The electricity prices in Texas are on the rise once again, and you are probably wondering why they are as costly as they are. With the summer coming, this is bad news for a lot of people who are on the Texas grid and who are already tired of paying so much for their electricity. It will likely mean that the cost of the monthly electricity bills is going to be high for quite a while.
In years past, the electricity prices were generally predictable. You would have a good idea of how much you were going to have to pay for your electricity bills depending on the weather. In the spring and fall, they were lower. Summer was always the most expensive time, but the prices today are more erratic. Today, we’re finding that gasoline prices and just about everything else that we buy is increasing in cost. This includes prices.
Let’s look at some of the reasons for these increases.
The State of the World
First, we have to think about the current state of the world and everything that’s happening. Keep in mind that natural gas accounts for more than 40% of the electricity in Texas. Therefore, the price of energy will tie in closely with the price of natural gas. When this price rises, the price of your electric service is going to rise, too.
These prices have been increasing steadily over the past few years. One of the major recent factors that have caused issues with the gas supply has been Russia’s war against Ukraine. There is still high demand for gas, but it’s not as easy to get given the geopolitical issues in the world. Keep in mind that it’s not just Texas or the United States that are paying a higher average rate for their gas—it’s the rest of the world, too.
How soon could this change? It doesn’t appear as though it’s going to get better any time soon. You can expect Texas energy costs, and energy costs in the rest of the world to be a bit higher for some time to come. Although later in the article, we’ll look at some ways that customers could save some money despite the higher prices.
Problems in the Supply Chain
Texas is a prime state for using solar power. It gets a substantial amount of sunlight throughout the year. Over the past two decades or so, more and more people have become interested in using solar power for all or at least part of their electricity.
Many investors and companies know and understand the power and benefits of solar. They have invested in many utility-scale solar projects. These projects have been planned for 2022 to 2025. Yet, there are supplier issues when it comes to the pieces and equipment needed to put these projects together. A lot of the materials are coming from overseas, and they are being delayed.
With fewer solar and wind power options up and running, it means the state is going to have to rely even more on natural gas.
Of course, the war in Ukraine also puts something of a kink in the supply chain when it comes to traditional natural gas, as we talked about earlier. Utility companies need to charge higher rates for electricity, so they can afford the limited supply. After all, less supply often equates to higher demand. Thus, we’re going to keep seeing high prices for a while.
Changes to the Regulations
One of the other major changes that could make it more difficult to save money are the regulatory changes. Winter Storm Uri was devastating when it swept through the state in February of 2021. So, changes were made to the market cap of wholesale electricity prices. It went from $9,000 per megawatt hour to $5,000 per megawatt hour.
At first blush, this might seem like a good move that could help to keep the prices lower. However, that’s not what folks in Texas are seeing. Instead, it has changed how the energy prices move in real-time.
This essentially means there are more real-time spikes in the prices. When those spikes occur, it will often mean higher trading values. This is especially true for short term wholesale electricity prices.
The Texas weather has the potential to be brutal. It could be bitter cold, as we’ve seen, or it could be scorching hot. The Texas electricity market has to adapt and provide people with the power they need, but it often means that the prices are going to rise with the demand.
Additionally, the first increase in prices this year started to be seen in the first part of April. It was at that same time that the National Oceanic and Atmospheric Administration reported that there would be a higher than normal number of storms. Not only that, but experts are saying that this is likely to be one of the hottest summers on record. The kWh usage is likely to keep going up because people are going to be using their fans and air conditioners.
Understanding the ERCOT Reserve Margin
What is the ERCOT Reserve Margin? The Electric Reliability Council of Texas is responsible for ensuring the reliable and safe transmission of electricity over the Texas grid. The reserve margin is the difference in the amount of power generation capacity available vs. the amount of power demand that is expected. The Electric Reliability Council of Texas uses the reserve margin as a means to determine whether more resources or demand reduction could be necessary.
Typically, they want to have a reserve margin of 13.75%. This means that they have 13.75% more power than they feel the demand requires, and it gives the state something of a buffer. It’s helpful for when the hot temperatures climb, and companies and residential customers are putting more pressure on the grid in Texas. The reserve margin projection for the summer of 2022 is 22.8%.
Getting the Best Electric Prices in Texas
What should you do about these rising energy prices? While you can’t change the electricity supply and you still need the power grid, there are some things you can do to keep your costs a bit lower. Below, we’ll be talking about a few of the things that you can do, starting with changing electricity providers.
Changing Energy Companies
Keep an eye on your energy contract expiration date and remember to shop around to find electricity providers that can offer you a better deal on your electricity supply. When your contract expires, you can change to another provider that could provide you with better power rates. It’s one of the best ways for you to reduce the costs of your electric bills.
Of course, you might not be near the expiration date. While you could still change, you will likely need to pay an early termination fee if that’s your choice. Customers might find that if you pay this fee, it could still be cheaper for them to opt for one of the different plans from another Texas power company.
When changing plans, always take the time to shop around and look at all of the options. You need to be sure you are looking at the fine print, too, so you have a better idea of whether it’s the right company for you. After all, you don’t want to switch to a different company and find out that after a few months, the prices are even higher.
If you have trouble figuring out which company is offering the best rates, you can always work with energy experts. Let a professional help you find the right new provider and make the switch. You can get help whether you are a residential customer, or you are looking for rates for a business.
Find Ways to Save Around the House
The biggest factor in how much your energy is going to cost this summer will be the Texas energy prices. You can’t do too much to change the costs other than switching companies. However, there are some relatively simple things you could do around the house that can help to keep your costs down.
First, think about the amount of hot water you are using. Cut down on the hot showers or cut them out entirely. Using warm water or cool water for a bath or shower will help to keep you cool, and it will keep prices down.
Second, use fans and open windows for airflow rather than air conditioning whenever possible. It will lower your energy bill and reduce the stress on the power grid.
These tips will provide you with at least some savings, and that’s better than nothing.
Don’t Do Nothing
The past year has seen a rise in the amount we have to pay for our energy, and there’s little we can do about it. The cost might be high, but you can not start to see the reasons why, and you can have a better idea of ways that you can try to combat those high prices.
If you don’t do anything, you can be sure the rates are going to skyrocket. When you look for other options and providers, and when you take some steps around the house to conserve energy, it could help to keep your costs down. The worst thing you can do at a time like this, though, is nothing.