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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 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

 

Texas Sets Another Record For Wind Power

Texas Wind EnergyTexas has set a new record for electricity generated from wind.  On November 27th 2016, the ERCOT system saw more than 15,000 megawatts of electricity provided to the grid from wind turbines.

The amount represented about 45% of the spot demand for power in the grid in the afternoon.

“We saw high wind output throughout the day, ranging from just over 10,000 MW during the late night hours to this peak output during the noon hour,” said ERCOT Senior Director of System Operations Dan Woodfin. “Over the years, ERCOT has taken a number of steps, such as improving renewable generation forecasts, to allow us to operate the grid reliably on days like this.”

During the period, total output from wind approach the system capacity of 17,000 MW.

See Also: Wind Energy Provides Cheap Electricity In Texas

 

Electricity Sales Continue Multiyear Decline

Numbers released recently by the Energy Information Administration show that electricity sales in the U.S. continue to slow.  For the 5th time since the 2008 recession retail electricity sales have actually declined.  The biggest declines were seen in the industrial sector. While the residential and commercial building sectors were more or less flat.

Electricity Usage

There is no one simple explanation for the decline in growth of electricity usage in the U.S.  Rather, it’s a result of a number of factors.  In the residential sector, the number of households has increased. Yet energy efficiency regulations and improvements the energy efficiency of newly constructed homes have offset the effect of having more households.  The EIA report also credits more aggressive federal energy efficiency standards for appliances with the slowdown in household electricity usage. For the commercial and industrial sectors the numbers reflect a continued sluggish economy and a shift of the type of manufacturing performed in the US.

While the government numbers provided no regional breakdown, a separate report by ERCOT, the agency responsible for maintaining the Texas electricity grid showed an increase in electricity usage in Texas for 2015.    Since the 2008 recession the U.S. has seen a general population shift to the South and West.  Population growth in Texas has likely offset the effect of more energy efficient building and federal energy efficiently standards and appliances.

Texas has also seen cheap electricity rates for a number of years which takes some of the pressure off of consumers to conserve energy and spend on energy efficiently efforts.  A website operated by the Texas PUC seeks to help Texas homes and businesses conserve energy with energy saving tips such as “save up to 16% by turning you’re A/C 1-2 degrees warmer”.

Enough Electricity In Texas For Spring As Renewable Energy Surges

ERCOT, the organization responsible for maintaining the Texas electricity grid, is predicting more than adequate capacity in the spring amidst an expected surge in renewable power for the state in 2016.   In its Seasonal Assessment of Resource Adequacy, ERCOT is predicting a spring usage peak of 58,279 MW.  This is well within system capacity even with the assumption that there will be 9,482 MW of lost system capacity due to maintenance and forced outages.  This is based on historical outage data going back to 2010.  The demand estimates were made using May 2006, a hotter than normal May, as a model.

Due to the fact that Texas’ operational solar capacity recently passed a threshold of 200 MW, the methodology for determining how much solar power to include in capacity projections has changed.  This resulted in a decreased amount of solar power included in the spring projections.  However, 2016 is expected to be an exceptional year for solar energy in Texas.

ERCOT Solar

By some estimates, the state will see an additional 2 GW of installed solar capacity in 2016.  This would result in a 10-fold increase in solar electricity.  Texas has long been considered a sleeping giant when it comes to solar power. Although it has the geography and climate to be a substantial producer, it has had very little in the way of utility scale solar power.  This is changing in a big way with projects underway for both the Austin and San Antonio municipal utilities among others.  The Austin project, in particular, is notable for its low cost. The purchase agreement for that project calls for a rate of less than 5 cents per kilowatt hour.  This is cheap even when compared to natural gas.  Several years of cheap natural gas have led to low electricity rates in Texas and created a challenging environment for solar and natural gas to compete on price.

Despite this, renewables have continued to gain ground in Texas, led by wind in particular. Wind, along with solar, make up around two-thirds of the state’s additional capacity for 2016.  Of the 12,500 MW in new power expected to come online, wind will account for about 63%. 2016 will likely see wind overtake coal as the second largest source of electricity in the state.

Although coal is rapidly becoming a smaller contributor to the state’s electricity output, coal plants are still critical for keeping the lights on in Texas.  The report downplays any potential impact of compliance with the Mercury and Air Toxics Standards regulations for coal units.   With the final compliance date being April 15, 2016, planners expect generators to be in compliance.

The preliminary summer report predicts record peak electricity usage for the state with demand peaking at over 70,000 MW for the first time.  Against this, it is predicted that the system will have over 79,000 MW of available generation.

Electricity Usage In Texas Grew In 2015 Led By Renewables

ERCOT, the Texas electricity authority, reported an increase in total system-wide electricity usage for 2015.  This is due in large part to record breaking summer demand for power which saw a peak demand record of almost 70,000 megawatts.  In total, Texans served by ERCOT consumed 347.5 million MWh of electricity which constituted a 2.2% increase in demand over 2014.

2015 saw a streak of new record peaked demand periods.  The top 5 all-time peak demand records all came within a one week period in the summer.

69,877 MW — Aug. 10, 2015
69,775 MW — Aug. 11, 2015
68,979 MW — Aug.   6, 2015
68,731 MW — Aug.   7, 2015
68,683 MW — Aug.   5, 2015

Wind continued its ascendance in the Texas electricity market, surpassing nuclear to become the third largest source of power.   Wind energy accounted for 11.7% of the state’s power usage for the year.  Cheap natural gas meanwhile continued to displace coal generation.  For the year natural gas accounted for almost half of the state’s power while coal fell from 36.0% to 28.1%.

Energy usage in 2015 consistently exceeded 2014 with only the month of December seeing a decrease over the previous year due to moderate weather.

ERCOT Cheap Electricity 2015 Usage

The mild and windy December led to an impressive showing for Texas’ wind portfolio.  On December 20th Texas set a new all-time record for wind energy production with wind turbines contributing over 40% of the system-wide electricity at times.  For many, this came as proof that the state’s infrastructure can, in fact, handle the intermittent nature of wind power without causing problems for the grid.

2015 also saw the first Texas city to commit to becoming become 100% dependent on renewable energy.  What made the announcement of Georgetown all the more remarkable is the fact that the switch is driven by the desire for cheap electricity rather than purely environmental considerations.

See Also:  Texas Electricity Capacity Adequate For Spring And Summer Of 2015
See Also: ERCOT Releases The 2014 Breakdown Of Electricity Generation In Texas

Texas PUC Agrees To Electricity Fee Rate Hike

Electricity Demand OutlookThe Texas Public Utility Commission has agreed to a rate hike that will affect almost every electricity user in the state.  The rate increase comes in the form of an increase in the “System Administration Fee” collected by ERCOT.  ERCOT is the entity responsible for maintaining the state’s electricity grid.

The fee isn’t charged directly to consumers.  Rather, it is assessed on every kilowatt of electricity purchased from the wholesale electricity market in the state.  Retail electric companies such as TXU, Reliant and Cirro, purchase power from the wholesale market and resell that electricity to end users in the retail market.  Any increase in the wholesale cost of electricity will ultimately be pass through to consumers.

While the Texas electricity market is the largest deregulated market in the country, parts of it are still subject to public oversite.  The PUC must approve fee increases requested by ERCOT.  The system administration fee will be going up 19.4%; taking it from 46.5 cents per megawatt to 55.5 cents per megawatt.

Although the actual impact on Texas electricity rates will be small, consumer groups are still less than thrilled to see rate increases of any kind.   The Texas Coalition for Affordable Power points out that because the fee is based on usage, an increase in the rate along with an increase in the state’s power consumption will result in a net gain in revenue for ERCOT of more than 50% in less than 10 years.

The justification given for the rate increase was the need to finance new technology, comply will new (federal) regulations, and keep pace with inflation.   ERCOT says it hopes to hold the fee steady at least through 2020.

The 3 member panel in charge of the PUC warned ERCOT against getting too comfortable with large rate increases.

“I don’t want to see double digit increases in the future,” said Commissioner Kenneth Anderson.  “This is a one-time deal.”

The increase will go into effect in 2016.

See Also: Capacity Crisis In Texas Electricity May Be Overblown