When you live in Texas, you expect a hot summer. This means increased electricity bills. But, when the summer gets exceptionally hot and humid, it may also mean rolling brownouts and am electricity bill that completely blows your entire budget for the summer. Fortunately, The Dallas Morning News published a story about the need for most Texans to lock in their electricity rate and why we should do it today.
Will Texans get burned? Forecast says a hotter summer and less available electricity
Texans are being warned to lock in their electricity rates before summer arrives.
Here’s why: The difference between the amount of electricity Texas can produce and the amount customers are expected to use this summer is the narrowest in 11 years. Politicians, consumer groups and regulators say that could mean unpredictable — and potentially higher — prices.
Despite those concerns, it’s not clear that much can or will be done short term about the shrinking “reserve margin” this summer. The Electric Reliability Council of Texas (ERCOT), which manages most of Texas’ electricity grid, is predicting record-breaking electricity usage this summer.
And forecasters are projecting a 60 percent chance of above average temperatures for Texas this summer, according to the National Weather Service.
Homeowners or renters on month-to-month electricity plans that follow the market rates, are the ones most likely to be affected by price swings this summer. Those with fixed-rate plans running through the summer shouldn’t feel the same pain.
“You need to be locking in your rates or you need to be prepared for some fluctuation in rates,” said state Sen. Kelly Hancock, R-North Richland Hills. “We want to make sure the retail providers this time are fully aware of this so they don’t enter into contracts that they cannot keep.”
Hancock is chairman of the Senate’s Business & Commerce Committee, which is scheduled to hold a hearing Tuesday on grid reliability and electricity market. He said the hearing is designed to inform the committee and get the word out about this summer.
The electricity market for most of the state, including North Texas, is molded by market forces. As demand goes up, so does prices unless supply can keep pace.
The supply side has taken a hit this year with Luminant’s closure of three large coal power plants, Big Brown, Sandow and Monticello. That knocked out about 4.2 gigawatts of power generation capacity — enough to power more than 2 million homes. That mirrors a national trend of coal plant closings.
Other Texas projects, mostly wind and solar, are coming online but not enough to fully make up for the coal plant closures. And some other plants have been slower to get off the ground than expected.
A year ago, ERCOT expected to have a reserve margin of 18.9 percent. By December, that was down to 9.3 percent.
ERCOT is scheduled to release a report Monday providing updated projections about how much electricity would be needed and how much would be available. Previous reports did not take into account forecasts of this summer’s temperatures.
“At ERCOT, our focus this summer will be on performance,” said ERCOT president and CEO Bill Magness, in a written statement in March. “We expect everyone involved in the electric business in ERCOT, including ERCOT as the grid operator, along with the generation and transmission owners, retail marketers and those involved in demand response will be focused on maximizing performance as well.”
ERCOT declined to provide any details this week about what they were doing to address this summer’s smaller reserve margin. A March press release from ERCOT said that it “anticipates voluntary load reductions [from large business] and an increase in power sold in the market by industrial facilities in response to higher power prices during peak demand.”
Carol Biedrzycki, outgoing executive director of Texas ROSE (Ratepayers’ Organization to Save Energy), a consumer advocacy group focused on low-income Texans, said this summer could get “hairy.”
Low-income customers often use prepaid electricity services, since those don’t require security deposits. The prices for those plans fluctuate based on market prices, although the maximum price is capped. Customers using those plans are also at risk of having their electricity cut off when their prepaid amount is spent.
In addition to higher prices, state regulators have eliminated some electricity benefits for the poor. A program was eliminated that automatically qualified low-income residents for deferred payments for high-use months or payment averaging to smooth out the peaks. PUC officials said these changes were made in response to decision by the Texas Legislature.
“Everyone is worried that we’re going to have high electricity prices this summer, and then the people who are most severely impacted by the higher price, we’re taking away the options that were available for them to try and keep their accounts in good standing,” Biedrzycki said.
State Rep. Rafael Anchia, D-Dallas, wrote in a letter to the Texas Public Utility Commission saying that “continued operation of aging, coal-fired power plant facilities is no long efficient in today’s marketplace.” But added that while this is beneficial in the long term, he found the small reserve margin to be “concerning.”
“As a result of this latest forecast, I implore the Commission to study this matter carefully in order to ensure citizens across Texas will not only have a consistent source of electricity during peak periods in the summer, but they are supplied power without significant price increases,” Anchia wrote.
Roberto Alonzo, D-Dallas, wrote a similar letter of concern to the PUC earlier this year.
The free market nature of Texas’ energy market makes action to moderate prices difficult. The system is set up to use prices to send signals to the private sector.
If prices rise enough this year, that would give companies an incentive to build more power plants. That’s not a quick solution though. Even a small natural gas plant would take about a year or more to build. So price signals this summer wouldn’t lead to new generation until the winter of 2019-2020 or the summer of 2020.
Texas also has what’s known as an energy-only market which exposes consumers to more ups and downs. In some states, the markets provides additional subsidies to ensure there is enough generation capacity.
In recent years, the Texas market has been good for the state’s consumers, or at least those who shop around. In the most recent data from the U.S. Energy Information Administration, Texas had the nation’s ninth lowest average electricity prices.
“The competitive retail and wholesale electric market that covers the region of Texas in ERCOT has benefited Texas consumers in the form of relatively low electric prices, like in 2016 where the ERCOT market had the lowest commercial and industrial electric prices in the ten largest states,” said, PUC chairwoman DeAnn Walker, in a written statement. “While the supply of generation will clearly be tighter than in the past few years, it is anticipated that ERCOT has sufficient tools to address the reliability of the ERCOT system.
But low electricity prices — fueled by low natural gas prices and cheap wind power — have discouraged company building new plants as quickly.
“It’s a two-edged knife because low [natural] gas prices mean low generation costs,” Hancock said. “The consumers benefit from that … but with lower prices, there’s less capital to invest in generation that will give us the sustainability we need to continue to grow the economy.”
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