Study Reveals Texans True Cost for ‘Free’ Nights Electricity Plans

Navigating the electricity market in Texas can be confusing and nuanced.

If you have shopped for plans you have likely seen electricity providers advertising free nights or bill credit plans.

On the surface, these sound great. The language “free” and “bill credit” makes these plans sound like the best deal. But, these plans aren't always the cheapest — thousands of dollars more in some cases.

We analyzed data from over 500 Texans and found that these seemingly great deals can end up costing you more than traditional plans. Our findings show that these plans can cost up to 45% more than traditional plans.

Key Findings from the Study

Free Nights and Weekends Plans cost 30% ($1,435 annually) more than traditional fixed-price plans.
Bill Credit Plans cost 24% ($1,072 annually) more than traditional fixed-price plans.
87% of consumers want the lowest cost plan.
98% were not able to identify the lowest cost plan.

Why Are These Plans More Expensive?

The crux of the problem lies in the misleading nature of the advertised rates versus actual costs. Consumers are often drawn in by seemingly attractive deals without understanding the complicated pricing structures. For instance:

Free Nights and Weekends Plans: These plans offer lower (or free) rates during specific hours but significantly higher rates during peak times. Most households can't shift their energy usage to the free periods enough to benefit.
Bill Credit Plans: These give credits for usage beyond certain thresholds, but reaching those thresholds usually involves higher overall usage, leading to higher costs.
Misleading Messaging: Energy providers often use tactics that make these plans seem like a great deal when they’re not. Terms like "free" or "discount" are highlighted, while the fine print, which contains crucial details about higher rates and fees, is hidden.

Overview of Findings

Bill Credit and Free Nights/Weekend Plans Cost More

The analysis conducted by EnergyBot found differences between the percieved prices and the actual costs incurred by customers. Real rates often deviated from advertised rates by up to 45%, making the actual costs significantly higher than expected.

This chart compares the difference in overall costs between the plans. Traditional plans are in blue, free nights plans in pink, and bill credit plans in orange:

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In this chart, you can see that in almost every case free nights and bill credit plans are more expensive than a low-cost traditional plan.

Consumers Want the Cheapest Plan

While 87% of survey respondents prioritized finding the cheapest plan, 98% did not select the least expensive option. The cause? Consumers associate “credit” and “free” with savings so they assume these plans are the cheapest for everyone.

This highlights a major issue. The complexity and variability of rate structures, like multi-tiered rates and time-of-use pricing, can lead to some confusion and overall dissatisfaction.

It’s clear that there is an urgent need for more transparency in the electricity market. Texans need better tools and information to navigate these confusing plans and select the best option for their wallet. The findings show that traditional fixed-price plans are usually more straightforward and economical, while heavily advertised plans with promotional rates often end up costing more.

Key Takeaways

Expected vs. Actual Rates: Significant differences exist between what the consumer expects the rate to be and the actual costs incurred by consumers.
Free Nights and Bill Credit Plans Cost More: Comparisons of the annual costs show that the most heavily advertised plans are not the most cost-effective.
Consumer Confusion: The complexity of rate structures and promotional offers leads consumers who don't know their energy usage to plans that aren't the right fit for them.
Full Costs Estimation is Key: The only way to be rest assured that you are getting the best rate is to estimate your total costs from historical usage. That’s why we built our platform to do this.

For more details, check out the full research study here.

How Was the Study Conducted

EnergyBot took a deep dive into various electricity plans by analyzing top-ranking options from the state-operated Power To Choose website. The end goal was to see how much homeowners were actually paying each year under different plans.

We gathered data from 501 participants over a full year, covering apartments, small homes, and large homes, served by ONCOR and CenterPoint Energy.

Then we applied their usage to the different types of plans available.

Traditional plans
Free nights and weekends plans
Bill credit plans
Device-specific plans
Tiered rate plans

To get the full picture, we factored in all charges, including energy charges, supplier fees, TDU charges, and any bill credits. Our calculations used specific formulas to determine the real rate per kWh and the annual costs for each plan. This approach helped us uncover the true cost of these electricity plans, beyond just the advertised rates.

What EnergyBot Is Doing to Help

EnergyBot simplifies the process of choosing an electricity plan by providing transparent and accurate cost breakdowns. Our easy-to-use marketplace uses industry-specific data to help Texans make informed decisions and save on their annual energy costs. With our free price comparison tool, you can easily compare different electricity plans and understand the true costs, allowing you to navigate the market with confidence and avoid unexpected expenses.

Texas’s deregulated electricity market offers a variety of choices, and that's a good thing. Our study reveals the importance for consumers to use a full cost estimation when shopping for plans. By understanding the true costs and structures of these plans, Texans can make better choices and avoid overpaying for their electricity. Stay informed, stay empowered, and never overpay for your electricity again.