Oftentimes people overlook one of the most important pieces of information on their electricity bills – the average price paid. Here is a discussion about what it is, why it matters and where to find it on your bill.
What Is Average Price Paid?
The Public Utility Commission of Texas requires every electric provider to put the average price you paid for electricity each month on your bill. It is expressed in cents per kilowatt-hour (kWh) and is rounded to the nearest tenth of one cent.
The average price takes into account your electricity rate and all fixed and variable recurring charges. Recurring charges are fees that are expected to happen at least three times during your contract period.
Recurring charges that may be included in average price paid are TDU delivery charges that your transmission distribution utility requires to transport the power to your house. Another charge that is included in the average price paid – even though it may not occur three times during your contract period – is the minimum usage fee, or meter fee, if you used less than the cutoff amount stated in your contract. A common minimum usage cutoff is 1,000 kWh.
What does not get factored into the average price paid? State and local sales taxes, reimbursement for the state miscellaneous gross receipts tax, and any nonrecurring charges or credits.
So the calculation for average price paid ends up looking like this:
Total dollar amount of all fixed and variable recurring charges ÷ kilowatt-hour consumption = XX cents per kilowatt-hour
Instead of putting the burden on the customer to calculate the average price per kWh paid, the PUCT requires the electric provider to do this on your behalf, making it easy to compare your current electricity costs to other plans’ rates.
Why Average Price Paid Matters
Knowing the average price paid is important because that is the number that allows you to compare one electric plan to another using the same criteria. Many people don’t know that the average price paid – your true cost per kWh – can be higher than your electricity plan’s energy-only rate.
You might be wondering, How can that be?
Sometimes Texas retail electric providers don’t take into account recurring charges, like the TDU delivery charges, when determining their energy rates. Instead, companies list these charges as separate line items on the bill.
When retail electric providers do consider the cost of recurring charges when determining their prices, the rate is known as all-inclusive. The average price paid and the energy rate will likely be the same in this instance, although there are a few exceptions.
When you’re shopping around for a new electric plan, it’s important that you’re comparing the average price paid on your current bill – not the energy-only rate – to the average price listed on a plan’s Electricity Facts Label.
A comparison of the average price between two plans is an apples-to-apples comparison, while looking at the difference between the energy-only rate on your current plan and the average price on a potential plan is akin to comparing apples to oranges.
Where Is Average Price Paid On My Bill?
Here’s another example:
No matter who your provider is, just look for the words “The average price you paid for electric service this month.” The PUCT mandates that these specific words appear on every customer’s bill so that Texans can easily figure out how much they are paying for electricity.
Finding these words is very easy to do if you have access to an electronic version or PDF of your bill. Simply open your bill and do a search for “average price paid.” For Windows machines, the keyboard shortcut for Find is often Control+F; for Apple devices, press Command+F.
How Can I Tell If My Plan Has All-Inclusive Pricing?
To determine if your electricity plan has all-inclusive pricing, you’ll need to compare the average price you paid to your energy rate, both of which can be found on your most recent electric bill. Your energy rate will likely be expressed in dollars, meaning a rate of 9.64 cents/kWh will appear as $00.0964 per kWh on your bill.
If your average price paid is more than one cent off from your electricity rate, then there are two likely scenarios:
- Your plan does not have a rate with all-inclusive pricing or
- Your electric provider has all-inclusive pricing but charged you a fee, such as one for not meeting its minimum usage cutoff
Of course, there could be other explanations for the difference in the average price paid and the energy rate, but those are two common ones.