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Oncor Hikes Rates Yet Again

Oncor (Formally TXU) filed another rate hike request with the Public Utility Commission a rate-hike. This rate hike will is quite significant, with commercial customers seeing a 15.5% jump in rates, residential customers having their costs rise by 14.6%, and streetlight rates increasing by a whopping 25.9%.

Let’s not forget this is right on the heels of a rate increase by Oncor less than two years ago.

According to Oncor’s Chief Operating Officer Charles Jenkins, “The proposed new rates reflect both the investments we’ve made and the cost controls we’ve put in place, including recently refinancing a portion of our debt at lower interest rates and passing those savings on to customers.” Just ask a bondholder about that fiasco….

When Oncor announced just how high they were going to be raising rates, it was met with astonishment. Thomas Brocato, an Austin attorney who specializes in making cities’ cases before regulatory boards, said the 16.5-percent increase was “really surprising given the very favorable outcome they had in their last case.

Cities are still fighting Oncor’s previous rate hike, so this comes as a double whammy.

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.

Buffett May Be Buying Oncor

Legendary investor Warren Buffett may be close to buying Texas’ largest electricity utility according to reports.   Once part of the giant energy concern that included the retail arm of TXU, Oncor Electric Delivery has been up for sale for some time since the bankruptcy of its parent holding company Energy Future Holdings.

There have been numerous attempts to sell the unit already.  Offers by Hunt Consolidated Inc and NextEra Energy have both hit roadblocks thrown up by Texas regulators.  Buffett’s company Berkshire Hathaway is said to be offering $17.4 billion for the utility.

ONCOR is responsible for the transportation and distribution of electricity for a large portion of the Texas electricity marketplace including the Dallas and Fort Worth areas.  It is one of a handful of regional monopolies allowed to transmit the electricity that retail electricity providers sell to residential and commercial end users.   10 million electricity users in Texas are served by ONCOR.

Texas Electric Grid Has Adequate Capacity for Summer/Fall 2017

ERCOT has released its latest Seasonal Assessment of Resource Adequacy for the summer months.   The organization anticipates that the Texas electric grid will have no trouble meeting the demand for electricity during the hot summer months from June – September.   The report forecasts a peak demand of 73,000 megawatts for electricity during the period.  This is based on the average demand for that same period over the last 14 years.

Against this demand, officials are projecting a peak production capacity of 83,000 MW.  Included in this total is 2,500 MW of new natural gas powered generation and 800 MW of new wind and utility scale solar generation.  Because of the intermittent nature of wind and solar energy generation, only 350 MW of peak power from wind and solar are being included in the projections of summer capacity.

There is no new coal power electricity generation included in the forecast.  Coal continues its multi-year decline across the U.S. and in Texas in particular due to a combination of environmental regulations, competition from renewable energy sources and cheap natural gas.  Cheap natural gas more than anything else has helped to keep electricity rates in Texas low for several years.

In a separate report, ERCOT looked at generation over the next five years.  The trend is unsurprising.  Summer capacity is expected to rise to over 87,000 MW hours in 2022.  Wind, Solar and Gas are expected to grow both in real terms and as a percentage of total capacity.  Coal is expected to continue to decline.

The Texas electricity market continues to be a model for the benefits of energy deregulation.  Capacity and reliability continue to improve.  This is occurring with a lower per kWh environmental impact thanks to the proliferation of renewable energy in the state.  Additionally, giving consumers the power to choose their electricity provider has led to innovations in the way electricity is sold to end users.   All of this is occurring in an environment of sustained low rates.

See Also: Oncor Proposes Electricity Rate Increase for Many Texans
See Also: Electricity-Related Complaints Continue Downward Trend In Post-Deregulation Texas Market

 

Oncor Proposes Electricity Rate Increase for Many Texans

Oncor-Electricity-MapOncor Electric Delivery Company has filed a request with the Texas Public Utility Commission to increase electricity rates for those in its delivery area.  This is primarily North Texas which includes Dallas, Fort Worth and surrounding cities.  It also includes parts of Central Texas including Temple and Killeen as well as parts of Western Texas including Midland and Odessa.

According to the company, the proposed rate increases are necessary to offset nearly $8 billion dollars spent by the company on upgrading and operating the electric grid as well as expansion into newly covered areas.

Oncor is one of a handful of regulated Transmission and Distribution Utilities (TDUs) in the state of Texas, each of which holds a regional monopoly on the transmission of electricity which is bought by retail electricity providers such as TXU and Reliant and resold to consumers.

ONCOR doesn’t bill consumers directly.  The flat and usage based fees charged by Oncor for electric delivery are passed through to consumers on their electric bills which come from Retail Electricity Providers in Texas.

If the proposal is approved, a typical residential consumer would see their electricity rate go up about .5 cents per kWh.

See Also: Texas PUC Agrees To Electricity Fee Rate Hike