In a move that was perhaps inevitable, the Texas Public Utility Commission has voted to double the current wholesale electricity price cap in Texas from the current $4,500 per megawatt hour to $9,000 per megawatt hour. This is the second wholes rate increase this year. Earlier in the year the commission voted to raise the then $3,000 price cap to the current $4,500 cap.
|2011 Wholesale Electricity Rate Cap||$3,000 per megawatt hour|
|2012 Wholesale Electricity Rate Cap||$4,500 per megawatt hour|
|2013 Wholesale Electricity Rate Cap||$5,000 per megawatt hour|
|2014 Wholesale Electricity Rate Cap||$7,000 per megawatt hour|
|2015 Wholesale Electricity Rate Cap||$9,000 per megawatt hour|
Schedule of electricity rate increases
The commission has been searching for ways to increase electricity rates for Texas consumers. This is seen as a must in order to address the state’s electricity capacity concerns. The down-side to the cheap electricity rates in recent years is that electricity producers are not making enough money (so they say) to continue to invest in the Texas market and build new power plants to address pending power shortages.
Because Texas is a power to choose state, regulators don’t directly set electricity rates. Retail electric providers purchase power in the wholesale market from producers of electricity in order to resale it to residential and commercial users. In times of high demand relative to the amount of electricity available the wholesale rate can spike dramatically; often reaching the rate cap established by the PUC. It is during these relatively few times that electricity producers make most of their profit. The largest producers of electricity in the state includes Energy Future Holdings, who is also the parent company of TXU.
Officials hope that by tripling this rate cap more money will find its way into the pockets of producers and encourage them to invest more into building new power plants in Texas. Of course, the extra money going to producers has to come from somewhere. Inevitably it means higher electric rates for consumers.
According to numbers published by the Texas Industrial Energy Consumer group, the new higher rate cap would have cost Texas consumers up to an additional $14 billion had it been in place in 2011.
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See Also: Prepaid Electricity