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Electricity Rates in Texas Continue to Surge: No End in Sight

May 2022 Texas Electricity Rate Report

If you are currently locked into a long-term contract with your electricity provider, consider yourself lucky.  Pricing on new electricity plans in Texas is at an historically high level.  The cheapest rate electricity plans listed today are more than double what they were a year ago.

May 2022 Texas electricity rate increases

Natural gas prices are at 13-year highs thanks to a confluence of macroeconomic events and war in Europe.  Electricity rates are driven by natural gas prices.  Electric companies are pricing their plans on the expectation that natural gas prices will not see any relief in the near-term future.  There is also an expectation of a hotter than normal summer.  This would put strain on the grid and cause higher cost electricity plants to be brought online to meet demand.

There was one earlier period in the past 20 years where rates were near where they are now.  That was during the winter storm of 2021.  But in that case rates spiked briefly in conjunction with a shock to the electric grid.  Electric companies raised their rates extremely high for a brief period of time.  Once the crisis passed, rates quickly fell again.

This time is different. The cause of this current round of price increases isn’t a multiday weather event.  The causes this time are global, persistent, and have no foreseeable end in sight.

Electric Companies are Spooked

Many companies can’t seem to raise their rates enough to feel safe. Several Texas electricity providers have stopped taking new customers entirely.  Spark Energy, for example, has stopped listing plans on their website.

Some smaller companies are even toying with the idea of paying customers to take their business elsewhere.  Those companies that remain active in the marketplace, are reducing their plan offerings and focusing on longer term 24 month and 36 month plans.  Even TXU has removed several of their 12-month plans.

Consumers are left with little option but to try to ride out the current market volatility. Those who enrolled in 12 to 36 month plans before the current rate increases started are in the best position.  But even they might have to deal with the new pricing reality eventually.

Those coming off of contracts now have to make a tough choice.  They can either start a new 12 or even 24 month contract with rates that might be double what they were paying before or they can pay incredibly high rates on a month to month basis in hopes that prices will go down soon.

2022 Electricity Rates Compared to 2021

The price hikes are stark when you look at the cheapest available electricity rates this time last year compared to now.  Even providers normally known for offering aggressively low pricing are trying to reduce their exposure in the current market conditions.

In June of 2021, Frontier Utilities was offering their Best Value 12 plan in Houston for 6.3¢ per kWh*.  Today their cheapest plan is the 24 Month Frontier Super Value plan at 13.7¢.  Likewise, Express Energy’s cheapest rate went from 5.6¢ to14.5¢ in that same timeframe.  These two companies aren’t alone.  Electric companies are worried right now, and they are passing on their concerns in the form of higher prices.

Electricity Rates Could Go Even Higher

As bad as things are, they could still get far worse.  Natural gas prices in the U.S. have gone up substantially.  But the U.S. has been largely insulated from the price shock being experienced in Europe.  Natural gas prices in Europe are 3 to 4 times higher than in the U.S..  In a global market, prices have a tendency to eventually converge.  This is especially true with the increase in liquified naturel gas (LNG) exports from the U.S. in the last half decade.  Once a smaller player, the U.S. is now the world’s largest LNG exporter.

In years past, the effect of surging natural gas prices could have been somewhat mitigated by switching more electricity production to coal.  But regulation and market forces over the past 10 years have increased the price of producing electricity via coal.  At present, coal-stockpiles are very low making a switch to coal for electricity production difficult.

Electric companies know all this too. The current round or repricing could be as much an attempt to get out ahead of anticipated natural gas prices as a reaction to the current prices. It also reflects the higher premium for hedging their future costs in a market that is on edge.

*Pricing at the 1000 kWh level

2022 Texas Electricity Rate Outlook

The Lone Star State isn’t often associated with winter weather crises—snow days, icy roads, and other cold-weather anecdotes are reserved for the state’s northern neighbors. This all changed in winter February 2021 when over 200 Texans died of hypothermia in the aftereffects of a historic freezing event and subsequent power outage. Winter Storm Uri was the most costly weather event in the state’s history. Electricity providers could not meet the sudden demand for heating. Texas electricity rates soared. The entire state power grid, from wind to coal to natural gas to nuclear, was not appropriately winterized for such a weather event. Winter is on its way once more — only this time, are Texas electricity providers ready?

Electricity Related Legislation and Policy

Because Texas has autonomy over its energy supply, lawmakers could quickly adapt following the crisis. In March 2021, Texas senators passed a bill (Senate Bill 3) that included weatherization mandates, an emergency alert system, and a ban on “indexed retail electric plans.” Indexed retail plans fluctuate with the price of fuel and demand; unsurprisingly, consumers who selected this riskier option suffered unmanageable electricity rates after the storm. The market forced some small electric companies out. ERCOT (the Electric Reliability Council of Texas) has new authority to get generators online at the first sign of energy instability. Furthermore, a new field inspection team came on board to ensure the implementation of the required structural fixes.

Winterization Standards For Power Infrastructure

When the temperature dipped into single digits last winter, the energy grid infrastructure stopped functioning. Texas electric companies dealt with failed transmission lines, pipelines, and generators. If energy companies don’t implement winterization recommendations by December 1st, 2021, they could be penalized upwards of $1 million per month. Winterizing can be tricky in Texas because most facilities are designed to withstand extreme heat rather than cold. Nonetheless, facilities are hard at work implementing techniques to keep pipes from freezing, building shelters and windbreaks around exposed machinery, and even adding portable heaters in those shelters.

Communication

Communication breakdowns contributed to the February storm’s devastation. Even with a fair warning from the National Weather Service, citizens were not appropriately advised to prepare for possible power outages that would affect their access to heat and clean drinking water. While state officials advised of resources available following the storm, people had lost the means to connect with those resources, like the internet, cellphone service, or television. Texas citizens must be better communicated to in emergencies. ERCOT is working hard to be more transparent and improve its outreach resources. The Texas Division of Emergency Management is establishing a better emergency alert system. Communication plans have also been improved between energy stakeholders across the grid, allowing companies to respond quickly to issues. Should the infrastructure fail and Texans lose power, they will at least be better informed this winter.

So is Texas ready?

While it’s impossible to predict what Winter 2022 brings, Texas electric companies have no doubt made substantial improvements to their physical infrastructure and communication plans. There is some concern as to whether the Railroad Commission of Texas — the state entity in charge of regulating the natural gas supply — has met its facility inspection goals and winterization recommendations. Nonetheless, ERCOT officials are working closely with the Railroad Commission to be better prepared for the oncoming season.

The disastrous power outage in 2021 exposed some of the limitations of the state-specific electricity grid. However, there are important benefits to an independently-controlled power supply. If one were to compare electricity rates, Texas residents typically enjoy lower energy rates than elsewhere in the nation. Several major companies even offer no-deposit electricity plans. Beyond cheap electricity, state-specific control allowed Texas leadership to enact legislation and mandate facility weatherizations within a month of the epic storm. Major weather events are on the rise around the world, and Texas is working to demonstrate how to quickly respond to failures and make tangible improvements. Emergency preparedness plans take time, however, and Texas hasn’t even had a year to recover.

Electricity Rates in Texas Spike – April 2022

Electricity rate in Texas have reached multi-year highs.  Customers who are currently in a fixed rate contract might not notice increase yet.  But when their plan expires, they may be in for sticker shock when they see the new rates.

The average rate for new enrollment plans in the Oncor delivery area for April was 12.6¢ per kWh for 1000 kWh of usage.  This is about a 25% increase from the same period a year ago.

Texas Electricity Rates April 2022

May Reasons For Higher Electricity Prices in Texas

The rise in electricity rates is the result of a perfect storm of conditions.  Inflation is the highest it’s been since the early 1980s.  Global unrest has led to a spike in natural gas prices.  Despite the considerable growth in wind and solar energy in Texas, natural gas is still the largest driver of the price electricity.   Cheap natural gas in recent years has meant cheap electricity rates in Texas.  But the opposite is also true.  Soaring natural gas prices will be felt directly by Texas rate payers.

With natural gas prices recently touching 13-year highs, electricity rates have spiked as well. Fixed rate electricity plans are priced based not only on current fuel costs but on the expectation of future prices.  When an electricity provider offers consumers a fixed rate for a period such as 12 months or 24 months, they are taking the risk that future wholesale electricity prices will rise.  The uncertainty of the current global political and economic environment creates a greater risk of continued price increases.

Even though the price of natural gas has nearly doubled recently, there is no end in sight for the potential price increases.  Electric companies are pricing their plans with extra caution going into a summer season that is forecasted to be warmer than usual.

Customers shopping for the cheapest rates now may consider 24 month fixed plans.  This term length is seeing the best rates currently.

European War Impacts Texas Electricity Rates

Texans are paying a price for the war in Ukraine; if only indirectly.  Shortages of fuel in Europe as a result of the conflict are driving up global prices.  Although the U.S. is nominally energy independent, we are still affected by global fuel prices.  Additionally, the U.S. is under pressure to increase exports of natural gas to help with the European supply crisis.

Coal power plants don’t offer the same cushion to prices that they once did.  Tightened regulations and aging power plants make coal a more expensive option than in years past.  Wind energy and solar panels are constrained in how much electricity they can supply during times of peak demand.  They can’t be ramped up to address peak demand and scarcity pricing the way fossil fuel sources can.

Few good options for Texas consumers

The combination of increased fuel prices and uncertainty about where the market is headed has caused electricity providers to be extra cautious in pricing their electricity plans.  Additionally, many of these companies are still feeling the financial effects of the winter storm of 2021.

Consumers who find themselves with contracted expiring during this period are left with few good options.  They can go onto the default rate of their current provider.  This rate is likely to be substantially higher than their contract rate.  They can lock in a new 12-month contract.  But the prices on these plans are the highest they have been in many years.

Many are choosing to lock in a 24 month plan.  The rates on these plans are generally lower than 12 month plans at the moment.  The rate will be higher than what consumers are used to paying.  But a 24-month plan would protect consumers from a potentially bigger spike in rates over the next 2 years.  Multi-decade high inflation and global geo-political uncertainty could result in even higher prices in the months or years to come.

The Super Value 24 by Frontier Utilities has a lower rate than any other plan at the time of this writing. But rates are changing fast so be sure to check current rates before choosing a plan.

How Texas Residents Can Reduce Their Electric Bills

After last winter’s epic storm, Texas electricity providers are actively implementing new ways of protecting the grid and improving energy efficiency. It’s not just electric companies that can play a role in preparing for winter. Lone Star residents are equally poised to tackle sky-high energy bills and prepare for seasonal weather.

Develop Good Energy Saving Habits

Homeownership across Texas is on the rise. Cities like Houston and Dallas are seeing some of the youngest homeowners in the country. While there is no shortage of energy-saving tips available via the internet, new homeowners may not be familiar with some of the tried and true energy-saving knowledge passed down from grumpy fathers finicking with the thermostat. Heating and cooling contribute almost half of the monthly electricity bill; adjusting the temperature by a few degrees can lead to almost immediate savings. Decreasing the temperature on the water heater can also lend a hand; most are preset at 140 degrees Fahrenheit, but 120 degrees is hot enough for dishwashers, laundry machines, and shower use.

Take Advantage of Assistance Programs

While Cardi B may not be singing about it, the Texas Weatherization Assistance Program (WAP) helps reduce home energy rates through increased energy efficiency education and materials. Available in all Texas counties, WAP benefits those that last winter’s storm affected most, like low-income or elderly Texans. Besides state-funded programs, most Texas energy companies provide opportunities for homeowners to apply for energy efficiency assistance, often in the form of insulation and air-sealing upgrades. Others distribute free supplies such as dimmable LED bulbs or more efficient showerheads, and some offer cash-back rebates to customers who invest in energy-efficient appliances.

Compare Electricity Rates in Texas

Electricity rates in Texas are unique in that residents can shop around and compare costs. It does place the burden on consumers to research options, but there may be opportunities to find a cheap electricity rate or cost savings within a consumer’s current plan. Certain companies offer a no-deposit electricity option, allowing customers to forgo a service charge often required to turn on the power. Some Texas electric companies award additional financial incentives for customers who pay their bills on time, enroll in online billing, or stick with a long-term plan. Some electricity providers are more technologically advanced, delivering smart tools like thermostats and meters that reduce energy consumption long-term and improve energy reading accuracy.

Understanding an Energy Bill

Better understanding a bill’s calculation may lead to selecting a different plan and saving money. Several variables contribute to Texas electricity rates, but some payment plans suit consumers’ budgets better than others. Here are a few models that may help reduce energy costs:

  • Prepaid plans allow customers to pay for electricity upfront and monitor their remaining balance daily via their smartphones; these plans put more control in the hands of consumers.
  • Time of Use (TOU) plans change energy prices during peak use times (often late afternoon). Customers enrolled in TOU plans can adjust when they use electricity accordingly, receiving cheaper rates.
  • Average billing plans allow customers to pay a monthly bill that reflects their annual, monthly average; these plans help residents avoid sky-high bills in summer or winter when unpredictable weather can crank up energy costs.

There is more to energy reduction than remembering to turn off the light switch. Smart consumer behaviors like comparing provider benefits or opting for a different payment plan may help reduce costs in a meaningful way. Texas residents have a lot of power when it comes to their, well, power.

Are Our Devices Wasting Too Much Electricity?

Vampire electricity — the energy wasted while devices are plugged in, yet not turned on — is a very real drain on the power bill. From televisions to internet routers to phone chargers, there are several devices constantly adding extra dollars onto the monthly electricity rate. The U.S. Department of Energy estimates nearly 50 electronics in the standard American household continue to use power even when switched off. The accumulated electricity wasted annually in the U.S. is more than some developing nations actually use. Data suggests that Americans waste billions of dollars annually on wasted electricity — that’s billions with a “B.” It’s not only a financial consequence either; electricity production is a major contributor to climate change, not to mention the millions of tons of e-waste created when consumers toss their old devices.

What About Smart Devices?

Investing in smarter devices improves efficiency in the home and often adds convenience. For example, many electric companies encourage consumers to install a smart thermostat, a wifi-enabled tool that leads to savings and a more comfortable living environment. But what about the Alexa in the corner, lurking for commands? Or the MacBook left charging near the desk, always in standby mode? While appliances and devices have undoubtedly grown more energy efficient, Americans also have way more of them. Smart devices are convenient and often use less power, but Americans are adding more and more devices to the home and using them constantly.

Electricity Use on the Rise

Energy companies have witnessed increased power use over the decades — the average individual kilowatt use per hour, or kWh usage, has more than doubled since the 1960s. The U.S has some of the most affordable energy rates among affluent countries and boy, do Americans enjoy it. In Texas, the market allows homeowners to look at different energy providers, compare electricity rates and seek cheap electricity, which has exacerbated overall consumption. While Texas has some of the cheapest electricity rates, residents pay some of the highest energy bills because they use a larger amount of power relative to other states.

Tips That Work To Reduce Energy Bills

Household devices are wasting too much energy, but with the vast majority of Americans owning a smartphone and a laptop, it’s not the simplest issue to fix. Garlic won’t help with these vampires. One of the easiest ways to prevent wasted energy and reduce your energy bill is to unplug devices when they’re not in use. However, this often disconnects smart devices from the internet connection, requires extra minutes to reboot, or restarts the clocks on appliances. Choose the battles to fight. A computer uses more electricity when left plugged in than a coffee pot, so unplug laptops whenever they’re fully charged. To be honest, leaving a phone charger plugged in all the time doesn’t drain too much energy, but a whole bunch of passively plugged-in devices could add up. Employ smart power strips as much as possible; it’s easier to turn off one switch at once. When feasible, replace older appliances with new, more energy-efficient ones.

Take a minute to walk around the house and count how many little lights are on and active digital displays. It’s likely more than expected and the wasted power is adding up.

What is the Impact of Wind Energy on Texas Electricity Rates?

Texas is a leader in wind electricity. The state gets a substantial amount of its power from wind turbines. The percentage of electricity coming from wind has increased steadily in Texas over the past couple of decades. But what impact does all of this wind power have on Texas electricity rates?

Electricity rates are low when the wind is blowing because electricity prices in Texas are based on the wholesale electricity market. The  providers pay a generator (coal, gas, or wind) for electricity at a price per megawatt hour that fluctuates based on market demand. Since wind power costs less than coal or natural gas-based generators, it’s can often be cheaper for electricity companies to buy  from wind farms.

Timing is important when it comes to wind energy

Electricity rates are low when the wind is blowing. Wind, especially in Texas, has a habit of blowing more when electricity demand is at it’s lowest. The peak season for wind in Texas is during the spring and, in particular, at night. Because the need for air conditioning is relatively low on spring evenings in Texas, wholesale electricity rates can plummet when electricity is being produced faster than it is needed for the grid.

This can be an opportunity for savvy consumers. This imbalance between supply and demand and the resulting price swings is why time-of-day plans such as the TXU Free Nights plan have become popular in Texas. TXU was one of the first to introduce such plans. But today many electric companies in Texas offer similar plans. Many consumers are able to shift their habits and use more of their power during these periods where electricity is sometimes free. This results in overall lower electricity rates.

Improving technology makes wind energy more competitive each year

Some of the recent improvements in wind turbine technology include taller towers, increased efficiency, onsite assembly and construction. Bigger blades are also an improvement because they increase power output. Increased efficiency means it requires less input to produce the same amount of electricity. With onsite assembly and construction, turbines can be assembled quickly with less expense. This has lead to a proliferation of wind turbines in West Texas.

A major portion of the cost of wind turbines is the initial construction and assembly. The average wind turbine can last as long as 20 years. Wind turbines spur growth because developers only need to deal with transport and installation costs, not the costs of purchasing land and building a tower. A single large wind turbine creates an estimated $6 million over its lifetime in savings for equipment manufacturing and almost $5 million in health and pollution.

Natural gas still drives the cost of electricity in Texas.

“Even though electricity rates have been going down, a large percent of that is due to natural gas prices,” said Paul Wattles, former director of energy markets at the Electric Reliability Council of Texas (ERCOT).  “The electricity generation mix has changed significantly over the last few years, but natural gas is still the largest source of electricity.”

The electricity generation mix has changed significantly over the last few years, but natural gas is still the largest source of electricity.  According to Wattles, electricity rates tend to go up when natural gas prices go up.

Expect wind energy to decrease electricity rates in Texas going forward

Wind relied heavily on government subsidies in the past. Today wind energy can compete on it’s own merit. The technology has improved to the point that with the proper infrastructure in place, wind energy can have a decidedly positive impact on electricity rates. This is a trend that is expected to continue for many years to come. Even without major new breakthroughs in technology, incremental improvements will continue for the foreseeable future.

What you need to know about the Reliant Truly Free Weekends 12 Plan

The Reliant Truly Free Weekends 12 Plan is one of a growing number of Time-of-Use (TOU) plans being offered by Texas electric companies.

Time of use plans offer an incentive to theoretically save people  money on their electric bills by allowing customers to pay different prices for their electricity during different times of day when demand changes. They can be complicated when customers try to figure out when they should use electricity and when they should not.

Electricity prices change based on demand, so it can be more expensive to use electricity during peak times like hot summer days when everyone uses their A/C than other times like evenings or weekends. The idea behind these plans is that customers will use less energy during the times of high demand.

Some customers are not happy with their Time of Use electricity plans because they cannot control when their electricity is used as easily as they would like. Others complain that they do not save money with these plans and that it is more work for them to track.

Will the Reliant Truly Free Weekends 12 Plan save you money on your electric bill?

As of the time of this review, this plan advertises an average rate of 15.5 cents per kWh for a home that uses 2000 kWh in the Houston area.  This is about twice the rate being advertised by other companies such as Gexa Energy, Frontier Utilities, and 4Change Energy.

The other thing to keep in mind is that this advertised rate is just an estimate of what your rate might be.  Really, it’s more like a guess.  That’s because the actual rate you will pay is highly dependent on your habits and when you use your power most.

As the name implies, the rate you pay for electricity over the weekend is zero.  The plan defines the weekend as 8 p.m. Friday to 12 a.m. Monday.  The plan features an energy charge of 17.905¢ per kWh for the non-free hours.  In addition to that, there is a Centerpoint delivery charge of  4.6397¢ per kWh.  Added together, that comes to an eye-popping rate of over 22.5 ¢ per kWh.  You would be hard pressed to find a plan anywhere that charges a higher rate than that.

Reliant Energy Truly Free Weekends Time of Use plan

To arrive at the lower estimated rate of 15.5 ¢ per kWh (for 2000 kWh of usage), Reliant estimates that 32% of your energy usage will occur on the weekends.  If you are the type that likes a challenge you might be able to get a lower rate than this.  Are you willing to do all your laundry on the weekend?  Let the dishes pile up in the sink and run the dishwasher only on the weekend?

The problem with this approach is that only so much of your electricity usage can be shifted to another time.  Reliant’s customers live in Texas.  And in Texas, the largest electricity expense for most people is air conditioning.  When it’s August and its 100 degrees, you aren’t going to want to wait until Friday night to turn on your A/C.

Other plan details

The contract term on this plan is 12 months.  If you choose to cancel the plan early, there is a $150 cancelation fee.

There is a fixed monthly CenterPoint Energy Delivery charge of $4.39.  This charge is the same for every customer in the CenterPoint delivery area. Some providers choose to pass this cost straight through while others such as the Flash Bundled 12 plan by Express Energy, bundle that extra cost into the electricity rate associated with the plan.

The plan uses 15% renewable energy.  Although, you have the option to request that 100% solar energy be used for the plan at no additional cost.