TXU price protection plans

[Poundkey]

Hello all, Poundkey's DW here asking a question.....since this is my department. Folks in and around Dallas, Texas are being asked by TXU Energy to select an electric plan to insure price protection. There are several plans ranging from locking a customer into a 24 month program with a guaranteed price lower or equal to what I am paying now plus a sizeable early cancellation fee........to just locking into a guaranteed higher price for a shorter period of time and no early cancellation fee. Of course per TXU's offer, "the only circumstance in which the price could change during the 24 month minimum term is in response to a change in law or regulatory charges". Has anyone researched the options and do the plans benefit TXU Energy or the customer? Am I missing something obvious?
Thanks for your input.

 

[Helena]

I'm glad I live in Garland which operates its own municipal electric company
with rates cheaper than TXU

 

[Nords]

Hello all, Poundkey's DW here asking a question.....since this is my department. Folks in and around Dallas, Texas are being asked by TXU Energy to select an electric plan to insure price protection. There are several plans ranging from locking a customer into a 24 month program with a guaranteed price lower or equal to what I am paying now plus a sizeable early cancellation fee........to just locking into a guaranteed higher price for a shorter period of time and no early cancellation fee. Of course per TXU's offer, "the only circumstance in which the price could change during the 24 month minimum term is in response to a change in law or regulatory charges". Has anyone researched the options and do the plans benefit TXU Energy or the customer? Am I missing something obvious?
Thanks for your input.

It seems hard to believe that TXU has suddenly taken stupid pills and decided to fork over money to their paying customers.

Someone has studied this situation to death and decided that they're in a good position to bet that their cost of generating power will be going down...

 

[Baxter]

Someone has studied this situation to death and decided that they're in a good position to bet that their cost of generating power will be going down...

Our electric co-op (in rural central/west TX) just lowered their rates slightly.

 

[Lyle]

With natural gas prices very high, like they are now, it seems a good time for them to lock in your price.

 

[BarbaraAnne]

It seems hard to believe that TXU has suddenly taken stupid pills and decided to fork over money to their paying customers.

Someone has studied this situation to death and decided that they're in a good position to bet that their cost of generating power will be going down...

I totally agree with Nords! There was an article about a month ago in the WSJ about how Texans pay the absolute highest rates - 14 cents per kwh!- in the country thanks to TXU and a state legislature that is incompetent (and that is putting it kindly!) They allow TXU to raise rates when electricity goes up, but don't require it to lower prices when electricity costs go down! Therefore good 'ol TXU continues to gouge its customers! I would never trust TXU and sign any type of long-term agreement. We use Reliant (which is just as bad, but is 5% lower than TXU). By the way, according to the article, our neighboring states pay 1/2 the rates per kwh that we do in Dallas!

There will be total deregulation in January. I am waiting to see if competition really works and if out of the ashes will come the "Southwest Airlines" of power companies. That is only way that we will have reasonable rates.

But frankly, I'm not holding my breath...

 

[REWahoo]

There was an article about a month ago in the WSJ about how Texans pay the absolute highest rates - 14 cents per kwh!- in the country thanks to TXU...

Like Baxter above we have a co-op and pay significantly lower rates than others in TX, especially those living in the area served by TXU. Last year we opted to purchase wind generated power and have paid 8 cents per kwh through all the rate gyrations.

...and a state legislature that is incompetent...

Unfortunately, our area of the state is also served by the same wind-generated legislature...

 

[Poundkey]

Thank you all for the great responses. Nords and BarbaraAnne have especially helped me focus on what the situation (probably) is.

First of all.....hardly a day goes by without an article in the Dallas Morning News about TXU and it's plans for 11 new coal burning plants....7 of which would be concentrated in the triangle made up by Houston, San Antonio, and Dallas. The articles are always about enviromental issues (state wide) verses positive economic impacts for the small towns near the new plants. TXU promises to make the air cleaner, but is vague on how this will happen. They also promise prosperity for the citizens of the small towns. After the "open" meetings (where environmentalists have their say) the "backroom" meetings take place between city officials and TXU......where the "deal" is usually struck. See DMN business section Dec. 3 to get an idea on how this works.
Also keep in mind that State and Federal officials are fully behind TXU's plans for new plants. Not fully understanding the business of producing electricity it seems to me that TXU is about to become the 500 pound gorilla in the room. Does anyone see this differently?

So IMO it comes down to this.....TXU is and will be the only game in town. With deregulation in January TXU may have to compete with lower rates.....at least for a while. Once all these new plants are online who knows what will happen. I expect that TXU will eventually be able to set rates where they want them and that folks north of these plants (DFW in particular) will be breathing some very bad air.

I think I agree with BarbaraAnne......signing a long term agreement with this outfit is something I don't want to do.
Thank you all again for the replies.

 

[HFWR]

TXU raised their rates through the sky when nat gas went up last year. Naturally, they've been less inclined to LOWER rates now that nat gas is about 50% lower. I told 'em to go f$&% themselves...

 

[fluffy]

Shop around: http://www.powertochoose.org/

TXU has just about the worst rates available

 

[Ibid]

What gets to me is the little bitty print that says you pay them a fee ($200, if I remember correctly) if you break the contract early.

 

[Poundkey]

Been looking around a little more. This company is pretty popular.
https://www.startexpower.com/index.aspx

 

[Gone4Good]

I'd wait before locking in prices for multiple years.

If I'm not mistaken TXU's "Price to Beat" is set based on something like a $13 / MMbtu gas price. Current gas prices are around $8. Inventories are full. A warm winter could drive prices down a bunch.

Although there isn't much price competition now, if margins stay that fat, competitors will increasingly look to undercut incumbent (read TXU) pricing to gain market share.

I'd switch to whoever has the lowest month to month plan and keep an eye out for better deals - they should be coming.

 

[BarbaraAnne]

I'd wait before locking in prices for multiple years.

If I'm not mistaken TXU's "Price to Beat" is set based on something like a $13 / MMbtu gas price. Current gas prices are around $8. Inventories are full. A warm winter could drive prices down a bunch.

Although there isn't much price competition now, if margins stay that fat, competitors will increasingly look to undercut incumbent (read TXU) pricing to gain market share.

I'd switch to whoever has the lowest month to month plan and keep an eye out for better deals - they should be coming.

I agree and think that's why we are getting bombarded by TXU and Reliant to lock-in now. I have gotten at least 5 mailings from Reliant in the last week, including one today. I don't think they are trying to help consumers...they are trying to protect profits!

 

[Poundkey]

I'd wait before locking in prices for multiple years.

If I'm not mistaken TXU's "Price to Beat" is set based on something like a $13 / MMbtu gas price. Current gas prices are around $8. Inventories are full. A warm winter could drive prices down a bunch.

Although there isn't much price competition now, if margins stay that fat, competitors will increasingly look to undercut incumbent (read TXU) pricing to gain market share.

I'd switch to whoever has the lowest month to month plan and keep an eye out for better deals - they should be coming.

I agree and think that's why we are getting bombarded by TXU and Reliant to lock-in now. I have gotten at least 5 mailings from Reliant in the last week, including one today. I don't think they are trying to help consumers...they are trying to protect profits!

Goods points from both of you, and pretty much the conclusion I've come to.......shop for the lowest monthly price and keep an eye out for an even better deal.

 

[BigMoneyJim]

I suppose you've seen the news stories that last quarter was TXU's most profitable quarter ever...by like 4x the previous high I think. Anyway, over a billion of profit due to lower energy costs but no price drops. Everyon'es pretty peeved about it, so I imagine pressure of one sort or another may drive prices down. But prices are ridiculous now. I'm sure they'd love to lock you into this price and were telling the legislature about how nice their plans are to protect against future hikes.

I'm mainly griping. I don't have the answer. I'm temporarily staying with family so I haven't had to work out the details myself yet.

 

[Gone4Good]

Hey Poundkey and DW,
I don't know if you saw but within the last couple of weeks a bill was introduced into the TX legislature that would force utilities to reset their default pricing (what used to be know as the "Price to Beat") to levels based on current natural gas prices. For TXU that would mean a reduction to about 11.5 cents / kwh from something like 14.3 cents. Considering that most of the competitive offerings in TXU's service territory are above 11.5 cents, the legislation, if passed, would force down the entire pricing complex. I don't know how much support the bill has, but it seems like a political no-brainer to me.

 

[BarbaraAnne]

In addition, if you look at Powertochoose.com there are some companies offering around 12 cents/kwh. I am seriously considering Spark Energy.

This is why TXU and Reliant were trying to lock folks in at higher rates. As Nords said, the energy companies weren't taking "stupid pills"!

 

[Gone4Good]

In addition, if you look at Powertochoose.com there are some companies offering around 12 cents/kwh. I am seriously considering Spark Energy.

This is why TXU and Reliant were trying to lock folks in at higher rates. As Nords said, the energy companies weren't taking "stupid pills"!

Yes, the "Price to Beat" scheme ended Jan 1, 2007. The incumbents were aware that the legislature could try to meddle with things this year. Their intent was two fold 1) lock people into long-term deals at record high rates 2) have as many people as possible switch to a "competitive offer" before Jan 1, 2007 so they could argue that competition was working and legislative intervention wasn't needed.

 

[BarbaraAnne]

Thanks for the update, 3 Years to Go.

Let's use this thread to compare notes as to the best deals going forward. By communicating we can all hopefully get a better deal than in the past.

We are all tired of paying outrageous prices for energy compared to neighboring states. When we move in a couple of years, if we stay in Texas, we will most likely move to an area with an electric co-op. Rates are much cheaper!

I'm embarrassed to say what we pay for A/C in the summer. It probably is greater than some folks' mortgages!

 

[Texas Proud]

Let's see.... I sign a contract for having a price set for 12 months... and if their costs goes down I am supposed to bitch because they are now making more money... but if their costs go up, well, we have a signed deal? Is that how it is supposed to work

I signed a 12 month deal at 13.1 cents per.... I am happy with it (compared to the other offers at the time)... yes, I wish electricity was 6 cents or even lower... but it is not... and to me the difference between 11.5 and 13.1 is not enough to bitch about... I will look at what is available when my 12 months are up... and move if necessary... THIS is competition..

And if the company wants to price it just below everybody else, but can make big dollars because their costs are a lot less then great.... let them..

BTW... I actually had thought about buying wind or some other renewable as the price was getting up to that level.... BUT GUESS WHAT Their prices went up also!!! I was wondering how the cost of that wind went up so much?

 

[Gone4Good]

Let's see.... I sign a contract for having a price set for 12 months... and if their costs goes down I am supposed to bitch because they are now making more money... but if their costs go up, well, we have a signed deal? Is that how it is supposed to work

Not at all. There are perfectly good reasons to lock in the price of a volitile commodity. And as you point out, prices go up and down. Sometimes you win, some times you don't.

But the original question was whether or not Poundkey should lock in long-term prices in December 2006. My advice then was not to do it because natural gas (which is the marginal fuel for power generation in TX) had fallen dramatically whereas electricity prices had not. Its like locking in a 12 month supply of gasoline at $3 when you know oil has dropped to $50 bucks a barrel. TX electric prices still have not come down that much (although some offers have) while natural gas continues to fall ($6 currently from $8 in December). It looks like the legislature may intervene to lower prices. So for anyone who hasn't already locked in prices, its pretty good information to know that prices may be coming down 20% or so . . . wouldn't you agree?

 

[REWahoo]

When we move in a couple of years, if we stay in Texas, we will most likely move to an area with an electric co-op. Rates are much cheaper!

I'm fortunate to live in a co-op serviced area. We signed up for the wind-generated option in September of 2005 and have paid a flat 7.9/kwh since. Even for those on the regular plan, I don't think rates went above 9/kwh at their peak.

 

[Gone4Good]

BTW... I actually had thought about buying wind or some other renewable as the price was getting up to that level.... BUT GUESS WHAT Their prices went up also!!! I was wondering how the cost of that wind went up so much?

The cost to the producer didn't change. What changed were the competing offers. Some people are willing to pay a premium for green power. So if the price of "dirty power" goes up, wind power prices go up as well because people are willing to pay a premium for it. The difference goes straight to the producer's bottom line - that's competition too.

 

[REWahoo]

BTW... I actually had thought about buying wind or some other renewable as the price was getting up to that level.... BUT GUESS WHAT Their prices went up also!!! I was wondering how the cost of that wind went up so much?

Based on my experience (see previous post) any increases in wind generated rates were likely initiated by the middleman, not the producer. The wind-gen rates charged by our co-op have remained unchanged for more than two years.