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The Disaster that Shook the Texas Electricity Market

By now, the whole worlds know about the disaster that struck the Texas electricity grid when winter storm Uri struck the state in February. There is no sugar coating it. The debacle in February represented a failure of every level of the Texas electricity structure. One of the world’s major energy hubs was unable to keep its citizens from freezing in their homes.

The Texas wind energy sector is one of the largest in the world but struggled to operate under the severe and prolonged freezing temperatures. But wind was not the only or even the major contributor to the failure of the grid to supply enough power to keep the lights on for Texans. The entire grid infrastructure was caught unprepared and under-winterized.

Texas still gets its largest portion of electricity from natural gas powered plants. These failed in large numbers too along with coal and even nuclear power. The winter blast affected all of these sources in different ways. They all failed when they were needed most, leaving grid operators facing a nightmare scenario. As the temperatures plummeted and demand for electricity skyrocketed, power plants began failing in rapid succession. This was setting up a black swan scenario that could have resulted in a catastrophic failure that could have resulted in massive damage to the state’s electricity grid. Residents could have been without power for months as much of the grid would have to be rebuilt.

In order to prevent the grid from succumbing to a cascading catastrophic failure, grid operators had to take the drastic step of off loading demand from the grid immediately early in the morning of February 15^th. And they had just moments in which to do it. With snow covering virtually the entire state from Dallas to Houston to the border, they began cutting power to homes and businesses. This action may have saved the grid from long term damage but it began a days long stretch of misery for Texans who would not be able to keep their homes warm.

Wholesale Electricity Rates Soar

The Texas electricity market is structured to incentivize private energy producers to build enough capacity to support the states’s electricity needs. This is done by using the free market as a mechanism to set prices high enough in times of high demand to make it worth while for companies to invest in new power production.

Wholesale electricity rates update in real time to reflect the current demand for electricity within the marketplace. On a typical mild spring night in Texas, the prices in the wholesale electricity market bottom out – often coming close to zero. On hot summer afternoons, the spot price for electricity in Texas typically spikes. The maximum allowable rate in the Texas electricity wholesale market is $9,000 per megawatt hour. Over time the average price is around $50 per mWh. This translates to about 5¢ per kWh.

One of the roles of Retail Electricity Providers (REPs) in Texas is to smooth out the prices by taking on the risk of volatility in the wholesale market while offering a more consistent rate to end users of electricity.

Shocking Electricity Bills for Some

The most sensational aspect of the misery suffered by Texans that week were the eye popping electricity bills reported on social media and evening news reports. There were reports of electricity bills of over $16,000 for just a few days of electricity. This however was not the experience of the typical Texas electricity consumer. These bills reported in the media were largely, if not exclusively, from customers of the electricity provider Griddy Energy.

Griddy built their business by removing the safeguards provided by traditional electricity providers and exposing their customers directly to the prices of the wholesale electricity market. Customers paid Griddy a monthly membership fee to gain access to the wholesale rate for electricity.

Most of the time this worked out great for Griddy customers because most of the time wholesale rates are lower than the rates one will find on fixed rate plans from Texas electric companies. But when things went terribly wrong on the Texas electricity grid these consumers found themselves trapped. They had no choice but to pay up to $9 kWh for electricity or turn their power off and freeze.

For some perspective, a home that uses 2000 kWh of electricity in a month may expect an electric bill of about $200 if we assume an electricity rate of 10¢ kWh. If that same consumer had to pay $9 kWh, it would result in an electricity bill of $18,000!

For unsuspecting consumers, gambling on the wholesale electricity market was like canceling your homeowners insurance. In most months you would save money because most of the time insurance isn’t used. You could save money every month and could save money for years. But when disaster strikes you could end up paying a ruinous amount of money. Note: As of February 26^th Griddy has been barred by ERCOT from participating in the Texas electricity market. Their customers have been transitioned to other electric providers.

The vast majority of residential electricity users in Texas are on fixed rate electricity plans (or at least plans where rates are bound within a certain range). This means that even as the wholesale electricity market shot to 180 times its typical price, electricity rates on bills stayed within the expected range. For most Texans their electricity bill might be higher than normal to reflect higher usage during that period but will not be thousands of dollars higher than usual. Ironically, some consumers may not see their bills go up at all since they were without power much of the time when temperatures were at their worst.

Covid and Texas Energy Bills

How has the pandemic affected home-energy use?

Last March, Americans left their offices, gyms, and schools behind to enter a period of quarantine at home. While many regions have largely reopened, a significant number of Texans still work remotely or attend school online. This trend has increased waistlines and exacerbated online shopping habits — not to mention adding pressure on home utilities. As the United States approaches a full year of this pandemic, how has the new normal affected home-energy use?

Utility usage has decreased, but not for families.

Overall, energy use in Texas has decreased throughout COVID-19’s extended stay — largely due to closures in the commercial and industrial economies. But some of these traditional big business energy costs have shifted to individual workers and students. People power laptops, routers, and cell phone chargers now exclusively at home. Texas residential energy bills now absorb eight or more hours of electricity — formerly provided through employers and schools. Homeowners have also taken on the additional resource burden for new safety habits like washing hands and cleaning surfaces frequently.

With big industry off the grid, the decreased demand for electricity will hopefully keep utility costs stable. But, Americans have faced income challenges throughout the pandemic. Many have lost jobs or left jobs to care for others at home. Although commuting and dining-out costs have decreased, these savings get gobbled up by the additional at-home energy and water usage.

Extreme weather and high temperatures piled more stress on summer 2020. Southern states, especially, relied heavily on home air conditioning; heating and cooling costs contribute the most to high utility bills. Winter 2020, projected to bring mild temperatures, may bring some relief to Texas utility bills.

What can Texans do to save?

If people pay more than their normal share in energy costs, what can be done, especially with winter on the way? Many relief programs have been questioned with the ever-changing tide of politics. Individuals can research their local utilities for possible assistance or forgiveness, but no guarantee exists. Some companies provide prepay options that could mitigate financial unpredictability. Others incentivize energy-saving strategies like free LED lighting or home assessments, but plenty of at-home options exist that Americans can implement on their own.

Easy energy-saving tips to combat Covid-costs:

Effective strategies can limit electricity use without compromising at-home comforts. First, turn the thermostat down, especially at night. Turning the thermostat down by even one degree can contribute to a lower utility bill. Consider down comforters and flannel pajamas for holiday gift ideas. Second, turn down the water heater. More people at home means more hot water use, especially for showers and dishes. This can increase dramatically over the holiday season. Third, unplug appliances when not in use. Computers, televisions, and phone chargers use electricity even when not switched on. Implement a power strip and turn these off with the flick of a button.

Get some control back.

The year 2020 has been chaotic. Don’t let surprise utility bills contribute to stress and anxiety. Americans can create a better sense of control over their immediate home environment with some basic energy-saving tricks.

What You Need to Know About The TXU Free Pass Plan (Updated 2020)

TXU is the company that popularized Free Nights and other time of day electricity plans in Texas. Now the electric company that brought you Free Nights and Solar Days has introduced a plan called the TXU Energy Free Pass 12 Plan.

Note: Texas electricity rates change often. The rates referenced in this review are as of July 2020. To compare current TXU rates with other electric companies, enter your zip code at the top of this page.

How does the TXU Free Pass Plan work?

The plan is fairly simple. For each billing period, TXU takes your 7 highest electricity usage days and subtracts those days from your bill. For those days you are charged a 0¢/kWh energy charge and the typical pass through fees associated with Oncor or your local distribution utility are waived.

What is the KWh charge on the TXU Free Pass plan?

The electricity rate for the days you do pay for is very high. In the Oncor service area which includes, Dallas and Fort Worth, the energy charge is 15.7¢/kWh. In addition to that, you will pay the Oncor passthrough fee of 3.577¢/kWh. This brings the total electricity rate to 19.3¢/kWh for the days you pay for.

If you used exactly the same amount of electricity every day of a 30 day billing cycle, your 7 free days would account for 23.3% of your total electricity usage.

TXU publishes an average electricity rate of 13.9¢/kWh for 1000 kWh of usage in the Oncor delivery area. To arrive at this number, they assume that 33.1% of your electricity usage occurs during your 7 free days.

Every household is different. Its hard to predict exactly what your final average electricity rate would be.

The table below shows TXU’s published 1000 kWh average electricity rate for each delivery area including the 7 free days. It also includes the energy charge plus TDU pass through charge for the non-free days of the plan.

TXU Free Pass Electricity Rates
City (TDU)	1000 kWh Average Rate	Non-Free Day Rate
Dallas (Oncor)	13.9¢/kWh	19.3¢/kWh
Houston (Centerpoint)	14.9¢/kWh	20.9¢/kWh
Lewisville (TNMP)	14.9¢/kWh	19.9¢/kWh
Abiliene (AEPN)	13.9¢/kWh	19.1¢/kWh
Victoria (AEPC)	14.3¢/kWh	19.8¢/kWh

Is the TXU Free Pass plan a good deal?

TXU’s other time of use plans also have high base rates. The challenge for consumers is to shift their electricity usage habits to take advantage of the free periods. With Free nights or mornings plans, consumers can change when they do their laundry or wash their dishes. They can change their pool timers or do other things to plan their daily electricity-intensive chores at the right time.

It’s a little more difficult, however, to shift electricity usage to specific days of the month. Summer is approaching in Texas which means A/Cs are about to be running all day every day. You can’t just shove all of your air conditioning into 7 days of the month.

For most consumers, this plan would act somewhat like a free weekends plan. If you work during the week, you should be adjusting your thermostat to use less electricity to cool your home during the days when you are working. On the weekend, when you are more likely to be home, you probably want to keep the thermostat at a more comfortable temperature. You’re also more likely to do energy intensive household chores like laundry during the weekend. This adds together to make the weekends likely your highest electricity usage days.

What else do I need to know about the Free Pass plan?

The plan comes with a 12 month contract commitment
The cancelation fee is $150
It has a base charge of $9.95 per month plus a pass through base charge from your TDU of between $3.42 and $10.53 depending on where you live.
The plan has a renewable energy content of 6%

Study Finds Consumers Overwhelmingly Prefer Electric Choice

A study of 1000 likely voters commissioned by The Retail Energy Supply Association shows a strong majority of consumers prefer to see choice in electricity markets.

The study billed as a “national scientific poll” questioned 1,000 likely voters. They were asked about their preferences pertaining to consumer choice in several categories including electric company choice. 74% of the respondents said that they agreed that choice in the energy market is important. Only 17% disagreed while 9% said they didn’t know. The results echoed public attitudes on other consumer products such as internet plans and cell phone plans. In addition, 49% of respondents said that an electric infrastructure funded totally by investors is preferable. This is the model followed in the Texas electricity market. 35% of people said they prefer that infrastructure be funded entirely by consumers. 16% said they didn’t know.

Of the 50 states, only 14 have some level of electric choice for consumers. Texas is by far the largest market to allow homeowners and businesses a choice of electric companies.

Texas was once like most of the country in that electric consumers had to get their electricity from the regional utility monopoly. Deregulated electricity in Texas broke up these monopolies (at least on the retail side). Electric infrastructure such as power lines are still maintained by regional utility monopolies. The difference with the Texas model is that consumers have the ability to choose their own retail electricity provider (REPs). These REPs purchase electricity from power producers and resell the electricity to end users. In the process they smooth out the volatile prices found in the wholesale electricity market.

Retail electric choice in Texas has led to lower electricity rates as well as innovation in the electricity market. Retail choice puts the obligation on consumers to be vigilant to make sure they are on the cheapest electricity rate plan for their area. If a consumer is willing to do their homework, they can find rates that are substantially lower than those paid in areas where electric choice is not available.

Summer Electricity Usage to be Lower in The U.S. but Higher in Texas

Nationwide electricity usage is expected to dip this summer even as electricity in Texas is expected to hit record highs.

The U.S. Energy Information Administration is projecting the lowest summer electricity usage in over 10 years across the country. As with most things in 2020, these numbers are impacted by the Covid-19 pandemic. Specifically, a decline in usage in the commercial and industrial sectors is expected to decrease overall electricity demand for the country. Even with states easing stay at home orders, the type of economic activity that drives electricity usage will be slow to ramp up. The EIA forecast calls for a decline of 12% in commercial electricity usage. Residential electricity usage is expected to increase 3% as people stay home during the pandemic.

Ordinarily, long term weather forecasts account for the largest part of the government’s forecast of electricity usage. This year, however, weather is a secondary driver to the unprecedented shifts in lifestyle, manufacturing, and retail activity brought about by the pandemic.

This reduction in electricity demand will also result in a lower utilization of coal. Coal power plants are often the last sources to come online when demand on electricity grids peak. This will accelerate the already multiyear trend of natural gas and renewable energy sources taking power market share away from coal. Coal is expected to account for only 17% of electricity production across the US this summer. This is compared to 24% in the summer of 2019.

Despite the expected national decline in electricity usage over the summer, Texas officials are predicting record high demand for electricity in Texas. According to ERCOT President and CEO Bill Magness:

“There is a lot of uncertainty in today’s world, but we are confident that Texas will still be hot this summer, Texans will need electric power as they do every summer, and ERCOT is prepared to do our part to keep it flowing reliably.”

Residential electricity usage represents a larger share of Texas energy usage than other parts of the country. This is because of hot summers and larger houses. Even though there is no statewide stay at home order in place, many people are still working from home and going out less.

As of June, summer 2020 electricity rates in deregulated parts of Texas are much cheaper compared to last year. In both the Dallas and Houston areas the average electricity rate listed on Vaultelectricity.com is more than 1¢/kWh cheaper than this time last year for the 1000 kWh usage level. This translates in to a $10 per month lower electricity bill at 1,000 kWhs per month.

Geothermal Energy, Groundwater, Renewables and Texas Electricity

Although geothermal energy generation might conjure up images of California and the Pacific Northwest where the geographical location supports the renewable source most, it is still an important component of the future of Texas renewables.

Geothermal most recently accounted for 0.4% of all electrical generation in the U.S., which is not a large margin by any means, but still helpful. California led the pack, understandably, with 72% of all geothermal production. This is all according to geothermal data provided the EIA.

Texas, of course, has never been a player for geothermal because of the geographical region, but many are thinking that with coal being phased out, geothermal could play a big role in the future of Texas renewables. Even if the geothermal plants are not exactly in the state. With more geothermal plants in the works to be built by next year, it will be interesting to see if geothermal gets a larger supporting role in the context of renewables.

Higher Capacity Factor and Lower Groundwater Depletion

An important thing to remember is that solar and wind have high rates of variability: this means they fluctuate and are harder to pin down for consistent electrical output. This also means that solar and wind have lower capacity factors, which is the annual energy output divided by the installed electrical capacity; or, in other words, it’s the amount of electricity that was actually generated divided by the overall potential of generated electricity if the plant, wind farm, or solar pv collection had been running at capacity 24/7.

Geothermal energy runs consistently with low variability. As a result, the capacity factor is extremely large. Last year it was in the upper 70%. Whereas wind stayed around the mid 30% and solar in the 60% range. The point being that geothermal could provide some extra stability to the grid as the U.S. grows more renewable in operation. The capacity factor speaks to a stability that would make a transition to renewables easier.

Another important consideration is that Texas has a groundwater depletion problem – geothermal can help with this by providing backup to water-free renewables like solar and wind. This is because nuclear, coal, and natural gas plants take significant amounts of water to operate. Add scorching temperatures to the mix, as well as drought in California and Texas alike and you have a big problem. Using water, naturally, like geothermal does, is a great (albeit definitely not as powerful) alternative to the ground-water heavy plants of old.

Will Texas See a Geothermal Future?

According to the EIA, “Texas has a unique untapped geothermal resource: its large network of crude oil and natural gas wells.” This has many assuming that Texas could its own geothermal plants opening up in the near future. Energy generation capacity for geothermal has actually risen by 4% since 2017, according to this report on geothermal’s rising market value.

Even though it’s overshadowed by the larger players in the renewables game – wind and solar – geothermal could still have an important role to play throughout the country, and even in Texas.

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.

Compare The Lowest Electricity Rates In Your Area