How to Understand an Electricity Facts Label

Martin Prescott/E+/Getty images

What is an Electricity Facts Label?

An Electricity Facts Label — often shortened to EFL — is a document that breaks down the details of an electricity plan. It is the most important document to review and understand before signing up for an energy plan.

EFL Explained

Electricity Facts Labels include important information about:

• The average price per kilowatt-hour (kWh) based on monthly energy usage
• Usage credits for electricity
• Utility company charges for electricity delivery
• The length of the plan’s contract
• Early termination fees
• Percentage of renewable content in the plan
• Contact information for the energy provider offering the plan

EFLs are important, but they can seem confusing if you’re new to shopping for an energy plan or are unfamiliar with deregulated energy. Read on to learn how to read an Electricity Facts Label and use the information in this document to choose the right energy plan for you.

Where to find an Electricity Facts Label

Finding a plan’s EFL can be tricky if you don’t know where to look. Here’s how you can find the Electricity Facts Label for every plan on the SaveOnEnergy marketplace.

Step 1: Enter your ZIP code on our marketplace, and we’ll show you available plans near you. You can then use our filtering tools to compare available energy plans and providers in your area.

Step 2: Once you’ve found an energy plan you want to learn more about, click “More details” at the bottom of the box.

Step 3: From there, you’ll find a few tabs with details of the plan, including “Plan documents.” The first option under “Plan documents” is “Access the EFL,” which will open the plan’s Electricity Facts Label in a new tab.

The next section of this guide will explain how to read an Electricity Facts Label and use the information when shopping for a plan.

How to read an Electricity Facts Label

Here is a sample Electricity Facts Label from one of 4Change Energy’s plans. The EFL for your plan may look slightly different from this sample, but it should include the same information in a similar format. We’ll break down each section of the EFL to explain what the numbers and information mean.

EFL by Save On Energy

1.     Average Monthly Use

This row shows three numbers — 500 kWh, 1,000 kWh, and 2,000 kWh. These are usage tiers, which represent how much electricity your household consumes each month. The Public Utilities Commission (PUC) in Texas mandates providers show their electricity rates in these three tiers. If you use 500 kWh, you will fall into the first usage tier. The second tier is 1,000 kWh, and the third is 2,000 kWh. You can check your previous energy bills to estimate how much electricity you normally consume in a month, or visit the SaveOnEnergy usage calculator to get an estimate.

2.      Average Price per kWh

This row will normally show three prices per kWh, lining up with the average monthly use tiers. This section shows you the rate for each usage tier from Section 1.The average price per kWh factors in the energy charge, other fees, and bill credits to provide this average estimate for each usage tier. Occasionally, the usage tiers will charge the same rate per kWh. We’ll explain this in more detail below.

3.     Base Charge

The base charge is a set amount each month that covers operational costs. It should not change during your contract. In this example EFL, the base charge is $0, although that is not always the case with other plans.

4.      Energy Charge

This section shows you the default rate the provider charges for this plan. We’ll explain why this is different from the average price per kWh (Section 2) below.

5.      Monthly Bill Credit

This section displays any bill credits for electricity you will receive with this plan. Usage credits for electricity are usually applied per billing cycle if your usage falls into a certain range. That range will also be noted in this section. In this example, there is a $100 bill credit for electricity each month you use at least 1,000 kWh.

6.      TDU Charges

The TDU (sometimes called TDSP) is the utility company in your area. The utility is responsible for delivering electricity to the consumer and restoring power during an outage. Because the utility delivers electricity and maintains power lines, it charges consumers each month for its services. These charges vary based on location and utility. There are two TDU charges — one is a fixed charge per billing cycle, and the other is a usage charge per kWh that you consume. In this example, the EFL provides a link to a TDU charge page showing each utility’s rates.

7.      Type of Product

This section states the type of plan, which is usually fixed rate, variable rate, or indexed rate. In this case, the EFL is for a fixed-rate plan, which means the base rate will stay the same throughout the duration of the contract. SaveOnEnergy can help you learn more about the different types of energy plans and the pros and cons of each type.

8.      Contract Term

This section shows how long the plan’s contract will last. The most common contract lengths are 12, 24, and 36 months. In this example, the contract lasts 12 months.

9.      Do I have a termination fee?

This portion of the EFL notes whether the provider will charge an early termination fee if you cancel your contract before it expires. Most providers will waive this charge if you move to a new home outside of their service area. The ETF section is important to note when searching for an energy plan. Some EFLs mention a flat cancellation fee, normally between $100 and $250. This example plan, however, charges $20 for every month left on your contract.

10.    Can my price change during my contract period? If my price can change, how will it change and by how much?

This section will usually begin with a simple “Yes.” Even if you sign up for a fixed-rate plan, your total rate could change throughout your contract because of fluctuations in utility fees, regulatory charges, or local government taxes.

11.     What other fees may I be charged?

This line is where you may find information about other monthly fees or deposits you could be charged. The provider may direct you to the Terms of Service document. We recommend reading the Terms of Service carefully before signing up for a plan to ensure you are aware of all fees you may encounter.

12.     Does the REP purchase excess distributed renewable generation?

Some consumers have power-generating equipment like home solar panels or wind turbines. This section notes whether the provider will purchase extra electricity that the consumer generates and does not use, similar to a net metering program. If the provider does purchase excess renewable energy, you could receive credits for the electricity your system produces and sends to the power grid. This is an especially important section for consumers who own a solar panel system, as providers that don’t participate won’t provide bill credits for excess renewable energy.

13.     Renewable Content

This section is where you will find the exact percentage of renewable energy in the plan. If this is a green energy plan, it will say 100%. Every energy plan in Texas is required to have at least 7% of renewable energy sources in the mix. This example notes that the renewable content will either be 7% or 100%, depending on whether you choose a renewable energy option for this plan.

14.     Statewide average for renewable content

This section notes the average percentage of renewable energy included in electricity plans for the state where the plan is sold. In Texas, for example, the statewide average is 31%.

15.     Contact Information

The EFL ends with contact information for the provider. Remember — the provider you choose is not responsible for restoring power during an outage. If you experience an electrical outage, contact your utility company instead.

How to calculate the average energy price per kWh

Providers often put their plans into a tiered-rate structure, which designates different energy rates for three usage tiers. For example, a plan may charge one rate for the first 500 kWh you use in a month but a different rate for every additional kWh you consume.

These three tiers are normally shown on the EFL as 500 kWh, 1,000 kWh, and 2,000 kWh. On the SaveOnEnergy marketplace, we advertise plan rates for 1,000 kWh of usage. At the top of an EFL, you’ll find the average price per kWh for each tier. This average price includes the base charge, utility charges, and other fees that go into the total cost of electricity. It also factors in usage credits if a plan offers them.

In the example EFL, the three usage tiers look like this:

The standard rate for the plan is noted on the EFL in the Energy Charge section. In our example EFL, the energy charge is listed as 16.490 cents per kWh. Some math is required to get from the energy charge rate to the average price per kWh. Use this Electricity Facts Label calculator formula to understand how providers calculate your average price per kWh.

Energy Charge + Per-kWh Utility Fee + [(Per-month Utility Charge + Base Charge)/Usage]

Let’s use the sample EFL above as an example. This is the information we will need from the EFL. 

• Energy charge: 16.490 cents per kWh ($0.20715)
• Per-kWh Utility Fee: 5.3770 cents per kWh ($0.05377)
• Per-month Utility Charge: $4.39
• Base Charge: $0
• For this example, we’ll assume you use 1,000 kWh of energy in a month.

$0.16490 + $0.05377 + [($4.39 + $0) / 1,000]
$0.16490 + $0.05377 + $.00439 = 22.3 cents per kWh
$0.223 X 1,000 = A bill of $223

This plan offers a $100 bill credit for electricity when you use 1,000 kWh or more. The credit brings the estimated average monthly bill down to $123. 

$123 / 1,000 kWh = an average electric rate of around 12.3 cents per kWh, roughly what is shown for the 1,000 kWh usage tier at the top of the EFL.

Why the Electricity Facts Label matters

When shopping for an energy plan, the Electricity Facts Label is the most important tool for understanding a plan’s energy rate, fees, terms and conditions, and more. Knowing your average monthly electricity usage will also help you choose the right plan for your usage tier. Refer to your energy bill to find your average monthly usage.

If you have questions about how to read an Electricity Facts Label or would like to discuss your energy plan options with someone, call 1 (855) 409-2149to speak with our energy experts.