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Texas Electricity Rates April 2022

Electricity Rates in Texas Spike – April 2022

Electricity rates 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

Many 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.

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