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Texas Electric Companies Respond to Coronavirus Impact

*** Updated 3/25/2020*****************

The Texas PUC Chairman DeAnn Walker has put forth a proposal to assist Texans who are having trouble paying their electricity bills during the Covid-19shut down.  The plan also has provisions for cushioning the impact on retail electricity providers and helping to keep them solvent during a moratorium on disconnects.

 

The proposal would replace the patchwork approach by the local utilities (TDUS) who have separately committed to suspend disconnects already.  If adopted in it’s proposed form, the plan will prevent all retail electricity providersin electric choice areas in the state of Texas from disconnecting residential customer for non-payment for the duration of the state of emergency declared by Governor Abbott.

 

The plan would reimburse electricity providers at a fixed rate for electricity they provide to residential customers who are not able to pay their bills.  This will be funded by a new pass through fee charged by the TDUs.  This would ultimately flow through to all electricity customers including residential and business electricity users.

 

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Most of the largest electricity providers in the state of Texas have announced that they are suspending disconnects due to non-payment at this time.

 

  • The Texas PUC this week encouraged all Texas electric companies to suspend disconnects.

 

  • TXU is extending payment due dates and waiving fees. They are also reducing down payments and offering to spread balances over multiple installments.

 

  • Reliant Energy and its sister brands including Cirro, and Green Mountain energy have announced similar efforts.

 

  • The distribution utilities responsible for delivering electricity to Texans have suspended disconnects for non-payment until further notice during the coronavirus outbreak. These include Oncor, which maintains he powerlines and is responsible for electricity delivery for the Dallas Fort Worth area and other parts of the state.

 

  • Centerpoint in the Houston area has suspended disconnects.

 

  • AEP Texas and Texas-New Mexico Power has also suspended disconnects at this time.

 

Impact on Electricity Providers in Texas

The decision to suspend disconnects, however, could have a large impact on the Texas electricity market.  Retail electricity providers in Texas must pay for the electricity they provide end users by purchasing it on the wholesale market.  If a substantial percentage of customers fail to pay their electricity bills, the electric providers could run out of money and fail.   This could lead to higher electricity rates for all Texans.

EIA Short Term Energy Outlook

The EIA recently put out a short-term energy outlook, which analyzed how the upcoming winter will look for all areas of the energy industry. Because of just how severe this summer was, perhaps it’s pressing to look ahead and contrast with what looks to be a completely manageable winter for the U.S. and by extension, Texas. 

This is extrapolated from the EIA short-term winter fuels outlook as well. But as is discussed, a forecasted “milder weather” will mean less fuel usage to heat houses. Depending on region, a Texas home heated by natural gas will be more expensive due to natural gas markets, as is discussed in the same report: 

“In contrast to the national average, EIA forecasts that expenditures will increase for homes that heat with natural gas in the Midwest and South as a result of higher retail natural gas prices.”

But on average, everything is expected to drop in the home-heating department, meaning that the majority of customers will see a drop in their bill by 1%.

The overall outlook also extends into the beginnings of 2020, so the data looks beyond the winter on a more surface level basis. We will briefly explore electricity, coal, renewables, emissions, and natural gas when considering the EIA’s projections.

Electricity, Coal, and Natural Gas: Greatest Hits of the Energy Outlook

Perhaps a positive effect of having warm overall temperatures this year is that we can expect a milder winter. This means less expensive energy bills due to decreased furnace usage and winter fuels in Texas and other southwestern states mainly, as discussed above. 

Looking past the winter and into 2020, the amount of electricity generated by natural gas plants will rise. This will most likely be necessitated by the continual decrease of coal plants. The EIA says coal will continue to fall by another 11% in 2020. 

Additionally, natural gas saw increased consumption this year, but because surplus storage, the prices stayed low in the last half of the year. The EIA forecasts natural gas production to stay relatively flat and prices to actually decrease through the early 2020 year because of the oversupply at the Henry Hub. This is all despite an increasing demand for natural gas to generate electricity across the country. 

Renewables and Emissions

Electricity derived from wind energy will increase from 10% to 12% in 2020, owing to the continual rise in renewable energy initiatives (especially in Texas). As the outlook states, “Texas accounts for 19% of the U.S. non-hydropower renewables generation in 2019 and 22% in 2020.”

As coal slowly dies out, CO2 levels are going to keep falling. By this time next year, CO2 levels will have dropped 4.1% in comparison to 2018 levels. A lot of this has to do with what they project to be a year that sees less household energy consumption overall.

What to Expect From Wholesale Electricity Rates in 2020 and Beyond 

Using data from 2018 on the wholesale electricity market, we can view the somewhat consistent pricing of wholesale electricity from the ERCOT North hub – from the months of January to June. Yet this consistency is just a lesson in perceived stability, as wholesale electricity, after all,  is rife with volatility. 

Wholesale prices this year alone were a wild ride as graphs spiked and danced to reflect the surging prices of extreme heat. But that’s just the nature of the market; as all commodities go, things fluctuate and you can only ride out the waves until a baseline homeostasis replaces the chaos.

Given that we accept this volatility, what if even more erratic behavior is in the books for wholesale electricity in the near future? 

Let’s explore that question in a little more detail

More Volatility on the Horizon?

Let’s pursue an answer to the following question: if wholesale electricity prices fluctuate in tandem with renewable sources like wind and solar, will an increased reliance on renewables simply necessitate a more volatile market?

There has always been a reliability problem for renewables in the sense that wind can stall for days on end, leading to an electricity demand that outweighs electricity generation. 

But when the wind is really rolling, this often means negative wholesale electricity prices. These wholesale prices don’t necessarily mean cheaper retail electricity for consumers, but only those who are trading on the wholesale power market and who can utilize the cheap electricity. Often though, negative wholesale electricity prices simply mean a surplus of electricity generation + a decreased demand, meaning that many companies pay factories to take excess energy off their hands. After all, it’s often cheaper to burn up excess energy than power down an entire factory. 

With this being said though, if renewables continue to grow, and we get closer and closer to an all-renewable grid, will this reliance on wind and solar simply mean more violent fluctuations of negative or exorbitant prices? Unless battery storage continues its positive trajectory, it just may.

Google (And Company) Will Hold a Huge Share of Electricity

According to Green Tech Media, Google has laid claim to even more renewable energy investments, meaning that they will hold the power to sway wholesale markets in the future. And tech giants continue a similar trajectory and push for renewables, the markets might rise and fall in conjunction even more with more green-minded stakeholders. 

But alas, Google isn’t only looking to decarbonize the grid but also to up the ante on energy storage technology, meaning that when the wind blows strongest, and the sun shines its brightest, there will be plenty of energy for the cloudy, windless days.

Retail Renewable Electricity Rate Outlook 

While anomalies can happen in the wholesale market – think back to the huge price spike with Griddy over the summer – the retail world is usually much more stable. This isn’t necessarily true for the town of Georgetown, Texas though, who is currently seeing higher retail electricity costs as a result of switching to all renewables. 

Georgetown is an example of a city generating far more power than needed and having to take financial losses despite having surplus power – an odd but common happening in the power world for those wanting to get rid of excess electricity.

The residents of Georgetown saw their bill raised by 22% from last year. This has more to do with lower gas prices mixed with excess energy that the town takes financial losses for. While a unique case of a 100% renewable town, will the volatility of renewables bleed into retail electricity bills and make them much more erratic? Sort of like Griddy’s wholesale model?

That’s hard to say at this point. Many are still really optimistic about renewables offering a much more promising future, but at this stage, the current paradigm doesn’t yet support a 100% renewable initiative. Checking in with Georgetown will be interesting in a year or two to see how electricity prices have faired.

Machine Learning for Cheaper Electricity Rates?

For renewable customers, some companies are using machine learning to scour utilities for the cheapest renewable electricity. Given the oft-discussed volatility of wholesale electricity prices, especially those that base their prices on something as erratic as wind levels and sunshine (wind and solar), machine learning offers automation and a way to break through the noise of the market to find the proverbial signal. 

What this means is that consumers get the cheapest prices in real-time and get advisories on the wholesale market that directly factors into retail pricing. There are even technological developments that allow smart thermostats to adjust to price spikes ahead of time, meaning that households can cool down or heat up quickly before a costly spike in the wholesale market affects the bill. This would offer incredibly cheap prices if there was dynamic adjustment through connected technologies. 

Wholesale and Retail Worlds Collide

The Baker Institute put out a study on the economic impact of the Texas reform in 2002, where the electricity market was deregulated. Through that study they found that the stronger competition of deregulated markets still has discernible effects on wholesale market prices. They also found that although the competitive electricity markets (deregulated areas of Texas) cost higher on average from 2002 and upwards, but that the disparity between deregulated and regulated prices has shrunk considerably in that time.

Substituting Natural Gas with Electricity (In Texas)?

There is no shortage of new technologies that tout themselves as the next big thing in energy and saving consumers money. But according to a paper by Pecan Street, replacing natural gas usage for electricity would account for more than $400 for average annual savings in the ERCOT area of Texas.

Because close to a third of all natural gas in the country is burned within houses, a switch to electricity has vast benefits for the environment, minimizing emissions in the process. 

A lot of naysayers will point out that the grid will buckle under the added demand, but this switch from natural gas to electricity would clearly not happen overnight. With enough delicacy, the powers at be and ERCOT can achieve a balancing act that doesn’t drain too much of the grid’s capacity. 

ERCOT might not be the most open to hear these sorts of ideas coming off of the crazy summer that Texas had, but many are stating that the grid can handle it. This can lead to a lot of savings if operations are changed accordingly to reinforce a stronger electrification of households.

 Natural Gas as a Long Term Plan? 

Because natural gas is such a staple of the Texas economy, it’s hard to imagine that it will disappear any time soon. That hasn’t stopped cities from banning natural gas though. Cities like Berkeley, California and parts of Massachusetts are banning it outright.

Overall, what may win out is a collection of cities that are investing in the longevity of the climate – The Sierra Club being a notable mention as 100 cities have banded together to try and go 100% renewable by 2050. This could very well tip the dominos in favor of a more electrified grid.

Those who are rallying for the integrity of the natural gas industry – the suppliers and drillers – are fighting back against any bans. After all, natural gas usage has helped the recent coal phaseout in the Texas and abroad, but there’s a caveat, as Daniel Cohan of The Hill points out: natural gas means methane, which is “roughly 30 times as potent as carbon dioxide.” Sure, coal has fallen, but with it comes higher methane levels – often a result of natural gas ‘flaring’.

Again, all of this leads back to the central question: 

Does it make sense to keep investing in natural gas for the long term, or is it a good idea to instead invest in a more electrified country? 

Right now seems to be a crucial transitionary period for more electrical connectivity, versus the traditional fossil fuel route of old.

Will Texas Offer More Help for Energy Bills in the Future?

Temperatures this summer were record setting. And with the high heat came expensive electricity bills that left many Texas customers unable to pay their bills. Air conditioning a house in the dog days of summer is not an easy task, especially if insulation is poor, or houses have not been weatherproofed.

With next summer potentially being just as hot for Texans, let’s explore some of the options that consumers have for getting help with energy bills. 

  • Consumers can get help through the Comprehensive Energy Assistance Program (CEAP), which is always an option for Texans who might qualify. It largely depends on your household size divided by your annual income.
  • You look up assistance programs in your local county. You would be surprised at the help that is available out there. For example, if you live in Tarrant County, they have a variety of options available. 
  • There are nonprofits who specialize in helping out during peak summer times as well. Be sure to reach out if you qualify.

Will Lite-Up Texas Make a Comeback? 

Continuing the subject of financial assistance for energy bills – which will continue to be relevant if global temperatures keep rising – will programs similar to Lite-Up Texas make a comeback any time soon? 

Lite-Up Texas was a program that helped lower income households through discounts and assistance, but it was discontinued in 2016. And penalty waivers stopped in 2017. The program itself was only offered in the deregulated parts of the state, which accounts for the largest portion after all.

Considering that the last two summers have been brutal, there’s a strong case for a similar sort of program to come back. Without it, a lot of REPs are forced to disconnect service for low income families, often when they need it most. Although utilities are not allowed to shut off the power during heat advisories, this still does not account for the sweltering weeks that fall just below that threshold. 

And the rising inability to pay electric bills isn’t just a Texas issue: in 2018, the EIA shared that 31% percent of all households in the country have a difficult time affording their energy bills. That’s a scary prospect, and will continue to get worse if temperatures increase without commensurate assistance. 

One viable option in Texas, specifically, is to offer customers the ability to tap into excess renewable energy, or to provide options for supplementary energy through renewable sources. If the development of microgrids continue to take off, there could even be a community reserve for lower income families, stored in utility-scale batteries or other similar storage options. 

Could Texas See a Similar Blackout to California?

Despite their best intentions to inform customers on the looming shutdown that would probably affect a million people, PG&E’s computer systems failed before they could adequately let those affected know. When it was all said and done, about 700,000 California residents were powerless.

PG&E as a utility is understandably under a lot of scrutiny. They have stated that it was most likely one of their downed transmission lines that led to the  deadliest wildfire in history, Camp Fire, last year. And this most recent outage put them under the magnifying glass again. 

Regardless, with everything as interconnected as they are,  and networks not having strong enough backup emergency operations in order to prepare for grid emergencies or shutdowns, there might be something to worry about if climate change continues to progress at its current rate.

A pressing question is this: could a similar scale blackout happen in Texas, say from a hurricane or tornado?

 

Tornadoes? Hurricanes?

Considering that the US experiences 147 big blackouts every year, as E&E News shares, it’s safe to assume that the number will only rise. The U.S. averages about 65 weather-related outages a year. 

For Texas in particular, Hurricane Ike in 2008 caused 7.5 million power outages in Texas and the midwestern states. Basically, anyone on the Gulf Coast is at obvious risk for hurricane damage, as well as the electric grid. All the reminder we need is Hurricane Harvey, which knocked out 10,000 Megawatts of electricity near the coast and Houston. Additionally, wind turbines were turned off because for their protection because they have a maximum recommended speed at 55 mph. Wind-generated electricity was, in turn, drastically reduced.

But despite the affected power lines, ERCOT was able to effectively manage the power problems because of cooler temperatures and high reserve margins to cover the emergency. 

Yet, what if hurricanes and tornadoes (like the recent tornados in Dallas) continue to grow more frequent, so that ERCOT doesn’t have the necessary electricity to meet the demand?  On a similar note, writers are wondering if California will ever have a solution for the increasingly prevalent wildfires. 

But there’s one thing that’s for sure, as the weather gets more extreme, so too policy makers, engineers, utilities, and so forth will need to change a lot about current infrastructure. Not only to prevent disasters, but to have adequate backup plans. Texas very well could be a state that is similarly affected, especially with the extreme heat we received this summer. Will Texas see as massive a blackout as California? Probably not, but don’t count it out entirely.