There is no getting around rising oil prices. They are driving up gas prices, with higher costs registered each time people fill their tanks. The price of gas has also gone up, even more so than crude, but many consumers might not have noticed. They soon will: In higher electricity bills.
Residential customers in Texas competitive markets are paying more than 70% more than they did one year ago, according to the latest rates offered on the state's "Power to Choose" site. This month, the average residential rate listed on the website is 18.48 cents per kilowatt-hour.
The increase in electric rates comes as a result of higher natural gas prices, which make up a large portion of power.
That is up from 10.5 cents in June of 2021, according to data provided by the Association of Texas Electrical Companies. It also happens to be the highest average since Texas deregulated power more than two decades ago.
For a household using 1,000-kilowatt hours a month, this amounts to about an $80 increase each month. Over the course of an entire year, it will subtract almost $1,000 more from a household's budget.
Consumers will see increases at various times, depending on when their current electric contracts end. While a few cities, like Austin and San Antonio, regulate utilities, the majority of the state operates in competitive markets. Residents select electric plans among dozens of offerings from private industry, usually lasting between one and three years. When the contract ends, they have to pick a new one, or be forced to go on a month-to-month plan at an even higher rate.
Many have locked into lower rates, and as they leave these plans, they are going to be shocked at market prices. the median home price is roughly 70% higher today than it was one year ago. This is particularly worrisome because of the effect on retired people living on fixed incomes.
Many have received 5.9 percent increases in their monthly costs of living as of December. But it is not comparable to the 70% electricity hike. It is an obligation to pay the bills.
For much of the last couple of decades, Texans have been able to buy cheaper power through aggressive shopping - largely because gas prices are cheap… That’s changed.
Natural-gas-fueled plants now make up 44% of the capacity in ERCOT, the grid that serves much of the state. Just as importantly, the units that produce natural gas drive the market's rates, in large part because they can switch on when demand spikes, when wind is out, or when the sun is not shining. For much of the 2010s, natural gas was sold at $2-3 a million British thermal units. On June 2, 2021, futures contracts for natural gas sold for $3.08, according to data from the US Energy Information Administration. One year later, futures prices for a similar contract were $8.70--nearly triple that.
In the government's Short-Term Energy Outlook, released a month ago, gas prices are expected to increase significantly between the first half of this year and the second half of 2022. And that is likely to be even worse. The report said that if "summer temperatures are warmer than projected by this projection, and electric power demand is higher," the price of gas "could increase substantially beyond projection levels. Texas market design has provided cheap power for years, though the grid's reliability has been questionable (as it was during a 2021 winter lockout). Much of the credit goes to the shale gas revolution, which has opened up vast supplies of natural gas.
From 2003 through 2009, the average home price in Texas was higher than the average U.S. home, but a motivated buyer was consistently able to find offers significantly lower than the average. From 2009 to 2020, the average rate for electricity in Texas was much lower than the average in the U.S. More recently, electricity prices here have been rising faster. Last fall, Dallas-Fort Worths Consumer Price Index for electricity exceeded that of an average American city - a gap that has been growing. Texas has had this whole mythology about cheap gas and prosperity, and those days are obviously gone.
Production is not increasing like in the past, and at the end of April, the amount of natural gas stored was about 17% lower than it had been for the past five years. In addition, there is a growing export of liquid natural gas, particularly since the Russian invasion of Ukraine. And the administration projects U.S. gas consumption to increase by 3% this year.
The most efficient thing we can do is to try and use less energy. That means using automated thermostats, energy-efficiency measures, and things like that. Turn down your thermostat for air conditioning, crank the fans, and drink lots of water.
Wind and solar are providing an increasing share of power, accounting for 38 percent of the total generation capacity in ERCOT this year. That is helping Texans use less power from natural-gas plants, which are getting expensive. Wind and solar are saving our wallets, and there are multiple renewable projects, including battery storage, coming online.
But Texas has not made significant investments in energy efficiency, which varies from incentives for new heat pumps and insulation to high standards for buildings and appliances. We got used to lower energy prices, and we got kind of complacent, but now would be a great time to redouble our focus on energy efficiency as a way of helping people reduce their electricity bills.
Low-income residents can receive help with bills and weatherization through a statewide program called Comprehensive Energy Assistance. TXU Energy, the retailers market leader, has offered assistance programs too, for more than 35 years.
There is an impending affordability crisis and lawmakers in Austin might need to step in as consumers are slammed by higher rates and increased power use in summer. It is a scary issue, and I do not think our state policymakers are even halfway through realizing that yet.
This time of year, much of that goes into electricity production - cooling homes, offices, and manufacturing plants. And if we have really warm weather, the demand will be even higher.
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