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.
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 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.