service area]: All transmission/distribution service providers in the providers service area, and their corresponding charges per kWh at each of the above usage levels.

Other key terms and questions

Additional product info, if applicable. This section may direct you to the Terms of Service statement, which includes the supplier’s full listing of fees, deposit policy, and other terms.

Disclosure Chart

Type of Product Specifies whether the plan is fixed or variable rate
Contract Term Contract length
Do I have a termination fee or any fees associated with terminating service? Supplier’s early cancellation policy and any associated fees. Suppliers may waive these fees with proof of move-out.
Can my price change during contract period? Usually says “Yes”
If my price can change, how will it change and by how much? Prices that change during a contract period are usually due to: changes in TDSP charges, changes in ERCOT fees or changes in local regulatory fees.
What other fees may I be charged? Monthly fees or deposits associated with the plan (Check the Terms of Service for a full list)
Is this a pre-pay or pay in advance product? Depends on plan
Does the REP purchase excess distributed renewable generation? Depends on supplier
Renewable Content % of plan sourced from green energy
Statewide average for renewable content: 16.5% (Texas’ renewable content average)

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