By NICHOLAS SAKELARIS | CoServ
CoServ’s authority to provide electric service within its service territory was granted by the Public Utility Commission of Texas in the 1970s, and this remained unchanged when much of Texas deregulated in 1999.
Pockets of deregulation exist throughout our territory, however, which is why one of the most frequently asked questions we receive is “Why can’t I choose my electricity provider?”
CoServ would like to answer this question and, in the process, clear up the confusion about electric rates and why the “power to choose” is often an opportunity to confuse.
We know you’re aware of retail electric providers’ relentless sales pitches because we hear and see the ads, too – most featuring assurances of “free electricity” and ultra-low rates.
First things first: There’s no such thing as “free electricity.” All electricity has a cost. For example, with TXU Energy’s Free Nights & Solar Days, customers do get free electricity at night but in return they currently pay 17 cents per kilowatt hour (kWh) for all energy used from 5 a.m. to 7:59 p.m. each day along with a $9.95 monthly fixed charge. That’s about 70 percent higher than CoServ’s residential rate.
In the deregulated parts of North Texas, most customers have Oncor as their transmission and distribution utility and pay between 4 and 4.5 cents per kWh for delivery. Then, they pick a retail electric provider that sets the electric energy rate. Their total price is the sum of those two components. So it’s important to do an apple-to-apples comparison when comparing CoServ to a retail electric provider.
“People who have come from the competitive market or who hear ads for 5-cent power, they get their bill from CoServ that shows they’re paying 9 or 10 cents,” said Gary Franzen, Director of Energy Services at CoServ. “Many times, they’re comparing our all-in rate – our bundled rate, which is another way of saying everything’s included – to someone in the competitive market’s energy-only rate.”
A more valid comparison is to compare CoServ’s rate to the all-in rate, which can be seen on the “Energy Facts Label” provided by competitive retailers. A January 7, 2020, check of prices on “Power To Choose,” the Public Utility Commission’s price shopping tool, showed that total prices of one-year fixed rate plans in the competitive market in North Texas ranged from 8.9 to 14.6 cents per kWh. This ranges from slightly less than to much higher than CoServ’s rates.
Similarly, in the competitive market where you find some customers paying a lower rate, you’ll find others paying a higher rate.
While it’s true the competitive market does offer energy-only rates as low as 4 cents, or even 2 cents per kWh, this is typically a short-term rate that will expire after a few months. These rates operate at a loss, so the retail electric providers make up for that with customers who stay with them outside of their contracts paying higher rates.
“The competitive market is notorious for offering teaser rates to attract new customers,” Gary said. “They will offer a very low rate to try to get people to sign up and then, as soon as that initial term ends, they will start increasing that rate. The business model for competitive retailers is to have some new customers who are paying less along with some long-term customers who are paying more. The average has to be a sustainable rate.”
While wholesale power costs can fluctuate, CoServ’s transmission and distributions costs have remained the same. We strive to keep our rates as low and transparent as possible. In fact, we haven’t had a rate increase since 2001.
CoServ offers consistent electric rates to all Residential Members regardless of how long they’ve been on our lines. And we don’t raise rates for some Members at the expense of others.
“Ultimately the difference in CoServ and the retail market is we pass on our actual costs with very little markup,” Gary said. “The markup that we do have covers our capital costs and, if we don’t need it for our crucial infrastructure, we return it to our Members in the form of Capital Credits.”