Everything You Need To Know About Texas Electricity Rates

Everything You Need To Know About Texas Electricity Rates

map-of-texas

In 1995 lawmakers in Texas passed electricity deregulation legislation to break up the incumbent utility monopolies and allow customers the choice to choose an electric supplier. A year later, FERC, the Federal Energy Regulatory Commission, issued Order 888 which required all Texas electric transmission owners to open their power lines to third-party electricity providers. Since then, Texas has become the standard for energy deregulation throughout the United States. Here is what you need to know about electricity rates in Texas after deregulation.

 

Texas Electric Rates Follow Natural Gas Prices

 

Since most electricity in Texas is generated using natural gas, electricity rates tend to follow the same trends in Texas. In fact, in the Winter of 2021 when natural gas prices spiked in Texas, electricity rates also saw a similar increase. Since there is such a close relationship between gas and power in Texas, energy suppliers and brokers typically track the price of gas to determine electricity prices in Texas for their customers. If you are a residential or commercial customer shopping for electricity in Texas, then you might also want to look at natural gas prices. See the chart below outlining historical natural gas prices.

natural-gas-prices-2022

Source: seekingalpha.com

 

So Why Are Electric Rates So High In Texas Today?

 

As of the date of this article (September 2022), electricity prices in Texas are reaching almost 15-year highs. The culprit? Natural gas prices. In fact, when you look at the last 30 years of natural gas prices in the U.S., prices today re also nearing 15-year highs. Remember what we said above? Natural gas and electricity are closely related in the state of Texas. Here are some reasons why natural gas prices are so high today:

 

Coal Plants Are Closing

With renewable energy on the rise and climate activists pushing for wind and solar, many older coal plants that generate electricity are going offline. As more and more coal plants retire, demand shifts towards natural gas for electricity generation. Today, wind and solar only account for a small fraction of the country’s electricity generation. So, as natural gas is used more and more in the power generation process, prices tend to increase with that added demand.

 

Hot Summers

Warmer summer temperatures used to not have a large impact on natural gas prices since most gas was used in the Winter for heating. As more and more electricity is generated using natural gas, hotter summer temperatures place more demand for gas causing prices to rise.

 

Europe

With the invention of liquified natural gas (LNG), the United States is now exporting its natural gas to Europe and other Asian countries that do not have the means to produce gas on their own. As foreign demand increases for U.S. natural gas, this causes more demand for the fossil fuel and drives up the price. Lately, since the Russian-Ukraine War, Europe has had trouble getting gas supplies from Russia. They are turning to the United States for LNG which is increasing demand even further.

 

In conclusion, if you are shopping for an electricity rate in Texas and looking to lock in a fixed rate for a period of time, it is best to understand the market and the effect on prices. While it is certainly not prudent to simply float on a variable price up and down with the market, our experts can lend a helping hand in guiding you through your options so you can choose the best rate for you. Contact us today to learn more about Texas electricity rates.

 

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Brian A.

Brian A.

Brian is an Energy Advisor at EnergyPricing.com

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