Why You Can Trust CNET Why This Document Is More Important Than Your Electricity Rate
When shopping for electricity, the advertised rate isn't necessarily what you'll pay. The electricity facts label tells you what each plan will really cost you.
The EFL is the most important document to look at before choosing an energy plan.
In energy choice markets -- states that have deregulated energy -- electricity providers typically advertise rates based on 1,000 or 2,000 kWh usage in a given month. The problem is, not everyone uses that exact amount of energy on a monthly basis. Even if you do, it may not be every month.
That is why understanding how to read the electricity facts label -- also known as the EFL -- is critical to choosing the right energy plan for your household. "If you read nothing else when you're shopping for energy, the EFL is the thing to read," Chris Burch, director of the Consumer Protection Division with the Public Utility Commission of Texas, told CNET.
Also sometimes referred to as a "fact sheet," the EFL is like the fine print of electricity plans.
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"What that really is is the blueprint of whatever plan you're looking at," Burch said.
In this guide, we'll show you exactly what's on an electricity facts label or fact sheet and how to read one to make sure you know what you're paying for your electricity.
We'll help you find the best electricity rates in your area
What is an electricity facts label or fact sheet?
An EFL fact sheet is a document that outlines the disclosures and details of your energy plan. It's like the nutritional facts label you see on packaged food products, but for an energy plan. It's a quick way to digest the "need to know" of any given energy plan.
Picking an energy plan is kind of like shopping for an internet plan for your home. You're looking at internet speeds, contract length and the price of the plan. Shopping for an energy plan is more complicated, however, since there's usually a usage component to the pricing structure. This is where the fact sheet or EFL comes in.
A fact sheet is essential when comparing energy plans since they outline things like electricity rates and charges, contract length, early termination fees, source of energy, demand charges and type of plan. For example, the state of Texas has EFLs nailed down to a science.
"It lays out everything you need to know about that plan," Burch said "The terms of service, how long the contract is good for, it's going to lay out the pricing structure of 'how much is this going to cost me per kilowatt-hour.'"
In Texas, all fact sheets and EFLs are required by law to follow a specific template, outlined by the Public Utility Commission of Texas. Texas retail electricity providers must include disclosures about pricing, recurring fees, contract lengths and renewable energy disclosures for each individual energy plan. If you're shopping around for an energy plan, this extremely templated EFL structure makes it much easier to get the information you need quickly. But if you're new to shopping energy providers, it can be a lot to mentally unpack.
This is the EFL template that retail electricity providers in Texas must legally follow.
Key terms to know about your EFL or fact sheet
EFL's may look confusing and intimidating with its fancy vocabulary. Since they're templatized, that means you'll need a quick brush-up on what a few key terms mean.
Here's some of the common vocabulary that's helpful to know before diving into your first EFL.
- Fixed rate: The price you pay for electricity stays the same throughout the duration of your energy plan's contract. If you're on a fixed-rate plan, you won't have to deal with surprise rate changes or increased rates during periods high of demand, when energy rates tend to fluctuate.
- Variable rate: The price you pay for electricity can vary from month to month. If you're on a variable-rate plan, your electricity rate could start low, but you're subject to fluctuations in electricity costs and spikes in price. On the flipside, your rate could start high but end up lower in any given month. Seasonality and demand usually plays a part in variable rate plans.
- Tiered pricing: Some plans have a tiered rate structure, where your electricity provider will have specific cost charges depending on your specific levels of energy consumption. Each tier has its own rate per kilowatt-hour. The amount you pay for your electric bill depends on which usage tier you fell under that month. "I would watch out for tiered plans because I think that it's difficult to measure your usage," America Garcia, the Texas program director with Solar United Neighbors, told CNET. "There are no two homes that use energy the same. There are people who use all their energy in the day and nothing at night, and I would say most people are vice versa."
- Base charge: A recurring flat fee that you may pay each month on top of the charges for electricity usage that month.
- Energy charge: The rate you pay for your electricity consumption, priced by cents per kilowatt-hour, and not including TDU charges
- Transmission and distribution services charges: The recurring monthly charge covering the cost of delivering the electricity from its source to your home. You might see it charged as a flat fee or as a cost per kilowatt-hour.
- Early termination fee: If you discontinue your service or switch providers before your contract is up, you could be charged a termination fee. This could be a flat fee or a situation where you pay a certain amount of money for each month you have left on your contract.
- Prepaid plan: You pay for your electricity usage upfront every month. If your account starts to run low or you end up using more electricity than you thought, you add more money to your account. Most providers run a credit check before setting up service. If your credit is low or the deposit is too much, a prepaid plan might work for you. "Typically whenever you call anywhere to set up services, it's going to be associated with a credit check," Garcia said. "And some people don't have the funds to pay for a deposit, so they hop on a prepaid plan."
- Free nights plan: This is a plan where you pay nothing to little for electricity used at night, but you'll likely have a higher energy charge during the day. This is a good time to check the EFL or fact sheet to see what timeframe counts as nighttime and if you use your energy during that time.
- Free weekends plan: Similar concept to a free nights plan, a free weekend plan offers free electricity on weekends. Expect to pay a higher energy charge on weekdays, however. Make sure to carefully read your EFL to see what's considered a weekday or weekend.
- Time of use rates: Electricity prices fluctuate throughout the day based on the amount of demand there is for electricity. If your energy plan includes time of use rates, you'll pay more for your electricity usage during specific hours of the day. Hours of peak demand depend on the area, but they're typically early mornings and evenings when most people are home.
- Renewable percentage: This is the measured amount of electricity in your energy plan that's generated from renewable energy sources, like solar, wind, hydroelectric and so on.
Where to find an electricity facts label or fact sheet
There are a plethora of websites that allow you to compare energy plans. By law, an electricity plan's EFL and fact sheet must be accessible. Websites like SaveOnEnergy and Choose Energy (like CNET, are both owned by Red Ventures) are a few popular options you might come across.
You can also search within your state's public utility commission's comparison site.
Energy comparison website by state
| Deregulated State (Energy choice state) | Government-run comparison site |
|---|---|
| Texas | Power to Choose |
| Pennsylvania | PA PowerSwitch |
| Illinois | Plug In Illinois |
| Maryland | Maryland Public Service Commission |
| Connecticut | Energize CT |
| Delaware | Delaware Public Service Commission |
| Washington, DC | DC Power Connect |
| Maine | Maine Public Utilities Commission |
| New Hampshire | NH Department of Energy |
| New Jersey | NJ Power Switch |
| New York | NYS Power to Choose |
| Ohio | Energy Choice Ohio |
| Rhode Island | Empower RI |
The first step is to simply just enter your ZIP code. For the below example, we used the Texas state-run comparison site, Power to Choose using a Dallas area Zip (75088) in an Oncor coverage area.
First, enter your zip code to find energy providers and plans available in your area.
After you've entered your ZIP code, you'll likely be bombarded with energy plans. Don't worry. You can use the filters on the left-hand side of the page to narrow down your options. You can sort by things like contract length, estimated electricity use, price per kWh and what type of plan you want.
Use the filters to narrow down your options.
Once you've applied your filters, it's time to spot an energy plan that catches your eye. Power to Choose lets you compare things like plan type, electricity rates, early termination fees and contract length upfront without having to click on anything. Once you've found an energy plan that you'd like to learn more about, it's time to check the EFL or it could be named the "Fact Sheet." Clicking on it will bring up that specific energy plan's EFL.
To take a closer look at a specific energy plan, check its Fact Sheet.
How to read an electricity facts label
In Texas, all EFLs are required by law to follow a specific template, outlined by the Public Utility Commission of Texas.
"We did that on purpose," Burch said. This means if you can read one, you should be able to read them all.
Here's a sample EFL for a real energy plan with Revolution Energy in the Dallas, Texas area. Not all EFLs look exactly the same, but they are all extremely similar and include the same information about pricing and plan disclosures. We'll walk through the EFL section by section and explain what you need to know.
Most EFLs will look something like this.
1. Average monthly use and average price per kWh: This row tells you the average price you'll pay for electricity depending on how much energy you used that month. The rate you see factors in additional charges, like base charges, TDU fees and any flat fees. You'll usually see three different rates -- one for each usage tier. There are three different usage profiles in our sample EFL. If you use 500 kWh, for example, you will pay an average of 14.4 cents per kWh. If you use 1,000 kWh, you pay an average of 13.8 cents per kWh. And if you use 2,000 kWh you'll pay an average of 13.4 kWh. These averages include all other fees factored in already so you get the best on what you pay per kWh based on your most common usage profile.
2. Energy charge: This is the rate the provider charges for electricity on this particular plan. Burch and Garcia emphasized the importance of understanding your energy charge. Garcia said your energy charge is the first thing you should look for on an EFL, especially if you don't know your household's average monthly energy consumption.
3. Base charge: This is a recurring flat fee attached to your monthly bill. It's not affected by your electricity consumption.
4. TDU charges: These are charges that you pay to the utility company for the transmission and delivery of your electricity. It's essentially like paying for the power lines and poles. You'll see two TDU charges: a recurring flat fee and a charge per kWh.
5. Billing examples: Some EFLs will include examples of an estimated electric bill depending on your home's electricity usage.
6. Type of product: This section tells you what type of plan it is. The EFL we're using is for a fixed plan. A fixed rate plan means that your electricity rate stays the same. A variable rate plan means your electricity rate changes. And if it's a prepaid plan, you'll put down money upfront for your electricity consumption every month. If your account starts to run low, your provider will most likely notify you.
7. Contract term: This section tells you the contract length associated with your energy plan. Contract lengths can last anywhere from three months to 36 months or even longer.
8. Do I have a termination fee?: This section outlines any early contract termination fees. If you end your contract early, you'll typically either have to pay a flat fee or a certain dollar amount for every billing cycle you have left in your contract. If you're moving, this fee is usually waived.
9. Can my price change during my contract term?: Even on a fixed rate plan, certain aspects of pricing are subject to change. This row tells you if pricing for your plan can change during your contract term. If the answer is yes, the EFL should outline what is subject to change.
10. If my price can change, how will it change?: If your energy plan is subject to change in pricing, this section will tell how it might change. The most common reasons your total price might change are fees from the utility company, government charges, taxes and just generally anything outside of the retail electricity provider's control.
11. What other fees may I be charged?: This section will tell you any additional fees that you might be charged. These additional fees' vary by retail electricity provider, and you might be directed toward a terms of service page. One of the most common fees we've seen (and the one shown on the sample EFL) is a recurring fee for not being enrolled in autopay. If you're not a fan of autopay, make sure you find a plan where you won't be penalized for participating in autopay.
12. Is this a prepay or pay in advance product?: This row simply just let's you know if it's a prepaid plan or not. On a prepaid plan, you pay upfront for your electricity consumption beforehand.
13. Does (name of retail electricity provider) purchase excess distributed renewable generation?: If you have solar panels or wind turbines on your home, you might be wanting to sell your excess electricity generated by your panel or turbines to the grid. This process is similar to net metering, but isn't allowed everywhere. This section of your EFL lets you know if your provider will buy your excess renewable energy.
14. Renewable energy content: This row tells you how much of the electricity from this plan is generated from renewable sources, like solar panels or wind turbines.
15. The statewide average for renewable content: This section tells you the statewide average for renewable content in its electricity plans. In Texas, the renewable content average is 31.1%.
How to estimate your electricity bill
If you know your home's average electricity consumption per month, you should be able to use a little math to estimate your electricity bill. We'll walk through an example together. However, we do want to note that the example energy plan we're using is a fixed rate plan with a tiered rate structure and doesn't factor in any time of use charges. There are a few pieces of information you need to have handy to start.
Here's what you'll need to know:
- Energy charge: you can find this near the top of an EFL.
- Base charge: this is typically near the energy charge on an EFL.
- TDU/delivery charge: this should be near the energy charge and base charge on an EFL.
- Your home's average monthly electricity consumption: your electric bill should tell you how many kWhs you consumed that month. Look back at some of your most recent electric bills and take an average of how many kWhs you use per month.
Once you've collected all the information you need, you're ready to start calculating. For this example, we'll use all the energy charges and fees from the example EFL above, and we'll assume our pretend home for this situation consumes 1,000 kWh of electricity on average per month.
Let's go step by step.
Step 1: Multiply your energy charge by your monthly energy consumption in kWhs
Energy charge: 8.031 cents
Energy usage: 1,000 kWh
$0.08031 x 1,000 = $80.31
The energy charge on our EFL is 8.031 cents per kWh. And our pretend home consumes an average of 1,000 kWh a month. First, you'll need to shift the decimal point forward twice on your energy charge, then multiply that by how many kWhs you consumed. The total you get back is your estimated energy bill before factoring in TDU charges and other fees. We'll get to those in the next steps.
Multiplying our energy charge (0.08031) by our monthly energy consumption in kWh (1,000) gives us a total of $80.31.
Step 2: Multiply your TDU cents per kWh charge by your monthly energy consumption in kWhs
TDU cents per kWh charge: 5.10 cents
Energy usage: 1,000 kWh
$0.0510 x 1,000 = $51
The TDU charge on our EFL is 5.10 cents per kWh and we're using the same 1,000 kWh per month. Just like your energy charge, you'll first need to move the decimal point forward twice on your TDU charge, then multiply that by how many kWhs you used. The total you get back is how much you'll be charged in delivery fees.
Multiplying our TDU charge (0.0510) by our monthly energy consumption in kWhs (1,000) gives us a total of $51.
Step 3: Add your totals from steps 1 and 2, as well as your base charge and any fixed TDU fees
Step one total: $80.31
Step two total: $51
Base charge: $2.00
TDU fixed fee: $4.23
$80.31 + $51 + $2 + $4.23 = $137.54
Total bill: $137.54
The base charge on our EFL is $2.00 and the TDU flat fee is $4.23. Adding our totals from steps one ($80.31) and two ($51.00), along with the base charge and TDU flat fee gives us an estimated electricity bill of $137.54.
Frequently asked questions
What is a tiered energy plan?
You'll most likely come across plans featuring a tiered rate structure. Energy providers use three tiers on an EFL to show three example energy profiles: 500 kWh, 1,000 kWh and 2,000 kWh. Each profile will show its own average price per kWh, measured in cents per kWh. The average price kWh includes other fees associated with the total cost of electricity, such as any base charges and any utility charges.
What's the most important thing on an EFL?
In addition to looking at the average price per kWh located at the very top of an EFL of fact sheet, Burch and Garcia both said that your energy charge, contract length and early termination fees are the most important things to pay attention to. Make sure you understand how your plan's pricing structure works before signing up for anything.
When is the best time to shop for an energy plan?
Electricity rates tend to fluctuate depending on the season. Rates tend to be higher during summer and winter months, and lower during spring and fall.
"The spring and the fall are the best times to be shopping for plans," Burch said. "That's typically when the prices are a little less."
Locking in a longer contract with a cheaper rate during spring and or fall could save you some money in the long run.
How do I find an EFL?
If you're comparing energy plans online, EFL documents can usually be found pretty easily with a few clicks. If you can't find an EFL or fact sheet upfront, try looking for a "more details" type of button that will bring up more information about the plan you're looking at. Retail electricity providers will also provide EFL documents for their electricity plans upon request.