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Now "Tiered" Retail Plans On Power To Choose Drawing Attention of Texas PUC

Tiers Are Latest, Predictable Gimmick To Get Lowest ¢/kWh Rate at 1,000 kWh

July 28, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

During Friday's open meeting, Commissioner Brandy Marty Marquez said that she wishes to discuss further the emergence of "tiered" pricing plans that retail providers are listing on Power to Choose

"Since February, 35% of the calls that we've received in our Power to Choose call center have been about the various tiered plans that are listed on the website, so what I'd like to do is find out more about this and write a memo, and talk about it at more length at our next open meeting," Marquez said

The tiered plans, which have blocks of flat (non-volumetric) charges for certain usage levels, are designed for the same goal as the minimum usage fee/credit plans, and the teaser/introductory rates before that: get the top spot on the default Power To Choose view, which goes to the lowest rate at 1,000 kWh usage which meets certain criteria (fixed plan, no minimum usage fee)

A typical tiered plan looks like this:

Tier 1 Block Charge   For 1 to 1,000 kWh used: $34
Tier 2 Block Charge   For usage over 1,000 kWh: $99
Each kWh over 1,000 kWh also charged at 9.8 ¢/kWh

This allows a 1,000 kWh quoted rate of 3.4 cents per kWh (the lowest on the default view for the Oncor service area)

The default view on Power to Choose (Oncor service area) is currently comprised entirely of such tiered plans (first page defaults to viewing 10 plans, and all 10 are tiered plans).

The cessation of listing teaser rates at the quoted rate begat the rise of minimum usage fee products (where the fee did not apply at 1,000 kWh, allowing for a low quoted rate). And now the banishment of minimum usage fee products to behind a filter has begotten the tiered pricing plans.

No doubt any action to minimize the ability of tiered plans to dominate the top of the Power to Choose charts will beget another creative pricing plan to get a low rate at 1,000 kWh. It's the nature of the beast, and is inevitable when a government agency is ranking competitive providers by price.

As we have observed before, "REPs are going to find any means possible, within the rules, to have their offers appear most favorably on the site, and banning certain products (which was already tried with teaser rates) will just lead to the creation of a new product which achieves the same goal. Such 'whack-a-mole' regulation compels the question of whether customers would be better served by visiting a third-party site which, unlike a 'neutral' state-sanctioned site, may offer opinions on the best products, and which plans are simply gimmicks. Moreover, unlike the Power to Choose site, third-party sites are financially invested in ensuring customers select a satisfactory product so that customers return to the site in the future -- a motive which should eliminate the listing of any products that are not in the customer's interest."

RetailEnergyX.com previously looked into the inherent problems of listing rates on Power to Choose

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