Texas Customers Are Consistently Switching Electric Providers
Not surprisingly, customers will switch their retail electric company if they feel they are being taken advantage of, or if brand trust erodes. Because the Texas electricity market is mostly deregulated, there are plenty of options in the area. And as Business Wire has recently showcased through a 2019 survey by Cogent Syndicated, there are a lot of customers regularly switching their providers these days.
The data shows that 16 REPs in deregulated parts of Texas have shown an increase in brand trust, while 13 have shown a dip in brand trust. This would certainly mean a lot of switches for the 13 who were dissatisfied. Cogent puts it at about 25%.
The study by Cogent shows the strong correlation between trust and longevity of customer base. Transparency is obviously important. And with such a high percentage of people preferring Retail Electric Providers (the competitive providers in deregulated Texas), brand trust is as important as ever.
The numbers from the study say that “ after 17 years of deregulation, 38% of Texans prefer to purchase their electricity from a REP, while 28% would like to use their incumbent utility.” A lot of people choose to go through the incumbent utility because they may not understand the ease of switching, or because they aren’t aware they could be saving more money. Electricity rates in Texas can vary substantially from one electric company to the next.
As the Houston Chronicle states, historically, many haven’t switched despite the amount of money they could save if they did switch. That looks to be changing. Because some companies hike up rates after initial promotional offers, there is a lot of erosion of trust. And clearly, as Cogent has pointed out, many are actually switching because they customers are realizing that prices are dropping, so they should be paying less and with a provider that looks out for customer savings over profitability.
Texas Heat Wave Means Record-Setting Demand for Electricity
Texas is hot right now, and demand electricity demand is even hotter. Consumers are combating the temperature by turning up their A/C dial, but this is resulting in record-setting electricity demands.
As Reuters has laid out, the demand has been steadily rising. These demands are happening despite The Electric Reliability Council of Texas (ERCOT) forecasting lower reserve margins overall in their most recent Seasonal Assessment of Resource Adequacy(SARA) report.
ERCOT and EIA Findings
In the summer SARA report, ERCOT expresses the potential need to enter Energy Emergency Alert (EEA) status to ensure the longevity of the electrical grid. They state that the “final summer SARA report includes a forecasted peak demand of 74,853 MW, which is 1,300 MW higher than the all-time peak demand record set last summer on July 19.”
ERCOT also states that the forecast of total electricity generation is higher than it was during preliminary findings in March, meaning that total generation capacity is up, but electricity demands are still at record levels due to the sweltering Texas heat.
The U.S. Energy Information Administration (EIA) says that ERCOT surpassed the record for peak hourly load in July of last year. This year they report that just the start of the Texas heat wave was already producing heavy demand levels: they reported that from July 15th to July 22nd, “the demand in the lower states peaked at 7o4 gigawatts (GW).”
The EIA also states that in 2017, gigawatts reached the 718 mark, meaning that this summer has definitely seen a huge demand. This will continue as temperatures stay humid and hot.
Increased Electricity Rates a Result of Lower Electricity Generation?
Generators are also being retired because low electricity prices are making it hard to justify their operation. Commensurate with the price of gas, some generators are not turning a profit because natural gas drives most of Texas power. So, as the Permian continues its profitable outpouring, generators disappear. And an absence of generators lowers the available reserve for electricity.
As Keith Poli breaks down in this post, prices there will most likely be an increase because of a dearth of electricity generation to meet the higher demands: “Higher real-time prices this summer would likely increase forward prices through 2022 or even longer, until enough new generation is in ERCOT’s planning queue and under construction. “
At this point, we just have to wait and see what comes out of this heatwave, and if the rises in temperature are illuminating future weaknesses in the grid. Once the heatwave cools some, and ERCOT publishes their data on the demand, we will get a more accurate read on just how much this heat wave affected electricity demand.
Analyzing The ERCOT Reserve Margin Prediction
Earlier this year, the Electric Reliability Council of Texas (ERCOT) made an optimistic prediction that raised alarms for NRG’s CEO, Mauricio Gutierrez. According to Gutierrez, ERCOT’s prediction that the next five years are looking good for Texas electricity generation and reserves is not true.
Gutierrez has said that ERCOT used outdated information in their latest forecast. He goes on to say that for a multi-year forecast (2020-2024), it’s suspicious that ERCOT included 1.7 gigawatts of power capacity from generators that are non-functional for the next 5 years. This doesn’t include another 1.4 gigawatts from thermal generation plants that are to be retired.
According to the NRG CEO, the amount of phantom power that ERCOT included in the report, accounts for 4% of the reserve margin. Currently, the reserve margin is around 8.6%, so according to next year’s projection of 10.5%, renewable energy is going to account for an increase in energy reserves.
Renewable Energy’s Effect on Texas Reserve Margins
The reserve margin is defined by the U.S. Energy Information Administration as following: “Reserve margin is (capacity minus demand)/demand, where ‘capacity’ is the expected maximum available supply and “demand” is expected peak demand.”
This means that if the Texas Grid has a reserve margin of 12%, then there is a 12% buffer between the forecasted peak demand (total electricity demand) and the amount of electricity stored in reserves.
But will renewable energy projects generate enough electricity to push the reserve margin in the range that ERCOT predicts?
So a lot of projects are always underway in Texas, meaning that the projections and optimistic increase in the reserve margin for the upcoming summers could be an accurate assumption.
Will ERCOT’s Prediction Hold up?
Back in December, ERCOT had already predicted a lower reserve margin because of “delays and cancellations of planned generation projects.” And we will see if the optimism for Texas electricity was accurate or a little “overstated”.
As the Houston Chronicle article states, NRG attempted to adjust the ERCOT report, they found that to reach a reserve margin in the 10-12% range, “Texas would need to add more than 17 gigawatts of new renewable generation sources in the next three years.” That’s a big margin considering that Texas currently has close to 80 gigawatts of total capacity. But time will surely tell.
Wholesale Electricity Rates in Texas Soar in Summer of 2019
This summer has seen dramatic spikes in wholesale electricity rates in Texas. ERCOT has called for emergency conservation of electricity as demand for energy has pushed the electricity grid to the brink of capacity.
August 2019 Texas Electricity Rate Update
The electricity market in Texas this August has been a tale of two markets. Wholesale electricity rates at times during the month spiked to levels seldom seen before. The electricity market in Texas is designed to drive up wholesale electricity rates substantially during times of extraordinary demand. Electricity producers make much of their annual revenue during such periods. This occurred multiple times throughout the month of August. With temperatures soaring to over 100 degrees in most of the state, grid capacity struggled to keep up with demand. At times the real-time price in the wholesale market hit an astonishing level of $9,000 per MW. This is the price cap set in place by grid authorities.
Despite the historically high wholesale prices, retail electricity rates actually managed to fall during the month of August. This is particularly true for plans targeting the 1000 kWh usage rate. The average electricity rate for electricity plans being offered in the Centerpoint (Houston) delivery area fell from 8.5¢/kWh in July to 7.6¢/kWh in August for 1000 kWh of usage.
The cheapest electricity rates for the 1000 kWh usage level in most parts of the state are currently being offered by Pulse Power. The Texas Saver 12 plan offered by Pulse has a rate of 7.0¢ per kWh in the Houston area. The 24 month version of this plan is even cheaper.
Many electricity providers are currently marketing electricity plans that aggressively seek to have a cheap average rate at the 1000 kWh usage level. As a shopper, however, you need to make sure that this fits your needs. Many of these plans have rates that jump substantially if you use 2000 kWhs of electricity or more for a given month.
Go Griddy Customers Burned
Meanwhile, consumers whose electric bills are tied directly to the wholesale price of electricity have had a very difficult month. Go Griddy is a retail electricity provider based out of California who promised Texas consumers savings by allowing them to buy directly from the wholesale market in exchange for a monthly membership fee. Customers of Griddy found themselves paying more that 100 times the price of a fixed rate electricity plan at times. Many unhappy Griddy customers took to social media to complain that their entire monthly budget was wiped out in a matter of a day or two.
Electricity rates for 2020 and Beyond
Although the turmoil in the wholesale market hasn’t directly hit customers who are on fixed rate electricity plans yet, wholesale prices will eventually impact the price consumers pay on their bills. Electricity rates in Texas have been steadily falling through out 2019. Even in the summer, when electricity rates usually go up, they have continued to decline. Look for rates to bottom out soon, however, and start to clime towards the end of this year and going into 2020.
How Much Does Texas Use in Energy Compared to the Rest of the US?
Do Texans lead the U.S. in energy consumption? According to a 2017 report compiled by the U.S. Energy Information Administration, we do. The Lone Star State has kept this streak going for almost 60 years. If you’re a trivia buff, check this out: about 13 percent of the energy consumed in the U.S. comes from Texas. Makes sense, after all, Texas is the second most populated state, and the second largest by land area. Here’s another staggering statistic to throw around at your next trivia match: the power consumed in Texas is nearly 100 times more than the state of Vermont!
Electricity rates in Texas typically trend higher as summer approaches. Summer brings high temperatures and high demand for electricity which typically puts upward pressure on rates. So far this season, however, electricity rates are continuing their year-long decline.
The average electricity rate available in the Oncor delivery area fell to 7.6¢ per kWh in June for the 1,000 kWh usage level. This was down from 7.9¢ in the previous month. In fact, average rates ticked down for all deregulated regions of Texas across all usage levels.
Texas Electricity Rate Chart
Gexa energy is still offering 24 month and 36 month electricity plans that are at or below the best rates being offered for 12 month plans. This represents a good opportunity for homeowners to lock in the current rates for a long time.
Once again, the cheapest rates available for 1000 kWh usage levels are mostly from electric plans offered by 4Change Energy and Gexa Energy. For those looking for cheap electricity for an apartment, all of the cheapest plans listed currently are from Trieagle. Trieagle also has competitive rates for larger homes that usage around 2000 kWhs a month.
Among the larger electricity brands, TXU is offering generally cheaper rates than Reliant this summer.
Concerns About The Summer Electricity Supply in Texas
The continued downward trend in electricity rates in Texas is particularly interesting considering that the state is preparing for what could be a difficult summer for the Texas electricity grid. Officials are warning that Texas may run short of electricity this summer during peak demand periods. Look for emergency warnings from ERCOT this summer asking Texans to temporarily curtail their electricity usage during hot days when demand for electricity threatens to exceed the available supply.
If you’re in a deregulated energy market in Texas, you can choose REPs (Retail Energy Providers). The REP is the company that sells electricity to consumers, and it’s also the name that appears on the bill. Some people confuse the REP with the TDU. However, they’re different from the TDU (Transmission Distribution Utility). TDUs deliver power to everyone within a given region. It’s the TDU that maintains the power lines and responds to outages.
There are seven regions in Texas – the Panhandle, North Texas, East Texas, Central Texas, West Texas, South Texas and the Upper Gulf Coast. Below are some options of retail electrical providers’ plans by region.
6.8 million people live in the Dallas-Ft. Worth-Arlington metro area, with 7.1 million in the North Texas region. The population continues to grow. In fact, up to 7.8 million people are predicted to call the North Texas region home by 2020. The TDU for most of North Texas is Oncor, with the TNMP serving other parts. Residents and businesses can choose between a broad range of plans and providers. If you’re new to the area and have not established any credit, Payless Power offers pre-paid electricity plans, and everyone is approved. TXU is one of the best-known REPs in the area, offering a variety of plans including free nights and 100% renewable energy options. Don’t worry about coming up with a deposit when you choose the right plan from First Choice Power.
The region of East Texas represents 8% of Texas’ total population. Beaumont and Tyler are the two most populous cities in this region, and the residents in this region can choose an electrical provider. Oncor is the TDU serving most of East Texas, and the TNMP serves the rest. Residents can sign up for a free 3-day weekend electricity plan from Gexa or find a plan from Cirro Energy offering auto-pay options. If you’re new to the area, consider a plan from Payless Power, where everyone is approved, and you can have same day activation.
Residential and commercial customers in Central Texas cities like Killeen can choose electricity providers. The TDUs that serves the Central Texas area is the TNMP and Oncor. There are a variety of great electricity plans in this area. Businesses can find no term contract plans from Cirro Energy. If you want to make the switch to green energy, check out 100% renewable energy plans from TriEagle. Lock in a low green energy plan with a fixed rate from Direct Energy. With proper usage management, you can receive bill credits from plans offered by 4Change Energy.
Upper Gulf Coast
The region known as the upper gulf coast is where you’ll find Houston, the largest city in Texas. Centerpoint is the TDU for the Houston area. Discover great plans for larger homes to save you money, such as Eco Saver plans from 4Change Energy. If you’ve just moved to the Houston area and have yet to establish credit, consider a no credit check, no deposit plan from Payless Power. If you work from home, you’ll want to look into plans with free mornings and nights from Gexa. When you’re ready to go green, you can make the switch to Green Mountain Energy or go with the Houston-based Champion Energy, among others.
The South Texas region has seen a 7-percent increase in population since 2010. The cities of San Antonio and Corpus Christi reside in this region. AEP Central is the TDU for South Texas. San Antonio is exempt from deregulation, but you can find cheap electricity rates and plans in Corpus Christi and other areas in this region. Lock in a great rate with a 24-month fixed electricity plan from First Choice Power. If you want to switch to a renewable energy plan, TriEagle features 100% renewable energy options, and TXU Energy offers green energy plans with free nights. Worried about bad credit? Payless Power provides no credit check electricity.
You can find deregulated electricity providers in West Texas cities like Abilene. Oncor, AEP, North and TNMP are the TDUs that serve this region. 4Change Energy offers generous save plans, which are great for larger homes. If you’re planning to move to another place, Direct Energy and TXU Energy offer convenient month-to-month plans, and you can find plans by First Choice Power with no contract required. Gexa Energy wants you to be happy with their services, so they offer a 60-day happiness guarantee.
The Texas panhandle accounts for 1.7% of the state’s population. Most of the panhandle region of Texas has not adopted power to choose electricity.