What 3 things do I need to know to shop for Texas electricity this summer?

Shopping for a retail electricity provider during the summer in Texas can be frustrating and confusing. And if you don’t have a basic understanding of what drives prices in the ERCOT region, you could wind up paying more for electricity. While learning that sounds complicated, you really only need to know three things when you’re shopping for Texas electricity this summer. Oddly enough, one of them is the weather.

Summer Weather

A typical Texas summer was once characterized as the only season where asphalt pavement is normally a liquid. Cities like Austin, Dallas, Houston, and others normally reach over 95°F and are stifled by humidity. This summer, the National Oceanic and Atmospheric Administration (NOAA) forecasts that the entire Great Plains region will face the possibility of above-average temperatures. In science-speak, that roughly means there’s a better than 30% chance for above average versus equal chances or below average. BUT because of all the rain, soil moisture in Texas is very high (in some locations, it’s practically saturated). In these conditions, temperatures tend to stay cooler due to the process of the moisture evaporating from the soil. As such, NOAA has lowered the probability for above-average temperatures for Texas.

ERCOT forecasts near-normal summer temperatures mixed with heat waves. So, there could be some hot stretches when ERCOT asks consumers to dial back their usage in order to help prevent outages. Doing so also helps prevent wholesale prices from skyrocketing. To sum up, Texas summer weather will be brutally hot and miserably humid at times but well within “normal”.

Natural Gas

Natural gas generates over half of the electricity in ERCOT. If natural gas rates go down, you can expect your electricity rates to drop. The same relationship happens if natural gas prices rise. Since the natural gas industry has the agile maneuverability of a super tanker in a head wind, you can usually spot pricing trends while they’re still a long way out. That usually gives you a firm idea of what electric rates might be like for up to three months in advance.

What does that mean for right now? Cheap, abundant natural gas is expected to exceed coal as a fuel for generating electricity (called “power burn” in the industry) through out the US, especially since above-average summer temps are expected in other parts of the country. In Texas, new natural gas-fired generators are already being built which will become operational between this summer and 2018. Even though natural gas storage is at near record levels, natural gas prices are slowly inching upwards. The July contract rose by 13¢ from $2.468/MMBtu to $2.595/MMBtu.

Are electricity ratings rising, too? Not as fast as they could be. One growing trend in the mix is that homeowners are using less and less energy. This is reducing sales by REPs and having an impact on their prices.

Know Your Own Electric Usage

Most Texas Electricity websites give you a way to track your monthly bills. If you have a smart thermostat, you already probably have a decent idea of your home’s energy usage. By looking at your bills and examining your energy consumption each month, you can get a decent ball-park idea of how you use energy in your home. You may also already know what things you could do to improve your home’s energy efficiency through such things as using LED bulbs, installing more insulation, air sealing your home, and even turning off electronics when they’re not in use.

Now that you know how Texas electricity pricing is affected by weather, natural gas price, and how you use energy, you’re all set to start comparing plans of the best retail electricity providers that fit your home and lifestyle.

The Texas Flood of 2016 & Your Electricity Bills

El Niños bring cool, wet weather in Texas by blowing persistent and extended Pacific jet stream across the state. While this helps kill off hurricanes, it amplifies storm tracks across the southwest and Texas bringing more rain into the Lone Star State — up to a foot or more on average. And this El Niño has been particularly strong.

However, the real culprit behind the recent flooding was a weak low pressure sauntering across the state, sucking in sea-level moisture from the Gulf. Weather Underground says the low is going to “trudge toward central and eastern Texas by Friday, then stall out before drifting southwest” when it will likely be dragged off by another weather front this weekend. Only then will Texas get a chance to dry out. It may not last long as NOAA forecasts more precipitation moving back into the state from the Gulf by next Sunday.

In the past week, parts of Texas and Oklahoma have received daily rainfalls of 7 to 11 inches —something like 400 to 600% ABOVE NORMAL. The US Geological Services reports flooding in all of Texas’s major river basins. At least three reservoirs are forced to release water due to exceptionally high levels.

Over the next thirty days, southeastern Texas will probably face cooler than average weather and elevated chances for heavy rainfall primarily along Gulf. With soil already saturated, it looks like many parts of Texas could remain soggy through Independence Day.

Apart from inconvenient outages this year’s flooding is unlikely to have an immediate affect on electricity rates. However, since there has been damage to transmission lines, there could be restoration costs that could be passed on in part to customers (see SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS). This expense would show up as future bill surcharges and would be shared by all customers of the effected TDSPs.

Meanwhile, this El Niño is predicted to run of steam. The first signs are already present. In May, a band of cooler water surfaced in the Pacific Ocean at the equator. As more sea surface water cools, the more the El Niño fades, shutting down the rain-maker express. The trouble is that as El Niño fades, its high level eastward-blowing winds will slacken. And it’s these winds that suppress hurricane formation in the Atlantic.

Yep, it’s never dull in Texas! Stay tuned!

Critical Peak Rebate Programs. What Are They?

Critical Peak Rebate programs are likely to become a new hot trend in the world of Texas electricity.  So what are critical peak rebate programs, and what do they mean to you? Lets take a look. Continue reading “Critical Peak Rebate Programs. What Are They?” »

PUC Continues to Drop Ball on Consumer Advocacy?

I revieve reader questions on a regular basis about how the PUC handles their ranking system. The general thrust is “I see there is a state rankings system for Texas electricity, but it looks dated.” Or “I don’t see the electricity provider that I’m interested in listed on the PUC’s page. What gives?” I wrote an article in early November about some serious flaws and confusing inconsistencies in how the PUC updates and lists the Texas retail electricity providers (REPs) in their complaint scorecard in attempt to address some of these FAQs. I then posted an update in early January pointing out that yet again the PUC had fallen behind and failed to update their complaint scorecard. I’m not sure what the problem is, but  Continue reading “PUC Continues to Drop Ball on Consumer Advocacy?” »

Texas Electricity Manipulation Questions Possibly Reveal Larger Concerns

After writing a post asking some questions about whether or not it was possible if the Texas electricity market was being manipulated on 06/26/12, I have since received a fair amount of attention. On top of the previously linked articles, my post was also mentioned at the bottom of another Houston Chronicle piece discussing the state of Texas generation capacity as well as an article the Texas Energy Report. The most interesting to me, however, Continue reading “Texas Electricity Manipulation Questions Possibly Reveal Larger Concerns” »

AEP Gets Approval To Sell Texas Electricity as AEP Retail Energy

In what I consider to be extremely poor tidings, Paul Ring of Energy Choice Matters is reporting that a judge in the Texas Courts is going to allow AEP to sell retail electricity as “AEP Retail Energy” under the license name AEP Texas Commercial & Industrial Retail Limited Partnership. I’ve written about this extensively before (part 1, part 2, part 3, part 4) and things were looking up when the PUC (Public Utilities Commission of Texas) formally weighed in against AEP’s brand licensing, but apparently Continue reading “AEP Gets Approval To Sell Texas Electricity as AEP Retail Energy” »

Texas Electricity, TCAP, and a Biased “History” – Part One

Most people probably haven’t heard of TCAP, the Texas Coalition for Affordable Power. Although, if you’ve read the TER Blog or visited the TER Facebook page with any regularity, you might have seen me comment about TCAP’s public relations face, Recharge Texas. So who is TCAP? TCAP is a membership group of local community politicians who have banded together to negotiate bulk electricity rates. Basically they’re politicians who charge a membership fee and percentage of usage to negotiate the electricity contracts for local government entities:

Continue reading “Texas Electricity, TCAP, and a Biased “History” – Part One” »

Deregulated Texas Electricity Bills are Cheaper than Entergy Texas Bills

Recharge Texas is back to their usual tricks and painting deregulated electricity in Texas in a negative light. Even worse is they have managed to wrangle a position blogging for the Houston Chronicle’s Fuel Fix blog, which I’m concerned will give them further false credibility.

Anyway, Recharge Texas is once again claiming that Texans are paying more in deregulated areas than they in regulated areas. The problem with this argument is that the numbers they use to support their theory are supplied by the United States Energy Information Administration (EIA).

Now, don’t misunderstand me, there’s nothing incorrect about the EIA’s numbers, other than they’re typically 2 years old at any given the time. The problem is that the EIA can only compare average regulated electricity rates to average deregulated electricity rates wholesale. What that means is that deregulated averages must include all of the people who don’t shop for electricity, don’t leverage the market choices to their financial advantage, and the people who still don’t know or understand they have electric choice.

Believe it or not, almost half of Texans in deregulated areas are paying as much as 50% more than the competitive market rates for electricity. Because of this the EIA information is a poor source for comparison because it skews deregulated rates high. Recharge Texas then uses these inflated numbers to make a blanket statement that deregulated electricity is more expensive than in regulated areas. When the fact of the matter is that deregulated electricity rates are substantially cheaper in deregulated areas for people who actually shop and compare.

Basically Recharge Texas is painting all of deregulation in a bad light simply because some people choose to pay a premium or don’t take advantage of the deals available. It is the equivalent of saying the price of food is more expensive in Texas than elsewhere because everyone chooses to shop exclusively at Whole Foods or Central Market, or that purchasing cars in Texas is more expensive because everyone purposefully chooses to pay sticker price without haggling.

Why am I bringing this up when the title of this post is discussing Entergy bills? Well, I stumbled across this article, and it is yet another example of a regulated utility about to raise rates. In this instance, the rates to be raised are already substantially higher than deregulated rates. In the month of October, the average bill for a customer with Entergy that used 1,000 kWh of electricity was $114.69.

For comparison, and you will have to take my word for it because it required me to do a lot of math, the average electricity bill in October for all the deregulated areas of Texas was $103.89 cents. And this includes all of the inflated bills from people who pay 50% over market prices. Entergy is ALREADY almost $11 more expensive compared to deregulated areas. If you add $14 to Entergy’s bill, it would be more than $24 higher than the monthly average in deregulated areas of Texas. If Entergy only gets half of what they’re asking for, it is still more expensive than all of deregulated Texas by about $18.

Other regulated areas more expensive than the average cost of the deregulated areas of Texas include El Paso and Victoria. And I’ll also include Austin considering Austin Energy is 250 million dollars in debt because they have refused to raise rates in well over a decade. They’ll be more expensive than deregulated areas very shortly while still be sporting a quarter billion dollar debt.

So chalk up Entergy, which services a massive chunk of East Texas customers, as another regulated area with massively higher bills than areas with deregulated Texas electricity. And that is even with all the high bills from indifferent shoppers that inflate the picture of deregulation. What would those numbers look like if everyone exercised electric choice?

Texas Electricity, AEP Texas and the Rules of Deregulation – Part 1

In a series of articles, I want to take a look at American Electric Power’s (AEP) court hearing regarding their application to become a Retail Electricity Provider (REP), similar to Reliant, TXU, Gexa, or Bounce. The interesting thing about their application is that AEP is currently a Transmission and Distribution Utility (TDU) for 2 regions of Texas. This is interesting because all TDU’s like Centerpoint, Oncor and AEP were forced to split from their REP businesses as a part of deregulation in 2002. Consequently, this hearing is big news and could have a huge impact on the entire Texas electricity landscape.

Understanding the Basics

To start, lets take a quick look at the intent of the rules put in place by the PUC when deregulation was first enacted. In section 25.342 of PURA (Public Utility Regulatory Act), the general purpose of the separation of TDU’s (Transmission and Distribution Utilities) and REP’s is laid out as follows:

The commission seeks to prohibit practices between regulated and
competitive activities that may unreasonably restrict, impair, or reduce the level of competition during the transitional separation of personnel, information flow, functions, and operations, and after a competitive market is established

In short, the intention of the rules are to prevent a competitive advantage in the deregulated areas of the Texas electricity market. Companies like Centerpoint and AEP who operate transmission utilities and have access to valuable customer information as well as an established brand shouldn’t be allowed to sell electricity. This separation is the reason that a deregulated electricity market can function and succeed. It is why in 2002 Reliant spun off Centerpoint and TXU spun off Oncor. AEP sold Central Power & Light and West Texas Utilities, which were their retail electricity business units, to Direct Energy. If the PUC hadn’t forced companies to separate their retail and transmission businesses then creating a fair deregulated market would have been impossible.

AEP Texas & Retail Electricity in Texas

When PURA went into effect in 2002, AEP opted to sell their retail electricity interests outright and concentrate on their power generation and transmission businesses. Now, nine years later, AEP Texas has filed an application with the PUC to become a certified retail electricity provider. And surprisingly, AEP has been granted a hearing that will determine whether or not they will be certified to sell electricity to all mass market customers in Texas. As I write this, parties are giving testimony in the hearing and a decision will be made sometime in early 2012. If their motion fails, AEP will still have the right to appeal in another court.

How is this even possible? As previously mentioned, deregulation forced the separation of retail and transmission energy companies in 2002 and AEP was forced to sell their retail interests. How can they now be allowed to start a new retail company using the AEP name?

The short answer, unsurprisingly, is legalese. The company seeking a PUC license is a subsidiary of parent company AEP, registered as AEP Texas Commercial & Industrial Retail Limited Partnership. The two separate companies that operate the transmission and distribution services, commonly referred to as AEP or AEP Texas in this article, are officially known as AEP Texas North and AEP Texas Central, respectively. In the eyes of the law, these are all three separate and independent companies.

Of course, there is some precedent in this situation. Oncor, the TDU for the Dallas and Ft. Worth area, and retail electricity provider TXU operate as two individual entities under parent company Energy Future Holdings. But this isn’t quite the same situation at all. The split of Oncor and TXU was carefully handled with massive PUC oversight in 2002 to ensure the two companies were truly separate. Oncor operates completely independently without any management from Energy Future Holdings. Additionally, great pains were made to separate TXU and Oncor with very different names and separate branding. And over time, Oncor has taken on separate minority ownership and board members from their parent company to even further the separation. AEP is simply coming along almost a decade later, starting a new subsidiary, and saying they’d also like to sell retail electricity to everyone in the deregulated areas of Texas-despite the fact they also operate two TDUs. The kicker is that they’d like to do it under the AEP name or some variation of the highly recognized AEP brand. But more on branding and marketing later.

These are just the basic facts surrounding the AEP case in regards to their intentions, the complications, and how it relates to the rules and boundaries set up by the initial laws put in place during deregulation in 2002. In the next section I will examine the details of AEP’s application and the issues surrounding their efforts to sell deregulated electricity in Texas .

When To Buy Electricity in Texas – 2011/2012 Edition

One of the most common questions most people ask is when to shop for Texas electricity. In fact, I’ve written about this topic before. Normally, my previous advice would apply any year, and for the most part it still does: Shop during the winter months when the rates are lowest and lock into long term plans with stable rates so you won’t be surprised by any huge bills. That is still the case, but I wanted to revisit the topic of the best time to shop because of a couple of new factors that will unquestionably effect our electricity rates…both in the short term, as well as potentially in the long term.

As I’m sure anyone who has been living in Texas is aware, we had a record setting drought and heat wave this past summer. Almost a month of consecutive days over 100 degrees, multiple threats of rolling blackouts and soaring electricity prices. Now, the soaring electricity prices and the high bills were the effect, and the cause was not having enough energy generation resources to meet demand because of the high temperatures.

Energy generation resources (coal plants, natural gas plants) are likely to continue to be a problem. With the looming EPA changes taking some of the existing resources offline, next summer could be even more grim than this past summer. Additionally, I’ve also spoken about and linked several articles recently discussing how the current economic market is making it unlikely that any companies will be building any new energy generation plants in Texas in the near future despite the fact that the state desperately needs more of them.

So what does this have to do with shopping for electricity plans? Well, recently multiple companies have come forward in their projections saying that they expect Texas electricity rates to rise in the near future. They highlight a scarcity of energy generation assets as well as companies that might attempt to recoup their losses from our sweltering summer (which I have also discussed previously) as reasons for the likely rate increaes. The parent companies for Reliant, TXU, Dynowatt, StarTex Power and more have all posted serious losses that they have attributed directly to the previous Texas summer weather.

The short of it is, that while there is no question that winter is the best time to shop for electricity plans, customers might really want to start keeping an eye on the marketplace RIGHT NOW. There’s reason to believe that the Texas electric rates are going to go up in the very near future, and probably for a long time to come. To that end, it might really behoove Texans to consider locking into long term plans that will last through the summer now, as opposed to waiting for January or February to start shopping. I can’t say when the rates will start going up for certain, but I can definitely advise people to keep an eye on the market prices and lock in a long term plan as soon as they start moving. Also, I’ve always been a proponent of 12 month fixed plans. Considering the state of the market, I’d actually consider more people start taking a look at 24 month fixed plans as well.

Anyway, I hope this post motivates people to keep an eye on the market prices moving forward.