Figuring electricity rates in Texas is fairly simple, but some companies can be misleading in how they go about quoting these rates. It’s always best to find the average rate, also known as a bundled rate.
The average rate is calculated using three things:
1. The energy charge rate, which is the rate your retail provider is charging per kilowatt hour (kWh).
2. The delivery charge, which is from the local delivery/utility company.
3. The estimated kWH usage.
Calculating electricity rates in Texas using these three factors will give you the average rate so you can do a true apples-to-apples comparison. Here’s how it works:
The energy charge is set by the retail provider, such as Ambit Energy, TXU, Reliant, etc. Let’s say that amount is 8.0 cents per kWh.
The delivery charge can be tricky, because some companies will move money over to the delivery charge and quote a smaller energy charge rate. That is why we have to consider the average rate that includes both. The amount of the delivery charge will depend on the local delivery company in your area, such as Oncor, TNMP, CenterPoint, etc. To keep the math simple, let’s say the delivery charge is $10. Notice this is a fixed charge. When calculating the average rate, this charge gets divided out by the amount of kWh used in a billing cycle.
Kilowatt Hours Used
The kilowatt hours used is simply how much electricity you use in a billing cycle. Again, to keep the math simple, let’s say you used 1,000 kWh in a billing cycle.
Now we have the information we need to calculate the average rate:
8.0 cents per kWh
$10 delivery charge
1,000 kWh used
Since we know the energy charge rate, we divide the delivery charge by the number of kWh used. In our case, that’s $10 / 1,000 = 1 cent (or $0.01). Now we just add that to the energy charge, which would be $0.01 + $0.08 = $0.09. That give is an average rate of 9 cents per kWh.
Now, if you happen to use, say, 2,000 kWh in a billing cycle, the average rate would obviously change because the delivery charge would get divided out by 2,000 kWh instead of 1,000. In our example, the $10 delivery charge would be divided by 2,000, which equals $0.005 (half a cent). This would make the average rate 8.5 cents per kWh. As you can see, you are not being charged a different price, the average rate is just calculated to a smaller number. This math can be applied to any rate, as long as you know the energy charge and delivery charge. But the easier way to identify the average rate is to find the line on your bill that will say something like “The average price you paid per kWh was 9.0 cents.” The average rate can also be found in the Electric Facts Label on any retail provider website usually in the plan details section.
We should note that every retail provider charges what is usually a $9.99 minimum usage fee if you fall below 1,000 kWh in a billing cycle. Like the delivery charge, this fee also gets divided by the kWh used then added into the average rate.
The reason Ambit Energy, currently the third-largest energy retail provider in Texas, quotes bundled rates is because it is a much more accurate rate that includes all three important factors. This way there are no surprises when you get your bill and see a much higher rate than what you thought you were getting. You can also search current Ambit Energy rates in Texas here.
Ambit Energy Electric Facts Label showing average rates at 500, 1,000 and 2,000 kWh used:
Ambit Energy Average Rate at 1,000 kWh used for four different term plans: