Saving money on your power bill

June 18, 2008 5:11:20 PM PDT
More bad news for families, the price of your electric bill is going up.It's because of what's happening with natural gas costs.

Here in Texas, when natural gas goes up, so does the cost of electricity. Get this, since January the cost of natural gas has gone up more than 60%, so get ready for bigger power bills.

You may know how much a gallon of milk costs, you probably know how much a dozen eggs costs, you certainly know how much you are paying for gasoline but when it comes to the price of electricity, not so much.

The reason power bills are going up is because the price of natural gas has gone up more than 60% since January and natural gas is the main product used to make electricity in Texas. How big of an increase you'll see depends on your current power plan. If you signed up for a fixed rate at the first of the year, things are not so bad.

"Those folks who continue to be in a contract are actually sitting quite well, those who have contracts coming up for renewal are in for a huge dose of sticker shock," said Alan Lammey of the Energy Intelligence Group.

Energy analyst Alan Lammey says electricity in Texas costs 30% more than a year ago and 100% more than two years ago.

If you don't know your current cost per kilowatt hour, look at your power bill to find out. If it's more than 16 cents a kilowatt hour, shopping around for a lower rate can save you money. By logging on to powertochoose.org, you can find the best offers available. Right now it's 15.2 cents per kilowatt hour offered by Stream Energy. But, if you find a better rate offered by your current provider, call your provider and see if they will cut a deal.

"If a customer sees an ad or becomes aware of a product, maybe their neighbor got an offer, if they call us, we'd be glad to honor that price for anyone who does call," said Reliant Energy's Pat Hammond.

Reliant isn't the only company willing to work with current customers.

"They should call us and talk about the product they have, because we may have a product that better suits their need," said Victor Howard with GEXA Energy.

If you have a month to month plan, switching to a longer term contract might save you, but consumers should also be mindful of the cost to get out of a long term deal.

When gasoline goes up you know it. When it comes to your power bill, price hikes can be a surprise.

Even so, the price per kilowatt hour is going up too. It's already 25% more than a year ago, 100% more than two years ago. If you are paying more than 16 cents per kilowatt hour, consider switching to a new provider. Locking into a long term contract can protect you from price hikes, but that may not be the best thing to do right now.

"We can't continue to remain at such exorbitant highs we are seeing right now," Lammey said.

Lammey believes natural gas prices may go down in a few months. If that happens a long term contract could lock you into a higher rate.

Lammey says consumers can always break a contract by paying a termination fee but, "from an economic stand point it might be a better deal to just go ahead and pay a smaller termination fee to get out of a contract and then resign up to a long term basis."

Before you do that though, it is extremely important to know the penalty for getting out early. The penalties for terminating a long term contract are clearly stated on powertochoose.org. There are plans with low penalties for leaving the plan. If natural gas prices go down, it may be a way to save now and then save later, but read the details before deciding.

We found some early termination fees that are as much as $400 dollars, others less than $100. It's something to look at very closely if you think breaking a long term contract is likely.

The energy comparison site run by the state of Texas has all the offers. We have a link to that on The Consumer Blog.

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