The 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 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
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.
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.
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 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
Continuing a 3 year trend, 2016 saw renewable energy account for the majority of new electricity generation capacity in the United States. The lion’s share of these additions came in the form of wind and solar power.
As is often the case, renewable energy generation peaked in the spring on a nationwide basis. The spring typically sees a peak in hydroelectric power in the western part of the U.S. as rain and snowmelt drives hydro power. The Western United States also contributed the majority of the country’s solar power with 77% of total U.S. solar generation. In Texas, the state’s massive installed wind base continued to churn out electricity for the Texas electricity grid which is separate from the other major U.S. electricity grids.
While 2016 also saw a large increase in solar power, most new solar capacity comes from small scale solar photovoltaic rather than large scale utility generation. As of October of 2016 the U.S had a total of 12.6 GW of small-scale solar power installed.
Wholesale Electricity Rates Continue to Fall
Despite the fact that new capacity generation is coming largely from renewable energy sources, it is cheap natural gas that continues to put downward pressure on electricity rates. Monthly wholesale prices for 2016 were lower than 2015; driven largely by lower natural gas prices. The cost of natural gas delivered to power generators was 17% lower for the first 10 months of 2016.
Low rates for natural gas also contributed to an increased reliance on natural gas for electricity generation. 2016 saw, first the first time, natural gas surpass coal for electricity nationwide. Although, in Texas this has been the case for a number of years.
GM has recently announced its latest milestone in its drive to increase its use of renewable energy to power its operations. The company last year completed a deal to purchase sufficient wind-generated energy to power its major plant in Arlington, as well as 15 other separate facilities, which includes GM’s financial headquarters located in the downtown area of Fort Worth.
The company stated that it has agreed to buy 50 megawatts of electricity produced at the Cactus Flats wind farm, a massive 150-megawatt farm that is under development near San Angelo by Renewable Energy Systems. The Cactus Flats wind farm is another major investment in wind energy in Texas, which is currently the largest producer of wind energy in the country with over 10,000 turbines currently in operation.
The plant in Arlington builds some of GM’s most iconic models, focusing on the company’s top-selling sport utility vehicles. The plant already receives 50% of its power from renewable sources of energy, and the addition of the Cactus Flats wind farm will result in the plant being powered completely by green energy sources. It is estimated that the shift to wind power will reduce the plant’s total energy costs by up to $3 million a year, as well as reduce carbon dioxide emissions by more than 1 million tons over the entirety of the contract.
GM’s Worldwide Targets for Renewable Energy Part of Climate Change Commitments
Beginning in 2018, GM will be sourcing over 193,000 megawatt hours of power per year from wind alone. At the beginning of the contract over 6% of GM’s worldwide energy use will be from renewable sources. This recent deal is just a small part of GM’s long-term commitment to being powered entirely by renewable sources by 2050. This goal was set alongside other similar climate change commitments, such as the development of vehicles powered by electricity.
See Also: Amazon Comes To Texas For Electricity
See Also: Arlington Electricity Providers
Texas 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
Over the last fiscal year Texans filed 4,835 electricity-related inquiries or complaints according to the Texas Coalition for Affordable Power. This represents a significant drop from the previous post-deregulation low set last year, where the Public Utility Commission registered 6,973 inquiries or complaints. Data from the PUC shows a drop across nine different categories of complaints, with only one category seeing an increase. The data from this year confirms the on-going trend of higher responsiveness and customer satisfaction in Texas’s deregulated retail energy market.
A Continuing Trend Based On Increased Customer Satisfaction
The almost 31% drop in electricity-related inquiries and complaints registered between 2015 and 2016 is the second largest drop so far recorded. Two of the main factors influencing this trend are lower energy prices and a growing familiarity with the conditions and providers of the deregulated market. Also, two major sources of complaints, Sharyland Utility and the installation of advanced meters, are no longer the source of as much dissatisfaction among customers.
The PUC registered a fall in almost every category of electricity-related complaints over the 2015 fiscal year. This falling rate of complaints includes a number of major categories of complaints, such as provision of service complaints, meter complaints and complaints related to switch-holds, the blocking of electric service for residences.
The data for 2015 suggests that customer satisfaction continues to see significant improvements across the state of Texas. The last three fiscal years in particular are registering increasing levels of customer satisfaction. While the data still shows a higher number of inquiries and complaints than pre-deregulation levels, the strong and on-going trend suggests that levels may soon approach their pre-deregulation lows.
See Also: Electricity Sales Continue Multiyear Decline