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Texas’ uncertain nuclear future

Sometimes I forget that Texas has nuclear plants.

By the standards of the U.S. nuclear energy industry, Texas’s two nuclear plants are fairly new. Neither one is more than three decades old, while many nuclear sites across the country are nearing the five-decade mark.

But as the economics of nuclear power in this country continue to slide, even the futures of the South Texas Project, near Bay City, and Comanche Peak, located 60 miles southwest of Dallas, are far from certain.

When Manan Ahuja, senior director of North American power at the research arm of credit rating agency Standard & Poor’s, recently updated his firm’s list of nuclear plants at risk of closing, he listed both Texas plants at “moderate” risk of closing as early as 2030 – despite the fact that NRG Energy recently renewed its operating license for the South Texas Project for another 20 years.

Ahuja explained that while the plants were “of a much more recent vintage,” low power prices in Texas and state regulators’ policy of not paying plants for their ability to ease power shortages at times of high demand or for generating carbon-free energy – like other states have done – left the two facilities vulnerable.

“It’s a game of chicken. Do you sit around and wait for those high prices, which could happen this summer because there’s been some (coal plant) retirements,” he said. “The prices are fairly weak, even in a fairly hot July last summer.”

Both NRG and Vistra Energy, which operates Comanche Peak, maintain the plants are economic and have no plans to close them.

“Given Comanche Peak is one of the youngest plants in the country, significant decisions on license renewal are a few years away, but the plant is currently well-positioned, and we have no plans to close the it prematurely,” a Vistra spokesman said in an email.

The situation in Texas mirrors one states across the country are grappling with, as nuclear power plants face increased pressure to reduce costs to compete with a surge of cheap natural gas and increasingly efficient wind turbines and solar plants.

I don’t know how serious that threat is, but it’s worth at least thinking about. I’ve always been of the opinion that nuclear power needs to be in the mix, as it is not carbon-generating, but it is surprisingly expensive and of course there are other risks associated with these plants. Given how prices for wind and solar are falling, and the vast potential for both in Texas, I would not advocate more nuclear power here, but neither do I want to see these existing plants mothballed or underused before their time. Whatever we can do to burn less coal is a good thing.

Dan Wallach: 2015 Electric Power Usage Update

Note: From time to time, I solicit guest posts from various individuals on different topics. While I like to think I know a little something about a lot of things, I’m fortunate to be acquainted with a number of people who know a whole lot about certain topics, and who are willing to share some of that knowledge here. In this particular case, I’m welcoming back someone who has written on this particular topic before.

I’ve been blogging about our electricity situation for the past few years here at OffTheKuff. In 2014, I mentioned that we were pondering going with a solar system. Well, we did it — a 9 kW (peak) solar system via Texas Solar Outfitters — and we also picked up a Tesla Model S. This is less about being green hippie freaks and more about disconnecting from what I’ve viewed as a deeply dysfunctional electricity market. (And also having a car that kicks ass, but that’s for another day and a different blog.)

We’ve only had the solar system since November, so it’s too soon to have full-year statistics. Once the system reaches its first full year anniversary, I’ll run the “profitability” numbers and do another guest post here. Stay tuned for more exciting charts and financial math (present value, IRR, and more)! Instead, I wanted to give some perspective on the economics of solar power.

Notably, Tesla just announced a new “PowerWall” contraption that puts a 10kWh battery pack on your garage wall for $3500 (plus hiring an electrician, plus permitting, plus ancillary equipment like inverters, so let’s call it $6000 minimum). Elon Musk envisions that we can truly replace our entirely fossil fuel-based economy with solar power: homes, cars, everything. (For more technical details on the PowerWall products, Teslarati has a good writeup.) Let’s do the numbers, shall we?

To begin, here’s our March electrical bill from Green Mountain — the best of the three available plans if you have solar.

WallachElectricBill

This is what “net metering” looks like. We drew 862kWh from the grid and fed back 573kWh. Meanwhile, over the same time period, our solar system reports that it produced 853kWh. Of this, the house consumed 280kWh and we sold back the remaining 573kWh. So, our actual power consumption for March was 1142kWh (solar generation plus grid consumption, minus excesses solar generation sold back).

I rolled back to last year’s stats, when we had neither solar nor a Tesla, and the monthly usage for the same time period was 864kWh, which says that the Tesla used around 280kWh for the month, or maybe it’s just hotter this year. Last year’s awful summer peaks were well north of 1500kWh, so presumably this summer, with the Tesla, we’re looking at 1800-2000kWh / month of peak usage.

(With our Tesla, we’re on target to hit about 7500 miles/year, so these numbers may represent a “low” usage point relative to others, but you can easily scale our numbers up if you want to predict your own hypothetical costs. Your mileage and the weather may vary, etc.)

Here’s where solar gets fun. The graph below shows the energy generated by our solar system on a beautiful, sunny April day. Positive numbers represent power we’re drawing from the grid. Negative numbers represent excess power we’re selling back to the grid. You can see our Tesla charging itself up after we got home from eating dinner out. You can also nicely see when the sun came up and when it went down again. On this particular day, midnight to midnight, we drew 20kWh from the grid while the sun was down. The solar system generated 52kWh, and we had an excess of 44kWh that we sold back to the grid (i.e., we consumed a total of 28kWh on this particular day and were a net seller of electricity). Sounds great right?

WallachSunnyDayApril

The new Tesla PowerWall contraption leads you to ask the question of whether you could store all that extra energy in a battery during the day and release it at night. If you could do that, you could then cut yourself free from the grid. Today’s question: what would it take to go completely “off grid”?

To pull this off, you need to generate everything you might ever need, even in the worst case. So how bad is bad? Here’s a chart of our power usage over a two day period in early April when it was rainy and awful.

WallachRainyApril

Over these two days, our total power drawn from the grid was 46kWh. The solar system generated 25.2kWh, of which 9kWh was sold back to the grid (i.e., we consumed an average of 31kWh/day on these two days). To make this work “off grid”, we’d need to double the size of our solar system. To make this work on a bad weather winter day, with correspondingly less daylight, the solar system would need to grow yet again. Also, this included a typical day of driving with our Tesla. What if we did a long drive and got home with a near-empty battery? You’d have a whole new form of range anxiety to deal with. Conversely, on days when you generate more than you use you’re just throwing it away.

Our current solar system cost us roughly $30k to purchase and install (before the 30% tax credit, which might go down in future years). No matter how you slice it, the profitability of the system is dubious, given how much cheaper electricity became after the Saudis decided to crank up their production. Doubling the solar system, installing expensive batteries, going off-grid, and discarding excess production? Sorry, that’s not financially rational.

Incidentally, if you want to know how to size up a Tesla PowerWall system for an off-grid solar application, you pretty much just add up your grid consumption during the night; you need to ensure you have enough solar capacity and battery capacity during the day to cover it. For our house, two PowerWall batteries ($3500/ea, for 20kWh total storage capacity) wouldn’t quite do the job. We’d need three of them to have a decent margin. If you had a bigger house or you drove many more miles on your electric car, then you’d have to ratchet everything up appropriately.

Conclusion 1: building a solar system to deal with worst-case power generation, operating your house “off grid”, will require your solar system to be much larger than you’d specify for a net-metering application, where you can rely on the grid for bad-weather days. As solar panels get more powerful and cheaper, the economics of this will change. Today, no. Ten years, maybe.

Next question for today: is there any point in buying a PowerWall if not to go off-grid? If what you want is “emergency” service in a power-outage situation, you can buy all sorts of natural gas generators. They’re loud when running and they require regular service, but after Hurricane Ike knocked our power out for ten days, we could feel the soulful allure. Unfortunately, a smaller PowerWall system wouldn’t help here, since for a ten day blackout, you’re really in a situation equivalent to the fully off-grid scenario.

Sadly, with only flat-rate grid electricity pricing available here, I conclude that a PowerWall has no real use at our home.

Caveat 1: so long as TXU is willing to give you “free nights”, then a PowerWall means free electricity for your home! You can expect TXU to kill that program off quickly once Tesla’s battery packs start shipping. Sorry about that.

Caveat 2: electric utilities are cranking up the scare machine that it’s “unfair” for solar consumers to pay less for the grid. First off, this is totally bogus, as we pay the same fixed fee as everybody else pays for CenterPoint to maintain the grid. (Many retail electric plans hide this fee, so long as you use more than 1000kWh, but they’re still paying it on your behalf. ) And if you’re a net provider rather than net consumer of power at peak times, you’re helping the grid. But let’s say the utilities win the argument and kill off or weaken solar net metering. At that point, we’re forced to buy a battery storage system to recapture our excess daytime usage. The grid then loses the benefit of our excess generation, and every new solar system just got more expensive for no good reason.

All of this would change if consumers were more exposed to the variable pricing of the commercial power market. Rice University, for example, buys its electricity a full year ahead of time, hour by hour, offset by in-house solar production. If it turns out that Rice pre-bought more than they need, they sell it back on the spot market. If they need more than they pre-bought, they have to go buy power on that same spot market. And, of course, when do they really need it? The same time as everybody else does, on the hottest days, so spot prices can be brutal. With this in mind, typical commercial flat rooftop solar installations point their panels southwest, maximizing their power generation in the afternoon when electricity is most expensive.

The real genius of power storage systems is that you can buy and store the power when it’s cheap and uses it when it’s expensive. Energy arbitrage! That means that the mammoth version of Tesla’s PowerWall might be very attractive for industrial and commercial users. Even utilities might deploy them into neighborhoods. And if home users were more exposed to the “real” pricing in the commercial market, they too would be incentivized to get personal battery storage systems, with or without solar, for the same reasons. So far as I can tell, none of the available-in-Houston 325 plans from the 52 different retail electric providers offer hour-by-hour variable pricing like this, but in Austin or San Antonio, your traditional electric utility might be able to do it. Here’s a nice NPR article with useful details.

Conclusion 2: so long as consumers have net metering available and are not exposed to variable time-of-day electricity pricing, they won’t be incentivized to buy a battery storage system, with or without a solar system on the roof. There’s really no benefit for Houston consumers today to buy a storage system.

Teslarati runs a similar analysis in a state with variable pricing. In Southern California, the PowerWall becomes profitable in 3-5 years, and is unattractive for off-grid. Also, Vermont’s Green Mountain Power, not to be confused with our NRG-owned Green Mountain Energy, is ramping up some kind of joint program with Tesla. Who knows, maybe we’ll see something like it here some day.

One parting thought: in the insane, fragmented universe of the deregulated Texas electricity market, where generation, distribution, and retail sales are performed by unrelated players, we’ll probably be stuck with pricing policies that incentivize consumers to waste energy for make benefit most glorious State of Texas. Of course, exposing consumers to the raw industrial electricity market would likely be disastrous. Consumers can’t easily manage their load or trade contracts against future use. The best we seem to get are “smart” thermostats that can throttle back at peak times. Yawn. What seems missing, then, is better regulations for how consumer pricing is structured to incentivize lower peak usage. My proposed solution? Net metering and predictable time-variable pricing should be a standard part of any retail electricity offering. Let me sell high and buy low! Similarly, every plan should be structured to eliminate perverse rate structures where marginal rates go down as usage goes up. That’s common sense. Deregulation!

Dan Wallach is a professor of computer science at Rice and a friend of mine who has written four of these analyses before.

Use less, pay more

Ain’t utility deregulation grand?

More than 70 percent of electric plans offered in the Houston area contain terms that may penalize customers who don’t use a certain amount of power, according to a Houston Chronicle analysis of more than 300 plans available in early January.

NRG and other companies with plans that include the fees say they offer a variety of products designed to meet the needs of different kinds of customers. They also point out that fixed fees covering some of their overhead allow them to reduce the rates they charge per kilowatt hour of consumption.

Some plans charge minimum-use fees to customers whose monthly power consumption falls below a particular threshold – usually 1,000 kilowatt hours. Other plans offer credits to customers who exceed a specified threshold of power use.

“The market probably still has a way to go toward rewarding people for using less,” said Troy Donovan, market development manager at CenterPoint Energy Services, which runs a website called TrueCost that factors the fees into its analysis of electric plans. It is a division of CenterPoint Energy, the transmission company that distributes electricity in the Houston area regardless of what retailer sells customers their power.

Consumer advocates say minimum-use penalties discourage energy conservation at a time when environmental groups, all levels of government and even electric companies themselves are encouraging customers to scale back on energy consumption.

“These fees often go unnoticed until you really cut back and you realize you still have a larger bill than you expected,” said Jake Dyer, a policy analyst at the nonprofit Texas Coalition for Affordable Power. “It’s bad news for a lot of folks doing their best to save power and save on their electric bill.”

Even customers penalized for using less energy pay for energy efficiency initiatives: A $3.05 fee on monthly bills in the Houston area covers installation of technically advanced smart meters partly touted as energy-saving measures; the city of Houston last year raised residential energy-efficiency requirements.

[…]

About a third of the Houston-area retail providers the Chronicle examined listed no plans containing penalties or credits based on power use.

TriEagle Energy, based in The Woodlands, charges customers flat monthly fees – in addition to their electricity rate per kilowatt hour – but the fees aren’t tied to power consumption. Consumers are more likely to stay with the company if they don’t get surprises like minimum-use fees on their bills, said Kasey Cline, TriEagle’s director of sales and marketing.

Other retailers, how­ever, say the fees make sense.

Champion Energy Services uses them to cover fixed costs that it otherwise would roll into energy rates, said Brenda Crockett, vice president for market development and regulatory affairs. The company has to pay costs of billing and other services for all customers, she added, regardless of their electricity use.

Other companies echoed that response.

“There’s a cost to cover, whether they’re using 1 kilowatt hour or 1 million kilowatt hours,” said Robbie Wright, a founder of Bounce Energy, which also charges minimum use fees.

That argument rings hollow with Dyer, of the Texas Coalition for Affordable Power. “You don’t pay a minimum-use fee when you step into a grocery store,” Dyer said. “You don’t pay a minimum-use fee when you shop for any other product. Most businesses price their product in such a way that the people who actually buy it will pay for their fixed-cost infrastructure.”

Dan Wallach noted this feature back in 2013, in his annual report of choosing an electric plan for his house that year. There’s no logical reason for this – the companies do it because they can, because most people don’t read the fine print closely enough. Jake Dyer is exactly right, but in the absence of some kind of market regulation, or better educated consumers, they’ll get away with it. It’s easy to say that other companies could undercut the ones that do this on price and steal their business, but that isn’t what has happened. Maybe this Chron story will help, but I doubt any one story could. It will take a lot more outreach than that to penetrate the public consciousness.

Dan Wallach: Home power analysis, 2014 edition

Note: From time to time, I solicit guest posts from various individuals on different topics. While I like to think I know a little something about a lot of things, I’m fortunate to be acquainted with a number of people who know a whole lot about certain topics, and who are willing to share some of that knowledge here. In this particular case, I’m welcoming back someone who has written on this particular topic before.

It’s July and that can only mean one thing: time to worry about my electrical contract for the next year. As we saw in last year’s installment, I ended up going with TriEagle Energy’s 100% renewable product. They want to jack my rates by 10% over last year, so clearly it’s time to run the numbers again.

This year, I decided to try to sort out what each plan would cost based on my power usage data for the past year (thanks again to SmartMeterTexas.com). For five months, my usage went over 1000 kWh/month and for seven it was well below. I then downloaded the full spreadsheet of available offers from PowerToChoose.org, built an equation to estimate my monthly charges, and then all I have to is sort to find the cheapest, right? Sadly, it’s not that easy. The spreadsheet data they give you is a disaster. Rather than just listing the fees, there’s now a textual column titled “Fees/Credits” and there’s no standard way in which they’re reported. Some companies report what you’d pay per kWh, inclusive of monthly fees, while others report what you pay exclusive of those fees. This meant I had to go through every row in the table and try to interpret their mumbo jumbo. Deregulation!

If you just try to just naively scale the 500 or 1000 kWh numbers, you end up with a wrong answer by 2% or more, but the EFLs often fail to give you enough data to do any better. So, with that caveat, here’s a histogram of how much money I’d spend in a year with each of the nearly 200 fixed rate electricity contracts on offer. Higher points in this histogram mean there are more plans that would end up costing me that price.

WallachPowerAnalysisChart2014

While I don’t want to name names for companies with unhelpful Electric Facts Labels and PowerToChoose-published data, I do want to give kudos specifically to Our Energy for doing it better. They say explicitly what CenterPoint expenses they are passing through, and they themselves have a flat rate on the power they’re selling. This allows me to calculate my real expenses, not a cheesy approximation of them. That would adjust them from $1316/year (as everything else in the histogram above is computed) to $1277/year, moving them into the top competitive position on my chart. Would others be cheaper as well? Probably, but PowerToChoose doesn’t give me enough information to choose. Should I reward Our Energy with my business for having the best and most transparent EFL? It’s tempting, but first, a rant…

Can’t we please go back to having a centrally regulated traditional utility company?

San Antonio still has this. I had a friend there send me a copy of her utility bill. She’s paying approximately $0.11 / kWh. Her bill breaks out the fixed and variable charges, much like I appreciate from Our Energy. On my histogram above, she’d be somewhere in the far left — getting an exceptionally good rate and not having to do this stupid analysis every year. All of our lovely free market competition in Houston is really just a series of opportunities for fools and their money to be quickly separated from one another.

Hey, what about solar power and saving the earth and stuff?

When I first started writing this year’s analysis, I said to myself, “Surely solar power must be a real option by now!” After way too much investigation, the short answer is, “maybe, if you can afford the big payment up front.” After spending the last month getting quotes and doing the research, I’m this close to pulling the trigger on a solar installation. Here are the high points:

Solar works hand-in-hand with the grid. When you install a solar system, it’s generating power during the day that you probably don’t need, and you need power at night that your solar system isn’t providing. This means your meter gets to run backwards during the day and forwards at night. If you have a month where you generated more than you used, you get a negative electric bill, which is then “banked” for future months. (Curious side-effect: you don’t want to over-size your solar system, because you’ll never get all your money back from the “bank”.) Also notable: if grid power goes down, so does your solar system. You can install a backup battery system or a gas-powered generator, but that’s a whole separate animal.

The financial incentives are okay, not great. In rough terms, the system I’m contemplating, which might generate 9-10 kW from the mid-day sun, will cost $20k after federal tax incentives. After that, you have small or even negative electric bills, and you start making money back on your initial investment. You stir in a bunch of assumptions about the depreciating value of the asset you’ve bolted to the roof, and you come out with a bottom line that you can look at with standard financial investment terms (internal rate of return, etc.). The proposal I’m considering from Texas Solar Outfitters would have an IRR of 7.4%, under their standard set of assumptions. Under different assumptions, you’re better off just getting power from the grid. (The same numbers in a place like California are in the “no brainer” category, both from additional up-front incentives and from the tiered electrical pricing they have. Solar helps keep you out of the higher tiers.)

What about leasing vs. buying, warranties, etc. In short, a lease is a lot like a loan. You’re paying less up front and you’re making monthly payments. The leasing company is trying to make money. The net effect is that the IRR goes down to the point that the deals are less likely to be worthwhile. (Again, this varies on a state by state basis. Nobody’s subsidizing those leases here.) Solar lease deals also act like an extended warranty on your gear. If your panels aren’t up to spec, they repair them for you. Most solar parts have very long warranties of their own, so this is less of a big deal than you’d think.

The environmental impact of solar is less abstract than the premium you pay for a “green” grid electricity plan. No matter what grid plan you purchase, green or not, the same mix of mostly coal and gas-fired generators are still producing the power your house is consuming. The only difference is that you’re paying your utility middleman to also buy you “renewable energy credits”, which are sold by wind farms and other such things and which may or may not be feeding their electrons to your house. It’s at best unclear whether you’re incentivizing somebody to install more “green” generation capacity versus building another traditional plant. On the flip side, when you’re turning sunlight into power, you’re directly removing your demand from the grid. This sort of logic is especially attractive if you’ve got an electric car and you’re worried about the “long tailpipe” emissions problem.

Aren’t you just a leach on the electric grid, then? Umm, no. By installing solar, you’re doing the grid a favor by supplementing its power during the peak draws in the hot summer sun. If more houses could run their meters backwards, that would effectively supplement the big generators and help avoid brownouts. Also, you’re paying the same monthly fee that everybody else pays for connecting to the grid.

So, what’s your new electricity plan then?

I need to pick a new electricity provider now, even though it might be a while before I can get a solar panel system installed on my house. The set of plans that support solar sellback is very small. So far as I can tell, I’ve got precisely three choices: Green Mountain, Reliant Energy, and TXU. The winner among these seems to be Green Mountain, who will buy your first excess 500 kWh/month from you at full retail price and half price thereafter. TXU buys from you at 7.5 cents/kWh no matter what. I can’t seem to find the Reliant number.

Green Mountain says you can sign up for any of their plans and switch without penalty to the plan that supports buying your power back from you, so that’s probably the way for me to go.

Dan Wallach is a professor of computer science at Rice and a friend of mine who has provided this annual analysis three times before.

Would you let Reliant turn off your air conditioning?

In the name of conservation, of course.

“Our objective is to have more and more customers participate so we can make a material difference in an event when the state needs us to make a difference,” said Elizabeth Killinger, senior vice president and retail regional president for Texas at NRG, Reliant’s parent company.

The program, which Reliant calls Degrees of Difference, is geared toward customers who use Nest, the Google-owned thermostat that can be controlled remotely over a wireless Internet connection.

Under the voluntary program, when electricity demand gets especially high, Reliant – through Nest – could remotely turn off customers’ air conditioning for around 30 minutes or less in an effort to reduce electricity consumption.

Reliant would then pay customers 80 cents for every kilowatt-hour of electricity they’ve avoided using, based on comparisons to their historic usage.

Officials at Reliant and Nest stress that the program is purely voluntary, and participants don’t lose much control, since they can easily override the adjustment and turn the air back on. But they doubt that will be necessary.

“Most folks aren’t really going to notice when their air conditioner pops off for a short time like this,” said Ben Bixby, general manager at Nest Energy Services.

[…]

The plan may seem counterintuitive. Reliant, after all, makes money when customers use electricity. But during periods of peak demand – generally, late afternoon in the summer – companies like Reliant can face extraordinary wholesale costs from power generators, which can charge up to $5,000 per megawatt-hour of power.

That figure is poised to increase to $7,000 in June and $9,000 next year. During normal conditions, wholesale prices from generators are generally below $100 per megawatt-hour.

“If we run into a circumstance where there’s not enough generation, and prices are rising, customer participation will help us reduce our costs,” Killinger said. The upside for Reliant is that the money it saves exceeds the value of the credits it would dole out to customers.

There’s already a program in place like this for large industrial and commercial power users, but residential users create a lot of demand, too. Basically, Reliant is looking to keep the peaks below a certain level, above which it becomes really expensive for them to provide the power needed. It reduces their costs, so they can provide an incentive to their customers to participate, and it may mean less need to build more power plants down the line. It’s a win all around if enough people agree to participate. We have a Nest at home, though we’re not currently using Reliant. I suspect we’d be willing to do this but haven’t discussed it with Tiffany yet. What do you think?

Dan Wallach: Energy pricing 2012

This is a guest post that follows up on an earlier guest post.

Dan Wallach

Last year, I wrote a guest article for Off The Kuff where I discussed the complexity of trying to get a good price on your electric bill. In Houston, we have seemingly hundreds of companies who will gladly take our money in return for electricity. Which should you choose? The place to begin remains PowerToChoose.com, but the market has changed a bunch from when I last took a look.

If you really dig around PowerToChoose, you’ll see all these companies you’ve never heard of, each of which has a piece of clip-art on its web page of a beautiful meadow with a shining sun, or maybe a happy family with perfect teeth. (Exercise for the reader running the Chrome browser: you can right-click on those pictures, and select “Search Google with this image”, and see how widespread those stock images are used. In one case, the smiling family I saw also appeared in web sites for a car dealership, a dentist, a youth ministry, a nutrition supplements company, and an alarm system company.)

Last year, it was common for these companies to offer low teaser rates for the first month that bubbled them up to the top of the list. You’d then pay the regular higher rate thereafter. This made it very difficult to do comparison shopping, since you had to dig deeper into the “electricity facts label” sheets to find out what the real prices were. It also created a huge incentive for you to switch companies every month.

At the time, I decided to switch to Pennywise Power, who was advertising a relatively low variable rate. I was entirely happy with them until this July, when their prices exploded. My bill for June was $197.99 for 1873 kWh ($0.105 per kWh, after taxes, fees, and such). My bill for July was $289.78 for 1662 kWh ($0.174 per kWh). It’s come back down again, but at least for two months, they were charging far above other companies’ advertised rates. (Note: the wholesale market for electricity went bonkers at the end of June, and some of that was clearly passed on to me.)

My conclusion last year was that Pennywise’s rates were low enough to be attractive, but I apparently failed to notice my own warning:

“Variable rates” aren’t connected to much of anything beyond the whims of the executives who set these rates. If you read the legal verbiage closely, they can change your rate, at any time, to any price they want.

After seeing the shocking July bill, I figured it was time to jump into a fixed rate product, so back I went to PowerToChoose.com and slogged through the various options. These days, the low teaser rates from last year are all gone. Now, the advertised price seems to be the price you actually pay, but things are still a bit wonky. One of the tricks I observed with Pennywise is that their pricing, which included a $9.95 “base charge” if you use less than 1000 kWh, creates some perverse incentives if your electrical usage is just below that number per month. Wasting energy to get over the top might save you real money! This year, I resolved to find the best fixed price with zero “base” charge. That led me to Summer Energy, where I inked a one year lock-in at $0.093 per kWh. (If you sign up today, with the proper promotion code, it’s $0.085 per kWh.) My first bill showed up for the back half of July, and it included a $4.89 base charge! I had to threaten to abandon them if they didn’t fix it, and they eventually came around.

So, what have we learned here? First, when you’re doing business with faceless companies who advertise low rates, you might expect to have unexpected charges and unusual behaviors. (Summer Energy still hasn’t sorted out my request to set up automatic credit card payment.)

Second, this “deregulated” market could stand to have more regulation. If you read the electricity fact sheets that our vendors are required to publish, there’s a remarkable amount of diversity among them, and lots of fine print they leave out. If I were king for a day, all of these fixed “base rate” fees would be standardized, simplifying vendor competition to price per kilowatt-hour within equivalence classes of different percentages of “renewable” energy.

Finally, a word about the future. A buddy of mine in California got himself a fancy solar panel system on his house. He sells excess capacity back to the grid, but it’s much better than that. His electric utility company (for which he has no choice) has tiered rates. The more electricity he burns, the more he pays. But by selling power back, he stays out of the higher rate tiers. He also gets tax credits and other incentives that aren’t available in Houston; some other Texas utilities offer rebates, but Centerpoint has nothing in our area. In theory, with our shiny new smart meters, we could have some all kinds of sophisticated billing policies like variable day/night rates or solar systems that let you sell power back to the grid, but these aren’t happening yet. I suspect this is an unfortunate side effect of our multi-vendor deregulated market. (Reliant does have a plan that lets you sell power back, but the base electrical rate is uncompetitive.)

If you dig deeper into your electrical bill, you’re paying a big chunk of your bill to Centerpoint for “delivering” your electricity, no matter who you’re paying for your juice. That’s the place where we might eventually see some innovation. Centerpoint could charge variable time-of-day or tiered rates, they could buy back your electricity if you have solar, and so forth. One of these days, I might buy myself an electric car, and I’d be keen to have more sophisticated electrical pricing in place before then.

Dan Wallach is a professor of computer science at Rice University.

“How to Choose a Texas Electric Provider the Wrong Way”

Recently, my friend Dan Wallach wrote a guest post here about how to find the best deal on electricity in Texas. Robert Nagle, another friend of mine, took issue with some of the things Dan wrote and penned a response on his blog, called How to Choose a Texas Electric Provider the Wrong Way. A brief excerpt:

I am amazed at how easy it is to make a bad decision about electric providers.  A college friend with a PhD in Economics chose an expensive coal-laden TXU plan because he had just moved back to Texas and wasn’t aware that you had the ability to choose your provider – he just went with whatever someone told him about. (In two minutes, I was able to find him a plan which was 10% cheaper and 100% green).  Various acquaintances have chosen plans for the most illogical of reasons. One chose “Reliant” because it sounded “reliable” (Reliant-reliable – get it? I guess getting your name on the downtown stadium was good for something).  Another signed up for the coal-dirty Reliant because it had balanced-billing – never mind that it was significantly more expensive than the other plans. A friend chose a plan simply because a friend of hers had recommended it – that was also more expensive. Another friend opted not to choose the “renewable” plan because she didn’t want to have to renew it each time the fixed rate expired.  There are other not-so-obvious problems. When I had Dynawatt (a company I don’t recommend) I could not make head or tail of the bill (no matter how long I studied it). Everything on the printed bill contradicted what the terms of my contract were, and when I called telephone support several times, each agent quoted me a different rate on my current plan – something which didn’t exactly inspire confidence.

4 Things You Need to Know about Choosing an Electric Provider in Texas

This blogpost is going to ramble a bit, so I’ll summarize for people who are in a hurry and need some fast tips.

  1. Texas consumes more fossil fuels than any other state in the US. If Texas were a nation, it would be the 7th largest emitter of greenhouse gases. Electric plants in Texas (population 25 million) emit as much CO2 as electric plants in the COMBINED states of New York, California, Florida, Massachusetts and Oregon (population: 86 million)
  2. 1 year Fixed-rate plans for 100% green (renewable) energy plans are on average 5-10% higher than comparable coal/natural gas plans.
  3. Don’t choose an electric provider which has received too many complaints. (Check thecomplaint scorecards on the PUC site and also Yelp if you want).

You’ll need to click over and read the whole thing for the fourth point. My thanks to Robert for sharing his expertise.

On getting the best deal with variable electric rates

Note: The following was written by my friend Dan Wallach, who thought I might be interested in sharing it here. He was right. My thanks to Dan for putting this together.

Everybody in Houston has the ability to select any one of hundreds of different electrical pricing plans from a variety of vendors. If you visit the PowerToChoose.com web site, you can see all the different rates listed. Some are “variable” rate, with the lowest currently advertised at 5.3 cents/kWh. Others let you lock in a fixed rate for some period of time (the cheapest currently listed is 8.3 cents/kWh for a six month term). A few plans are “indexed” (meaning they track the spot price of natural gas), with the cheapest currently going for 10.7 cents/kWh. On top of all these different plan styles, there is also a significant variation in the “percentage of renewable content” from one plan to another, as well as variation in various freebies and incentives.

I wanted to keep it simple. Just give me the lowest price, please. I initially signed up with Amigo Energy, who in 2008 offered me something like 7.5 cents/kWh without requiring me to make any kind of deposit. At the time, they were one of the cheapest vendors around. That sounded great, and they even gave me free tickets at one point to a Houston Dynamo playoff game. Thanks! I didn’t really pay much attention to my electrical prices again until I noticed a recent bill was over 13 cents/kWh, earlier this summer, when the extreme heat was giving me some extreme electrical bills. I called them up and they said that they had discontinued the program I signed up for, so they unilaterally decided to raise my price to a much higher number. Oh, and would I like to switch to another plan? Lovely.

Lesson 1: “Variable rates” aren’t connected to much of anything beyond the whims of the executives who set these rates. If you read the legal verbiage closely, they can change your rate, at any time, to any price they want.

I want the lowest rate I can get. PowerToChoose.com listed several vendors offering 5.5 (give or take) cents/kWh, including one company I’d actually heard of before: Reliant Energy. Several of the vendors explicitly say that their cheap rate is “introductory” and you’ll be switched to the regular rate after one month. Reliant, however, makes no such caveat, at least not that was immediately obvious, so earlier this summer I dumped Amigo and went with Reliant. My first month was cheap. The bill that just arrived, however, averages to 7.5 cents/kWh (including taxes) on 2061 kWh of charges. That’s a $155.39 bill, which is still reasonable in the grand scheme of things for an August in Houston, but it wasn’t the $113.36 that I would have paid at my original rate, either. Oh, and if I call up Reliant on the phone to complain, the contract seems to say that they can charge me $5.95 to speak to a human being. No thanks.

Lesson 2: See lesson 1.

Challenge: how can I consistently pay these low advertised rates? Do I have to switch companies every month? As it turns out, every one of these companies is required to publish an “electrical facts label,” and those tend to include a pointer to a web page with their historical prices. The table below has the actual rates that I’ve been able to glean from these web sites. This was far more difficult to put together than it should have been. (Notes: all of this data was compiled on September 11 from PowerToChoose.com and the various vendors’ web sites. All prices are based on monthly rates at 1000 kWh usage and include CenterPoint delivery charges. If you’re outside of Houston and don’t have CenterPoint, your rates will be different. If you use less than 1000 kWh, many vendors tack on a surcharge that increases your effective electrical rate.)

Company / Product Initial Advertised Rate (at 1000 kWh / month) Historical Rates (at 1000 kWh / month)
First Choice Power (“First Choice Web Advantage Flex”) 5.3¢ No historical rates are on their web site for this specific product. Other products are much more expensive (all greater than 13¢).
Reliant Energy (“Basic Power Flex Plan”) 5.4¢ 8.2 – 10.0¢
Pennywise Power (“Wise Buy Monthly”) 5.4¢ 6.3 – 7.2¢
StarTex Power (“Promotional Month to Month”) 5.5¢ 11.3 – 13.8¢
Bounce Energy (“Thrifty Saver Promotional”) 5.5¢ 11.2 – 13.9¢, but with various promotions, coupons, etc.
Mega Man LP (“Mega Man Savings Plan”) 5.5¢ 11.8 – 12.5¢
Veteran Energy (“Freedom Month to Month”) 5.9¢ 12-13¢
Frontier Utilities (“Winter 11 Special Online Intro”) 6.4¢ 7.8-8.3¢ (only two historical prices are present, so this isn’t very meaningful)
APNA Energy (“Promotional Newcomer Variable”) 7.3¢ 12.3-13.1¢

Beyond this, prices jump two cents or so and we’re starting to see the various “renewable” energy products. What’s actually going on when you sign up for one of these plans is, at best, unclear. The electrons being pumped into your house are coming from the same power plants over the same grid, no matter who you’re actually paying for your service. (Hint: very few of the companies listed above actually own real electric plants. They buy power wholesale and sell it to you at retail.) What you are really doing, when you buy “renewable” power, is buying the same power as anybody else, plus you’re buying “renewable energy credits” (RECs). There’s a whole secondary market for RECs, which the “renewable” power generators sell and which you’re indirectly buying. In theory, this incentivizes power companies to increase their “renewable” capacity so they can capture those extra dollars themselves. In practice? There’s a very good 2009 study on the REC market. At one point, REC prices went negative! Suffice to say that the REC market is a work in progress.

If your goal is to reduce carbon emissions, you could buy “renewable” power, which might eventually do something, or you could invest in making your house more energy efficient, which does something right now. I’m going with plan B (“ask me about overpriced LED lighting!”), but you’re welcome to choose plan A if you want. So what do you pay for “100% renewable” power at variable prices?

Company / Product Initial Advertised Rate (at 1000 kWh / month) Historical Rates (at 1000 kWh / month)
Bounce Energy (“Organic Power Promotional”) 9.3¢ 12.9-14.4¢
Reliant Energy (“Monthly Flex 100% Texas Wind”) 9.4¢ no historical data provided for this product
Kinetic Energy (“Go Green Monthly”) 9.9¢ 7.5-13.3¢
Texas Power (“Promo Pure Variable Month to Month”) 9.9¢ no historical data provided for this product
Gexa Energy (“SmoothStart Green”) 10.4¢ no historical data provided for this product

Okay, let’s try to draw some conclusions. First, the low rates you see advertised on PowerToChoose.com are strictly for the first month of service. After that, your rates will go up, sometimes by a surprising amount. If you want to continue paying the low rate, then you’re going to have to be vigilant about what you’re being charged and you’re going to have to change companies every single month.

If you find that bothersome, then the best deal on the board today seems to be PennyWise. PennyWise is owned by NRG Energy, which also owns Reliant and Green Mountain Energy. In effect, PennyWise is their “discount” brand and Reliant is the “commercial” brand. Whatever. I’m switching to PennyWise and we’ll see whether they continue to have good prices or not.

Sidebar: What if I wanted to put in solar panels?

I’ve been pondering this for years. The front side of my house faces south. There’s a big area on the front roof, unobstructed by trees or anything else, that could well have some nice big solar panels on it. Reliant (but not PennyWise) offers two different programs, announced earlier this year. In one, you “lease” all the gear and in the other, you buy your own gear. Either way, you sell power back to the grid when you’ve got excess generation. Nowhere on any of their web pages are there actual hard numbers. If I buy, what will the gear and installation cost? If I lease, what do I pay up front and per month? Can I buy/sell power with any company on PowerToChoose or do I have to deal with Reliant? What do I pay on and off-peak for power under the variable plan? (I’ve only been able to find an old copy of their fact sheet which has uncompetitive prices.)

I don’t want to deal with a salesman. Please just post all the numbers online, maybe in a convenient Excel spreadsheet, so I can play with it on my own. If you want to be cool, put together an online calculator, like the banks do for mortgages, that asks you all the right questions and then estimates all the costs. Help me calculate when I break even on the deal.

City goes for electric cars

This is cool.

A deal between the city and Reliant has the electric retailer converting 10 of the city’s new Toyota Prius gasoline-electric hybrids into plug-in vehicles with greater fuel efficiency and the ability to recharge through a standard home power socket. Reliant is also installing 10 charging stations for the cars around the city, including seven that will be available to the public.

The project is designed to raise consumer awareness about plug-in electric cars and promote the city and state as a hub for future advances in the industry, said Jason Few, president of Reliant. The company also benefits through the possibility of more electricity sales, Few said, and more information on how customers will use public charging stations.

“We firmly believe there’s a business model behind this,” Few said. “The more we know about consumer habits, the better we can provide the infrastructure and the products and services to meet the needs of electric vehicle owners and drivers in Texas.”

[…]

The city of Houston already owns one of the largest fleets of gasoline-electric hybrid cars in the country, with 750 of its 12,500 vehicles powered by such systems.

The new Priuses were part of the city’s ongoing car purchase plan, but the $10,000-per-vehicle conversion and the charging stations are being covered by Reliant.

“Without Reliant we never would have done this project” said James Tillman, the city’s assistant director of finance. “We anticipate saving about $1,400 per year per car, including fuel and maintenance costs. Even if we had to pay for the conversion ourselves, we likely would have broken even.”

Presumably they’ll keep doing more of this as they buy more replacement vehicles. It’s a good idea, and I’m glad to see it happen.