electricity rates

Why Are Electricity Rates in Texas So Expensive?

It’s time to pay your monthly power bill, but once you open it up, you notice your rates have increased again. If you’re like many residents, managing Texas electricity rates can be a real hassle. But fear not — there are plenty of ways you can manage your bill and bring it down to something more approachable. First, you’ll need to understand why your bill is so high. Let’s take a closer look.

Key Takeaways

  • Texas electricity prices can be high due to changes in supply or demand, extreme weather patterns, and fluctuating natural gas costs. In addition to factors impacting the electricity market, personal energy consumption also plays a significant role.
  • You can expect to pay a higher rate during peak demand seasons, which usually line up with some of the hottest and coldest times of the year.
  • Homeowners can manage their energy costs by monitoring power usage, switching to more energy-efficient appliances, and locking into long-term fixed-rate plans.

Why is Texas Electricity So Expensive?

A combination of uncontrollable factors and lifestyle preferences affect the electricity rates you pay in Texas. As of 2023, the average monthly cost of electricity in Texas falls around $133/month

Electricity companies measure your usage with kilowatt-hours (kWhs). This is the amount of electricity you use in an hour multiplied by the number of hours you use it. This year’s average cost of electricity per kWh in Texas is $0.1383, or 13.83 cents. That’s actually one of the lowest averages in the nation!

But if your power bills seem to go up and up over time, you’re not alone. High inflation rates, global conflicts, and climate change all drive cost fluctuations, which leaves some consumers in the red.

Cost of Natural Gas

Despite considerable growth in renewable energy sources like wind and solar power, natural gas is still the main player affecting the price of electricity in Texas. Since natural gas is used to create electric power, cheaper natural gas prices mean cheaper electricity rates. But the reverse is also true, which is where problems begin.

Take the war in Ukraine, for instance. Fuel shortages in Europe resulting from the conflict have driven up prices worldwide. Fortunately, current natural gas prices seem to be on the decline. We’ve seen milder seasons overall in many areas, contributing to the general price shift.

Though the U.S. is largely energy-independent, global changes still impact residents. This is especially true considering coal power plants are falling out of favor; fewer options are available to help power companies cushion prices. Wind energy and solar panels offer alternatives, but their power is limited. During peak demand, it’s difficult for providers to ramp up their supply without relying on natural gas.

Increasing Demand

Texans take pride in their communities. More people are moving to and sticking around the state than ever. But this surge in residents comes with an unintended consequence: significantly more demand for power.

Texas has recently become one of only two U.S. states (alongside California) with a population of over 30 million. Populations in many prominent areas — like Dallas and Houston County — have more than doubled over the past two decades. The state’s population increased by a little less than half a million people (470,708) in 2022 alone. More demand without a notable change in supply leads to higher prices.

Extreme Weather

Yearly heat waves help fuel extreme weather that damages existing electric grids and power supply systems. Climate change-driven shifts in weather patterns have also resulted in more severe weather year-round, including the 2021 winter storm that brought power outages, heat loss, and significant road closures to much of Southeast Texas.

Peak Seasons (Summer and Winter)

As is true for many other utility costs, the higher the demand for power is, the higher the numbers on your energy bills. Demand tends to skyrocket during the summer and winter when residents rely on HVAC and heating systems to keep their homes comfortable. But how do power companies keep up if there’s more demand and limited supply?

As demand rises, power companies use more expensive generators to fill in the gaps, which comes with a higher price tag. So, to some extent, higher prices like these are normal. In fact, they’re healthy. They act as an incentive for companies to build new power generation and storage solutions.

The spike in population combined with weather changes has led to new all-time electricity demand records this summer, according to The Electric Reliability Council of Texas, which oversees the power grid in most of Texas. Luckily, despite intense seasonal highs and lows, natural gas prices are better than last year.

Why Your Bill is So High

Clearly, there’s a lot more to your electric bill than your power usage. But how can you determine why your bill is so high, given all these moving parts? While there are some things you can’t change about your power costs, most of your bill is within your control. Knowing your power usage needs and selecting a plan that makes sense is a great place to start.

Plan Type

When you get your energy bill in the mail, it’s easy to assume what you’re paying comes down to the cost of power. But this isn’t necessarily true — or, at least, it’s not the full picture. 

You’re not the one buying power directly from a power plant. That’s where retail electricity providers — the companies that send you a bill each month — or city-owned utilities (like Austin Energy) come in. These providers may own the power plant or purchase power at wholesale prices from a party that does. They then pass on these costs to you based on your power usage.

So, when prices temporarily spike to crazy-high rates, you’re not necessarily the one who feels it. Your rate plan with your provider is what you need to worry about. It should fall into one of two categories:

  • Variable – With a variable plan, how much you pay for power can change monthly. These plans are susceptible to changing market prices. This is great when prices are lower than usual but not ideal when costs spike. It’s also difficult to predict your monthly bill and plan your power consumption accordingly.
  • Fixed Rate – A fixed-rate plan will lock you into a single set rate for a given period, usually 12, 24, or 36 months. Fixed-rate electricity plans are priced based on current fuel costs and future price projections. They protect you from market changes and make it easy to manage power costs.

Peak Season

It’s fair to expect your electricity costs to go up during the middle of summer and winter. Rates might go up, but your usage will probably also increase. This is a great example of why fixed-rate plans are ideal; you’ll pay the same for your power in the heat of summer as you do during low-demand periods. The only thing you need to worry about, then, is how much energy you use during these peak seasons.

Energy Usage

Arguably, the most significant part of energy usage is managing air conditioning during warm months and heating during cold months. Even a few degrees can make a noticeable difference. Major home appliances and water heaters also come into play.

How to Reduce Your Electricity Bill

Once you’ve done the work to figure out what’s influencing your power bill, it’s time to put your discoveries into action. These tips can help you lower your electricity bill — or at least take steps to set yourself up for success.

1. Consider Long-Term Electricity Plans

Long-term electricity plans help you lock in rates, which protects you from sudden spikes in energy rates. A long-term fixed-rate plan is usually the best way to keep costs manageable over time. Of course, if costs significantly dip, you may pay more for a short time. But overall, it’s reasonable to expect prices to rise over time. Locking in with a lower rate now will likely save you money (and stress!) in the long run. 

2. Be Aware of Your Plan’s Expiration Date

If you want to shop around or switch up your plan, make sure you know when it will end. When your current electricity plan expires, you may be moved to a default or variable rate, which will likely be higher. 

Start shopping for the best electricity rates before your plan ends to avoid these price spikes, especially if you’re dealing with high electric bills. The deregulation of the energy market in Texas gives you a chance to shop around. Fortunately, the Public Utility Commission of Texas has created the Power to Choose program to help you compare different provider rates.

3. Be Mindful of Your Usage

It’s essential to understand your energy consumption to adjust your usage accordingly. Remember, home appliances like air conditioning systems, water heaters, and dryers can be huge power drains. Get to know the energy demands in your home to strike a balance. Using programmable thermostats to heat and cool your home efficiently is also a good idea.

4. Weatherize Your Home

Don’t waste precious power. Take steps to protect your home from changes in weather so that you don’t have to rely too heavily on electric heating and cooling. Things like proper insulation, blackout blinds and curtains, and energy-efficient windows help you easily maintain indoor temperatures.

5. Upgrade Appliances

Most old appliances are less efficient than modern ones, especially those with Energy Star ratings. Even if it costs some money to upgrade appliances, doing so can save you money over time.

Overall, understanding and managing electricity rates can take time and effort. But by being proactive and smart about your energy consumption, you can likely lower your monthly bills to fit your budget. The power is in your hands now — use it wisely!