Don’t Get Fooled by TXU Energy’s “Vari-a-bull”

By Paul Colgin, September 9, 2011, Events & Fun, FAQs, News

It’s ironic that TXU Energy’s anti-variable rates campaign is called “Vari-a-bull”. Because that’s what is… a full heaping, steaming pile of it. What they want Texans to believe is that variable rate plans are dangerous, the providers who offer them are trying to steal your money and everyone on a variable plan is experiencing wild roller coaster rides. BULL. TXU is pulling out all the stops to prevent customers from switching to better options. What they haven’t realized is that you’re not ignorant and there’s a reason why customers are leaving TXU in droves for better options in the market (more on that in a second).

What is a Variable Rate Plan and What are the Benefits

A variable rate plan is simply a month-to-month electricity plan with a rate that could change from one to the next. Yes, that means the rate can even go down. Most providers (if not all) who sell variable rate plans base their prices on market conditions, such as natural gas prices. When natural gas prices rise, so does your rate, when they go down, your rate does too.

Is there risk involved with a variable rate plan? Yes. It’s not for everyone. But, there are benefits to being on this type of plan:

  • Yes, your rate may go up, but it can just as easily go down allowing you to save money over what you might have paid with a locked in rate.
  • Unlike a fixed rate plan, there’s NO contract that locks you in a specified time period.
  • Because there’s no contract, you won’t have to pay a termination fee if you want to switch providers.
  • You can try out a provider for a few months before committing to a longer term rate – allowing you to test out their customer service, rewards program, refer-a-friend program, etc.
  • You have the ability to apply for a fixed rate plan at any time to lock in a rate.

Attacking Promotional and Introductory Rates

In all fairness, there’s been plenty of criticism regarding a specific type of variable plan, called an introductory or promotional rate plan. Some providers have been a little less than upfront about what an intro rate is – a plan that gives the customer a large discount on their first bill for making the switch to that provider – giving TXU fodder to continue misinformation campaigns. But, in all actuality, the promotional rate acts like a promotion. Here at Bounce, we call it a “welcome bonus” on your first bill:

“With Thrifty Saver Promotional, you get immediate relief on your electric bill through our low promotional rate. Savings will vary depending on what you were paying for electricity from your previous provider, but some customers have experienced as high as 50% savings from one billing period to the next. You can think of this as a “welcome bonus” for joining Bounce Energy. After your first billing period, you are moved to our standard Thrifty Saver program, where you keep a very competitive rate and continue earning valuable rewards via our Rewards Program. You also have the ability at any time, since this is a month-to-month plan without a contract or termination fee, to apply to another Bounce Energy plan of your choice.”

While TXU cries about variable rates, particularly promotional rates, being misleading, they place a graphic on their own site that shows that Bounce Energy has, in the past, raised customers rates on our Thrifty Saver Promotional (formerly Thrifty Saver Introductory) as much as 55% from the 1st bill to their “second, third or fourth bill”. TXU is assuming that our customers didn’t know it was going to go up, which isn’t true.  Again, they’re assuming you’re ignorant.

But, all of that doesn’t really matter. You know why? Because even if you didn’t understand how the promotional rate worked and did experience the rate increase on your subsequent bill, you still would have saved more money by signing up for our Thrifty Saver program over a TXU Energy fixed rate plan. We could call TXU’s graphic misleading, but we’ll let the math speak for itself.

Thrifty Saver Promotional vs TXU’s e-Saver 12

For this example, we’ll tell you the story of Marcy and Michael. Both live in Houston and they both signed up for a new electricity plan at the end of June 2010. Marcy signed up for Bounce Energy’s Thrifty Saver Promotional plan and Michael signed up for TXU Energy’s e-Saver 12, one of the lower rate plans that TXU offers. Both of their average electricity usage for the year is 1,500 kWh per month.

  • Michael signed up for his TXU plan at a rate of 11.4¢ and paid that same rate for all 12 bills. Total energy charges and monthly service fees would amount to Michael paying at least $1,935.45 to TXU.
  • Marcy got an intro rate of 8.7¢ per kWh on her first bill and throughout her time on our Thrifty Saver program her rates ranged from 12.1¢ down to 10.4¢. Calculating out her rates each month with her usage and fees, she paid a total of $1,891.45 toward her electricity bill.

(actual rates for TXU and Bounce Energy used)

Michael paid $44 MORE than Marcy did on his TXU plan. And, let’s make matters worse for TXU:

  • At Bounce, you can also earn rewards that are valued at more than $200 that include bill credits, movie tickets, companion airfare, gift cards and even free electricity.
  • The plan Michael signed up for was only available online – if he needed help and wanted to call TXU, that plan wouldn’t be available. If he wanted to sign up over the phone, he would’ve had to pay a higher rate.
  • The plan Michael signed up for requires auto pay and paperless billing. TXU’s plans that don’t require paperless and auto pay have higher rates.
  • If Michael needed to call TXU’s customer service regarding a payment, he would have been charged $3.95 per call.
  • Let’s say Marcy wanted to switch to a Bounce fixed rate plan. Since she wasn’t locked in a contract, Marcy could have applied for our Terrific 12 fixed rate plan at any time. If she had done so in October, for example, she would have saved $585 over what Michael paid TXU.

TXU Energy’s Indexed Plans

TXU may not offer “variable” plans, but it’s not like they don’t have month-to-month plans that fluctuate. They’re called indexed plans. An indexed rate plan is an electricity plan that allows a provider to tie your electricity price to anything that rises and falls. Here’s what funny – guess what TXU bases their indexed rates on? Yep, natural gas prices… just like other providers do with their variable rate plans. So, TXU bashes variable rate plans out of one side of their month and then turns around and sells a very similar product through the other side.

So, what’s the difference between variable and indexed plans? There’s no doubt that both plan types bear risk, but a case can be made that indexed plans are actually MORE volatile. They are tied directly to a commodity, like the price of natural gas, which the provider has no control over. If that price skyrockets, like it has in the past, then so will your rate. And, that price can fluctuate every day – meaning, you have to watch the natural gas market constantly to make sure your electricity bill stays under control.

Is it true that providers can choose to raise your rates if you’re on a variable plan and external factors cause the cost of energy to rise? Yes, that can happen. Is it true that providers can choose NOT to raise your rates when external factors cause a rise in the cost of energy? Yes, that happens. With an indexed plan that won’t happen – your complicated equation/formula/rate is what it is – pay up.

TXU Customers Churning in Droves

Luckily, their tactics aren’t working. You’re smarter than that and you aren’t buying the “bull” TXU is spewing. According to a recent article written at EnergyChoiceMatters, a web site dedicated to deregulated energy news, TXU experienced a net loss of 33,000 customers in 2nd quarter of this year alone. Going back further, TXU has experienced a net loss of 143,000 customers dating back the same quarter of 2010. That’s almost 10,000 customers a month jumping ship for better options in the marketplace. They’re now well under the 2 million residential customers it inherited when deregulatation began in 2002.

In conclusion, we’ll pose a simple question… Who’s actually trying to take you for a ride?

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