TXU Energy, one of the largest retail electricity providers in Texas, is known for having some of the highest rates in the state. There are several reasons why TXU tends to be more expensive than other energy companies.
Reasons For TXU Energy Being So Expensive
- High Customer Acquisition Costs
As one of the major legacy electricity providers in Texas, TXU Energy has a large customer base that they have acquired over decades.
The cost of acquiring these customers through marketing, promotions, and retention efforts is baked into TXU’s rates.
They spend heavily on advertising and incentives to gain and keep customers.
These high customer acquisition costs ultimately translate to higher rates compared to smaller retailers.
- Focus on Long-Term Contracts
TXU makes most of their revenue from long-term fixed-rate customer contracts, often of 36 months. This guaranteed revenue allows them to recoup the high costs of customer acquisition over time.
But it also means they have less incentive to keep rates low, since customers are locked in. Smaller providers with month-to-month or short-term contract options have to keep rates competitive to retain customers.
- Brand Recognition
As an established major brand, TXU can get away with charging a premium. Many customers stick with TXU because they know and trust the brand, even if they could get lower rates elsewhere.
Brand recognition is a big factor for consumer choices in the energy market.
- Operating Costs and Profits
TXU has large overhead costs associated with plants, equipment, transmission lines, employee payroll, etc. They build these operating expenses into the rates they charge customers.
Additionally, as a for-profit public company, TXU is focused on returns for shareholders. So profit margins are another factor making TXU more expensive than municipally-owned utilities and energy cooperatives.
- Limited Plan Options
TXU offers fewer rate plan options than many other providers. They tend to push long-term fixed rates. The plans are simple but often not the cheapest available.
By comparison, some competitors offer shorter term, variable, indexed and other complex rate plans that may provide savings. The lack of innovative rate products leaves fewer opportunities to lower costs.
- Regional Factors
Electricity rates depend heavily on local energy infrastructure and regulations.
TXU’s core market is metropolitan areas of Texas, including Austin, Dallas and Houston.
Transmission constraints in these major cities at times lead to higher wholesale electricity costs that appear in TXU’s rates.
Regional factors like this are outside of the providers’ control.
- No Price Match Guarantee
TXU does not offer any price match commitment. Many retail electric providers promise to match competitor pricing. The lack of a match guarantee means TXU does not have to lower rates to compete on price.
Customers have to actively shop around and switch to get the best deal.
How Can I Get a Cheaper Rate from TXU?
Even if TXU tends to be expensive compared to some other providers, there are still ways existing TXU customers can reduce their electricity bills and get better rates.
- Call and Negotiate
If you are currently under a long-term fixed rate contract with TXU, call customer service when it’s close to expiring. Be friendly and ask if they can offer a lower rate or extend any promotional offers.
Loyal, long-term customers have the most negotiating leverage. An existing customer is far less expensive for them to retain versus acquiring a brand new one.
- Shop Around Frequently
Don’t just default renew your TXU contract. The market is always changing, and new customer promotions pop up all the time. Before your current term ends, compare TXU’s new rate offers to competitors’ prices.
Switching providers regularly forces TXU to stay competitive.
- Pay Attention to the Details
Look closely at the fine print of any TXU rate plan. A lower advertised rate may have a longer term or higher fees that outweigh savings. Avoid automatically choosing the plan TXU pushes you towards and read the terms yourself.
- Use Less Power
Cut your home energy use through conservation and efficiency. Things like LED lights, programmable thermostats and weatherproofing lead to lower TXU bills.
Often simple behaviors like turning off unused lights and raising your thermostat temperature a couple degrees have a big impact. Using less power offsets the rate itself.
- Leverage Smart Technology
Take advantage of tools TXU provides to help manage costs. For example, their Smart Thermostat allows remote temperature adjustments. Get on balanced billing or an average monthly payment plan to even out seasonal spikes in your bill. Sign up for alerts so you can monitor usage spikes and identify issues early.
- Ask About Discounts
TXU offers a handful of specialized discounts, like for seniors, military members or students. Ensure you are receiving all the discounts you qualify for to chip away at the rate.
Multi-family or corporate customers may also get reduced group buy rates by negotiating.
- Compare Plans Regularly
TXU has a few different rate product options from fixed to indexed plans. Running the numbers for your situation could reveal savings from switching rate structures. Just remember any change restarts your contract term. Evaluate plans regularly as new ones are introduced.
Frequently Asked Questions (FAQ)
There are a few potential reasons your TXU bill may be higher than expected:
Rate increase – TXU periodically raises their rates, especially when your contract term expires. This can lead to suddenly higher bills.
Increased usage – Things like running your AC more in summer, or added appliances and devices, boosts your power consumption and therefore bill.
Variable rate plan – Plans tied to market prices fluctuate, so bills go up when wholesale rates rise.
Change of residence – Moving to a new home may come with higher energy needs that the previous resident offset with conservation.
Additional fees – Look for non-usage fees for services, delivery, taxes and other charges that add to your bill.
Estimated meter readings – Actual meter readings later correct estimated usage leading to “catch-up bills.”
Some tips to reduce your electricity costs with TXU:
Switch to a competitive fixed rate plan through TXU or another provider
Improve your home’s energy efficiency with upgrades like extra insulation or new windows
Adjust thermostat a few degrees warmer in summer and cooler in winter
Unplug devices and turn off lights when not in use
Shift high usage activities like laundry off-peak hours
Use power strips to easily shut off standby electronics that draw “vampire” loads
Check for discounts you may qualify for like senior, student or military rates
TXU’s average monthly billing plan levels out high and low payments into a consistent amount each month. This makes budgeting easier but there are some drawbacks:
Pros:
No billing surprises
Consistent, predictable payments
Avoid seasonally high bills
Cons:
Potential underpayments build up a balance due at some point
Changes in usage aren’t reflected immediately
Existing debt carries over month-to-month
The cheapest TXU plan overall is typically their shortest term fixed rate, often a 3 month term. But the cheapest plan can vary based on your location, usage habits, and current promotional offers. Indexed rates that float with market conditions might dip below fixed rates at times but carry some price risk. It’s wise to evaluate your options frequently as new plans are introduced or existing ones change.
Conclusion
In summary, TXU Energy ends up more expensive than many other electricity providers in Texas for a variety of reasons. But savvy customers still have options to control their energy bills, even if they want to stick with TXU.
The competitive electricity market means rates and plans are always evolving. Performing regular rate comparisons, negotiating contracts actively, and cutting energy consumption provide opportunities to lower costs.
While TXU may not be the cheapest option, they do offer tools to manage your bill. With some diligence, Texas electricity customers can find reasonably priced options even from pricier legacy providers like TXU.