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Lower Corporate Taxes Mean Lower Electricity Rates For Texas

Texas electricityThe Texas PUC is pushing the state’s utilities to pass through some of the benefits of the recently passed corporate tax cuts in the form of lower electricity rates.

Retail electricity is deregulated in Texas. However, the transmission and distribution utilities that deliver electricity around the state are still subject to the state’s oversight.

Oncor, the state’s largest distribution utility which covers Dallas, Fort Worth and much of North Texas, has already agreed to pass all of the millions of dollars of expected tax savings along to consumers.  Oncor agreed to pass the savings along to customers as part of a rate review which is a formal process in which the PUC reviews the appropriateness of rates being charged by the utility.  No exact details have been determined with respect to how the savings will be passed along. The rate review was actually completed before the tax reform bill was passed but there was a commitment in principle to passing along the savings.  It’s not yet know exactly how much Oncor will save from the lower corporate tax rates but with a $245 million tax bill in 2017 future saving are likely to be in the tens of millions of dollars.

Several of the state’s other electrical utilities have also agreed to pass along the savings to consumers.  These include Southwestern Electric Power Co., and El Paso Electric.  Centerpoint, which is responsible for delivery to the Houston area, has yet to specifically commit to lowering electricity rates in response to the tax cuts.

TDU fees in Texas appear as a pass thru item on consumer’s electric bills.  They are the same for any consumer within the delivery area regardless of the Retail Electricity Provider serving the address.  Lowering these pass thru fees will lower the effective electricity rate for millions of Texas rate payers.

Texas Electricity Rates to Go Up In 2018

Texas electricity rates are expected to go up in 2018 as the state’s electricity grid experiences growing pains.  2018 will see the closing of a number of coal fueled power plants.  Coal has been giving way to cheaper electricity fuel sources for a number of years.

The growth in wind power and natural gas fueled power will offset the loss in coal over time but for the summer of 2018, expected record demand for electricity will converge with power plant closures to put a squeeze on wholesale electricity rates.  This, in turn, will cause the retail electricity prices paid by most Texas consumers to increase. The rise in wholesale rates could be particularly dangerous for consumers who have electricity plans that are tied directly to the wholesale price of electricity.

The rise in prices could be felt more in areas like Houston.  Houston electricity rates tend to be higher that rates in the Dallas / Fort Worth area.  Average summer temperatures also tend to be higher in the southern part of the state.

Reserves to fall below comfort level

The state of Texas typically targets a reserve margin of 13.75%.  This means that the available supply of electricity should exceed the projected peak demand for electricity by at least that amount.  This give a cushion for unforeseen spikes in demand or lose of capacity such as could be experienced during a large storm.

The most recent projections by ERCOT put the reserve margin during the summer of 2018 at 9.3%.  This number is expected to climb to 11.7% by the summer of 2019 as newer power plants come on line.

 

See Also: Hurricane Harvey’s Impact on Texas Electricity Grid
See Also: Oncor Proposes Electricity Rate Increase for Many Texans

 

Hurricane Harvey’s Impact on Texas Electricity Grid

High winds and significant flooding along the Texas Gulf Coast substantially impacted the Texas electricity grid.  The transmission and distribution infrastructure sustained severe damage in the southern portion of the state as a result of Harvey’s landfall.  10,000 megawatts of electricity was lost to the grid according to the Electric Reliability Council of Texas (ERCOT).

The loss of generation capacity was offset by a large drop in electricity demand across the state.  The loss in demand was a direct result of downed transmission lines.  Leaving hundreds of thousands of Texans without power at times.  The grid also benefited from a drop in temperatures across the state during the period when the loss of capacity was at its greatest.

Many factors associated with the storm combined to reduce electricity output.  Several power plants went offline as a result of flooding that impacted the delivery of fuel supplies to the generator facilities.  These same transportation difficulties kept personnel needed to run the plants from getting to work.

Near the coast where winds exceeded 130 miles per hour, many high voltage transmission lines were taken out of service by the damaging winds.  Further inland in the Houston area, flooding took a larger toll on transmission facilities.  Capacity was also lost due to loss of wind power.  Wind turbines are turned off when wind exceeds 55 mph in order to avoid damaging the equipment.

Power loss along with the failure of a backup generator were to blame for explosions at the Arkema chemical plant.  The plant stored chemicals that become volatile when not cooled to a certain temperature.

Meanwhile, many electricity providers in Texas stepped up to help in relief and rebuilding efforts.  NRG, the parent company of Reliant Energy and several other electric brands in Texas donated one million dollars to organizations including the Red Cross, and the J.J. Watt Houston Flood Relief Fund.   Direct Energy, the parent company of Bounce energy and the Direct Energy retail brand is matching donations up to $25,000 the Red Cross.  TXU Energy is allocating $500,000 to help customers who are unable to pay their electric bills in the wake of Harvey.