Minimum usage fees can penalise you for consuming less power
What are minimum usage fees, and how can they affect your bill? Find out everything you need to know about minimum usage fees on your electricity bill in Texas
What Are Minimum Usage Fees?
A minimum usage fee is a charge that applies to customers who consume less than a certain amount of kWh per month. This charge has become increasingly popular among retail electric providers in recent years; as a Houston Chronicle investigation revealed in 2015, 70% of electric plans in the Houston area contain provisions that penalize customers with low monthly consumption. The monthly threshold required to avoid a minimum usage fee tends to range between 1000 - 2000 kWh per month, though some retailers will waive a minimum usage fee after 500 kWh consumed. Most retailers tend to charge around $7 - $10 for minimum usage fees, though according to a 2013 survey of the Oncor service territory, the fee charged can be as high as $20.
Did You Know?
Many retailers that don't charge minimum usage fees provide usage credits to customers who consume over a certain threshold of kWh in a month, which essentially achieves the same result of penalizing small power consumers.
Some retail electric providers don't charge a minimum usage fee, but charge a monthly base charge that may be reduced or waived when customers consume over a certain amount of kWh in a month. While this isn't labelled a minimum usage fee, it works in the exact same way.
Minimum usage fees do not violate any rules set by the Public Utilities Commission, but they must be clearly indicated in the Electricity Facts Label. In March 2015, Rep. Sylvester Turner proposed a bill (HB 2254) that would discourage this practice of charging minimum usage fees by requiring more reporting by the PUC on the details of minimum usage fees and usage credits. As of June 2015, this bill was still in committee.
Why Do Retail Electric Providers Charge Them?
Retail electric providers say that minimum usage fees allow them to recover the fixed costs relating to providing service to their customers (such as maintainning their customer service call center, or for printing and posting of paper bills). Some also say that minimum usage fees allow them to recover some of the risk associated with offering fixed rates (such as the risk associated with buying too much or too little power for their customer base, or of having to swallow the costs if electricity prices rise above the fixed rates paid by their consumers). As these kinds of costs are fixed and don't increase considerably with increased customer consumption, retail electric providers are able to cover their costs with higher-consuming customers, which enables them to avoid paying the minimum usage fee.
Do You Have to Pay a Minimum Usage Fee?
For larger electricity consumers (i.e. 2000 kWh per month or more), minimum usage fees are something you probably will not need to worry about, as most REP require 1000 kWh - 2000 kWh per month maximum. With the average Texas household consumption at about 2000 kWh per month, most families will not have to worry about paying a minimum usage fee for their electricity. Minimum usage fees are more of a concern for smaller households (i.e. 1 - 2 persons), who live in smaller homes.
How Can You Avoid Paying Minimum Usage Fees?
There are a couple of things you can do to avoid paying a minimum usage fee:
- Do your research: the most important thing you can do to avoid paying minimum usage fees is to find out which contracts and which suppliers include minimum usage fees. While many retail electric providers charge minimum usage fees, not all of them do. Some REP offer special rates with no minimum usage fees or base rates included; others charge lower minimum usage fees and/or will waive the fee at a lower threshold. You can find the minimum usage fee charges in the EFL. Make sure to look out for any base charges or usage credits, as these can often be constructed to work in the same way as a minimum usage fee
- Find out how much you consume per month: if you don't find a minimum usage fee-free contract that appeals to you, it is important to know how much you consume in a month. The minimum usage required before the fee is waived varies by REP, so you may be able to avoid minimum usage fees charged by some REP but not others. You can check out our estimation tool if you don't know how much you consume in a month.