Mental Gymnastics Now Needed to Compare Electricity Contracts

by Mary Scott, President, AARP Texas

By: State: Texas | Source: AARP.org

Have you read an electric service contract lately? Did you experience confusion, dizziness or mental fatigue? It shouldn't have to be this way.

Dallas resident Leonard Strub knows first-hand how confusing electricity contracts can be. While searching for a 12-month fixed rate plan in the Dallas area, he sifted through 32 different plans. What he found was puzzling. The contracts he reviewed ranged in length from two to seven pages, boasted tiny font, and contained sentences with more than 65 words.

Shopping for an electric utility provider in deregulated areas of Texas is a frustrating experience for thousands of consumers like Strub. Contracts are plagued with inconsistent formatting, complex penalties and confusing rate structures. How can anyone be expected to choose the right provider if we don't have the information to understand and compare offers?

"I can plod through the numerous pages, the legalese language and the total content of confusion, but I'm concerned for older citizens—like my wife's parents," Strub said. "They are 88 and 89 years old, not computer literate, and unable to wade through the confusing language. They are being charged 15.5 to 17.7 cents per kilowatt hour, when most of the 12-month contracts range from 11.6 to 14.5 cents."

Texas law does not currently require standard electricity contracts. But it does require that customers be given the information they need to make an educated decision regarding their service provider. The Public Utility Commission (PUC), the state agency tasked with protecting utility customers, has established rules that require terms of service documents be provided in a readable format and written in clear, easily understood language. However, the PUC has not adequately enforced these rules to stop confusing rate structures, hidden fees and fine print in electricity contracts.

AARP is working to make contracts easier to understand for consumers like Strub's parents. We support legislation requiring electricity contracts be written in a standard format approved by the PUC. Also, we'll work to give consumers the necessary tools to challenge companies that don't provide term-of-service documents written in clear, easily understood language.

The failure of electricity deregulation in Texas goes far beyond confusing contracts and hidden fees. Since this costly experiment began in 2002, prices have spiked to record levels everywhere utilities compete for customers—about 75 percent of the state. Residents in deregulated areas pay, on average, twice as much on electricity bills as Texans in regulated areas of the state. These increases have left millions of households struggling to make ends meet. And rates won't be coming down any time soon—not without the intervention of the Legislature.

During the 2009 legislative session, AARP will continue its fight to reduce high electric rates in Texas' deregulated areas. We'll also be vigilant to ensure this mistake is not repeated elsewhere. There are areas of the state today served by municipal power companies, cooperatives and fully-regulated, investor-owned utilities that enjoy much lower and stable rates.

For consumers in deregulated areas, who have been given a "choice" of electric providers, we believe it shouldn't be necessary for them to have to do mental gymnastics to understand a contract, make an informed decision, and save money.