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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

TXU Ultimate Summer Pass 12 – What You Need To Know

The Ultimate Summer Pass 12 is TXU’s latest Time-of-Use (TOU) plan. TXU has a long history of popular TOU plans.  It’s been almost a decade since they released the TXU Free Nights plan which later became the Free Nights and Solar Days plan. Since then, many electricity providers have offered similar plans.

The Ultimate Summer Pass 12 plan includes two different time-of-use elements.

50% off electricity during the summer

You will receive a 50% discount from the TXU energy charge during the summer months.  This plan defines the summer months as being between June 1st and September 30th.  Note that this discount applies only to the Energy Charge portion of your bill.  It does not apply to the TDU charges that TXU collects on behalf of your local delivery utility.  If you live in the Dallas or Fort Worth area this is a fee that goes to Oncor.  Currently this rate is 3.89¢/kWh.

Free Hottest Days

In addition to the 50% discount during summer months, you will pay an Energy Charge of 0¢/KWh on the three hottest days each month from June to September .    This is not exactly free electricity because the TDU pass thru charges still apply.

TXU will use designated local weather stations to determine which days near you are the hottest.  If there is a tie, your highest usage days among those hottest days will used for your free days.

What else you need to know about the TXU Ultimate Summer Pass 12 Plan

Your bill will consist of 3 elements.

Energy charge – This represents the biggest part of your electric bill and is the portion of the bill that is eligible for the 50% off and free days.  The Energy Charge is based on the TDU area you live in.  See the table below for Energy Charges by area.  These rates are current as of the rollout of the plan.  But electricity rates in Texas change often.  So always review current rates and the current electricity facts label (EFL) before you enroll in this or any plan.

TDUEnergy Charge
Centerpoint16.1¢/kWh
Oncor14.3¢/kWh
AEP North14.4¢/kWh
AEP South14.4¢/kWh

Base Charge – This is a flat $9.95 monthly charge regardless of how much power you use.

TDU delivery charges – Any plan from any electric company in Texas has TDU charges included.  Sometimes they are bundled with the energy charge.  But usually, they are broken out separately.

So what is the electricity rate on the TXU Ultimate Summer Pass 12 plan?

TXU Ultimate Summer Pass 12 Terms

For the rollout, TXU is advertising a rate of 16.9¢/kWh for 1000 kWh of usage in the Oncor (DFW) area.  When you add the per kWh charges together you get a total of 20.8¢/kWh for your non-summer days.

During the summer months, this rate drops to 11.05¢/Kwh.  On the three hottest days the rate is equal to the TDU charge of 3.89¢/kWh

TXU has done the math to arrive at an average rate of 16.9¢/kWh over the length of your contract.

Cancellation Fee

The plan has a cancelation fee of $150.00 if you leave before the 12 month term.

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 Bitcoin Will Help Stabilize the Texas Grid and Lower Electricity Rates

It’s no surprise that bitcoin has found its way to Texas in a big way.  The Texas ethos and bitcoin ethos are perfectly aligned.  Texas culture embraces individualism, hands-off government, and personal sovereignty.   Add to that a business-friendly environment, low taxes and cheap electricity and it becomes clear why the bitcoin mining industry is flocking to Texas.

Bitcoin mining is energy intensive.   At the current level of difficulty, mining one bitcoin requires about 145,000 kWh of electricity.  Bitcoin miners can lock in long term agreements to purchase electricity from Texas electricity producers for as little as 5¢ per kWh.  That means the electricity cost to mine one bitcoin in Texas is as little $7,200.  There are, of course, other expenses involved including hardware and facilities.  But cheap electricity is a huge benefit of operating in Texas.  And when bitcoin miners relocate to Texas, the arrangement is mutually beneficial.  Bitcoin mining can have a positive impact on the Texas electricity grid.

Benefits for the Texas electricity grid

One of the major challenges of any electricity grid is maintaining enough peak capacity to meet the needs of the grid during times of peak demand.  During normal times, much of the capacity in a grid sets idol because there is no need for the power and no place to put it to use.  But that capacity must be available for when there is a surge of demand on the grid.  This can happen on hot summer days or during a winter storm.

Many regulated jurisdictions address the peak capacity dilemma by operating what is known as a capacity market.  In a capacity market, power producers are paid not just on what electricity they sell to the grid, but on what capacity they add to the system.  This is one way of making sure there is enough spare capacity to meet the demand.

Texas doesn’t operate a capacity market.  Texas has an energy-only market which relies on market forces to ensure that producers are incentivized to build enough power to meet the state’s needs.  Such a system relies on market signals to encourage private companies to build generation capacity.   When demand for electricity rises, the real-time price of electricity goes up.  The increase in prices during these peak demand periods can be dramatic.  Many producers make most of their money during these events.

Bitcoin Mining Servers

So how does bitcoin help solve the capacity problem?

When the grid is demanding more electricity than is being produced by power plants, there are two basic ways to solve the problem.  You can either put more electricity into the grid or reduce the demand for power. When it comes to balancing out the real time supply/demand equation on the grid, an extra watt of power added to the grid is indistinguishable from a watt removed from the demand side.  What is important is to balance out the power going into the grid with the power being drawn from the grid.

This is where bitcoin mining operations can help solve Texas’ demand/supply balance challenges.  Bitcoin mining operations require huge amounts of electricity to power the computers that solve the algorithms that keep the bitcoin network secure.  Cryptocurrency mining is a process that helps secure the blockchain and rewards miners with bitcoin for their efforts. Miners use computer hardware to solve complex mathematical problems in order to add new blocks to the blockchain and are rewarded with bitcoin for their work.   Each bitcoin mining facility is only a tiny part of the global network.  They can be powered down in seconds when the need arises with no consequences for the wider network.

In this way they become a perfectly responsive element of the electricity grid.  They can reduce power demand even faster than new electricity production can be brought online.  That means that during times of strain on the grid, they can instantly relieve stress on the system.

Why would they be willing to temporality stop their mining operations?

There is a concept in the power markets know as demand response.  Demand response means that consumers of electricity can be paid to reduce their electricity consumption at times when the grid is strained, and power prices are spiking.    As mentioned before, reducing demand on the grid is functionally equivalent to adding more power into the grid.

Bitcoin operators don’t need turn off their computers out of pure altruism.  Once again, market forces are at play here.  When the demand for electricity surges, bitcoin mining facilities then can act as virtual power plants.  They will be compensated for the amount of electricity demand they remove from the system.  As demand on the grid goes up and prices rise, it will become more profitable for these companies to not run their mining operations and instead be paid as a demand response resource.

Bitcoin miners will increase capacity on the Texas grid

Bitcoin mining operations will encourage additional electricity capacity for the Texas grid at no additional cost to the average electricity consumer.  They become ready made steady customers for power producers and they use power at a constant rate around the clock.  This makes it profitable for new power capacity to be developed.  Bitcoin will build new power generation in Texas.

The largest operations prebuy large amount of electricity from producers.  This creates a baseline of demand for electricity that incentivizes power producers to build and maintain larger amounts of low cost electricity in Texas.  During times of stress on the grid bitcoin miners can reduce or completely turn off their power consumption to help balance out the grid.

Large bitcoin miners will enter into contracts to make long term purchases of electricity from producers.  They will buy large blocks of electricity at a fixed and low price.  When wholesale prices go up, it becomes profitable for them to sell that electricity to the grid.  Because producers have long term contracts to produce large blocks of electricity, they are financially incentivized to build new capacity.  During times of need, that capacity is available to feed the grid.

In Summary

Large scale crypto mining operations act as shock absorbers in the system.  When demand for electricity is low, they can use the excess power being generated by the system.  When demand and spot electricity prices spike, they can curtail their operations to relieve strain from the grid.  They are financially incentivized to do so because during those periods, it will become more profitable to turn their computers off than to continue running them.  They will increase the overall capacity of the Texas grid and make it more stable at the same time.

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.

What is the Cheapest TXU Electricity Plan

TXU Electricity Rates

Let’s look at some of the electricity plans available from TXU Energy and see which plan might be the best for your specific circumstances.

There are 3 basic questions you need to ask yourself before you select an electricity plan:

  • How much electricity do I use

  • Am I willing to adjust my habits around when I use my electricity

  • Is renewable energy an important consideration for me in choosing my next electricity plan

Best TXU Energy Plan for an Apartment

If you live in an apartment you probably don’t use a ton of electricity.  A good estimate for how much electricity the average apartment in Texas uses each much is around 500 kWh per month.  With that in mind, you need to look at the average rate for TXU electricity plans at the 500 kWh usage level.

Select 500kWh home size
Vaultelectricty.com allows you to select your home size to compare rates

Using the Vaultelectricity.com electricity rate comparison tool, select Apartment from the Home Size drop down box.  For our purposes today, we will look at electricity rates in the Houston area.  It is important, however, that you enter your own zip code in the search box to find the best rates on TXU plans in your area.

We see that the Clear Deal 12 is the cheapest electricity plan listed by TXU in Houston. Again, the rate listed in the image below is probably not current depending on when you are reading this.  Make sure that you do a fresh search for the most current rates.

Cheapest TXU Energy Plan for 500kWh usage level

The Clear Deal 12 plan includes a bill credit that kicks in when your usage in a billing cycle hits 800 kWhs.  So, if you use a little more electricity than the average apartment, you will have a cheaper rate on your bill once you go over 800 kWh.

Electricity Facts Label for TXU Clear Deal 12 Plan
Check our current listings for the up to date EFL and rates

Notice on the Electricity Fact Label associated with the plan above , that the base energy charge goes up when your usage exceeds 1200 kWh.  This is more proof that you must pay attention to how much electricity you use when selecting an energy plan.

Best TXU Plan if you live in a Home

To find the best electricity rates for a home, select either the Large Home (2000 kWh per month) or Small Home (1000 kWh per month) options from the Home size dropdown.  Most electricity providers in Texas tailor specific electric plans to meet the needs of either small, medium, or large consumers of residential electricity.

In the case of TXU, the Clear Deal 12 plan also comes up as the cheapest option for large and small homes.  Although, the rate at 1000 kWh is cheaper than the average rate at 2000 kWh.  This is because, as mentioned before, the Clear Deal 12 plan is really targeted at the 800 – 1200 kWh per month usage range.

Shift You Habits and Save on Electricity

TXU energy has a couple of plans aimed at consumers who are willing to adjust when they use their power in order to reduce their electric bills.  These plans fall into the broad category of Time of Use plans.  Whether or not you can save on these plans is highly dependent on how you choose to use your power.

We have a more complete description of the TXU Free Nights and Solar Days plan here.  But, in brief, the plan offers free electricity at night and relies on solar energy for your daytime power.  Don’t worry.  This doesn’t mean you have to put solar panels on your roof.  TXU is buying solar generated electricity from the grid.

You have to make sure that, if you choose this plan, you are able to use a lot of your electricity during the free nighttime period.  The electricity rate for day time usage is much higher than the Clear Deal 12 plan.

If you would prefer to cram as much of your power use as possible into specific days of the month, rather than at night time, you may prefer the Season Pass 12 plan from TXU.   This plan looks at the 7 highest usage days on your monthly bill and removes that cost from your bill.

More About TXU Energy

Texas residents who are looking to save on their electricity bill might be considering changing their power plan. TXU energy creates plans for individual homes and businesses in Texas, so it can provide competitive rates for you depending on what you need. When you shop for electricity plans with TXU, they have plans that are exclusive to your usage habits.  TXU Energy is one of the largest and oldest electric companies in Texas.  In certain parts of the state such as the Dallas/Fort Worth area, it is easily one of the most recognizable brands.

The Age of Your Home Will Impact Your Electricity Bill

If you are looking to buy or rent a new home in Texas you may want to consider how the age of the home will impact your electricity bill.

The U.S. Green Building Council has stated that newer homes are more energy efficient than older homes by as much as 30%. The main reason for this is the installation of new technologies and materials in the construction of newer homes. Some of these technologies include better insulation, more efficient windows, and high-performance heating and cooling systems.

Building codes now require more energy efficient building practices

Local building codes are now written to require the incorporation of energy efficient practices into the design and construction of buildings. You may be surprised at how thorough some of these regulations are. They govern all aspects of the building process down to and including that a certain percentage of the light bulbs installed be of the high efficiency variety.

These codes are continually being updated resulting in more and more implementation of the most energy efficient designs for new builds. Older homes were built during a time when the codes where less stringent. The result is lower electricity usage in new builds compared to that of older homes.

Energy efficient windows lower electricity costs

Newer homes are typically built with modern energy efficient windows. Energy-efficient windows can help you save money on your electricity costs. By sealing off your home from the weather, they keep the warm air in during the winter and the cool air in during the summer. This means that you can lower your thermostat settings and still stay comfortable.

According to the U.S. Department of Energy, “Energy-efficient windows can save you up to 30% on your annual energy bill.”

Some of the other benefits of energy-efficient windows include:

– Reducing your carbon footprint

– Increasing the value of your home

– Helping you save money on your energy bills

Newer homes are typically better insulated

The electricity usage in a typical home increases when the insulation is not adequate. This is because the insulation keeps the warm air inside during the winter, and the cool air inside during the summer. The improved insulation found in newer homes will save electricity and lower energy bills.

More energy efficient appliances are typically found in newer homes

Newer homes often use less electricity because they come with newer high-efficiency appliances. This includes light bulbs that are more energy efficient. It also includes using power strips to prevent electricity spikes when an appliance is turned on or off.

Newer homes usually have better heating and air systems

Keeping your home at a comfortable temperature will be your biggest energy need. A high-performance heating and cooling system is one of the best ways to save electricity in a home. These systems are designed to be very efficient in converting energy into heat or cold. They also use less electricity than a standard heating or cooling system.

Newer homes are also more likely to have mini-split systems, which are growing in popularity because they are so efficient. They consist of an outdoor compressor and one or more indoor air-handling units.

The best way to save on electricity is to shop around for a cheaper rate

Of course even in Texas where electricity bills can run high, most people are not going to make their home buying decision based on potential electricity costs. But it is a factor to consider when you calculate the cost of your next home. Regardless of how much electricity your home uses you can always lower your electricity bill by insuring that you’ve chosen the cheapest electricity rate available to you by shopping for the best deals.