Friday, September 22, 2023

Texas heat has energy bills burning holes in budgets

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Sometimes it’s hard to distinguish which is causing more suffering — the brutal Texas heat from one of the hottest summers the state has ever seen, or the ensuing electric bills that come with trying to battle the sizzling onslaught.

Jason Thomas, co-founder and partner at Vault Energy Solutions, notes that electricity rates in Texas are the highest they’ve been in 13 years, with no sign of a decrease in sight. Temperatures in North Texas are expected to stay around or over 100 degrees for some time, with some parts of Texas possibly reaching as high as 114, according to some forecasters. These are actual temperatures, with the heat index being even higher.

Thomas’s company recently published a report on its website that addresses the recent surge in electricity rates across the state. The full report can be found at www.vaultelectricity.com/electricity-rates-in-texas-continue-to-surge-no-end-in-sight/.

Thomas noted that a perfect storm of conditions is converging that could make this summer and beyond the most expensive period ever for electricity in the history of Texas. Factors in this include:

  • Natural gas prices, which have tripled in the U.S., are the largest driver of electricity rates in Texas.
  • Natural gas prices are even higher in Europe because of the war in Ukraine. While natural gas exports will help prices in Europe, it will drive up prices in the U.S. even more.
  • Summer temperatures are forecasted to be higher than normal. This will drive up wholesale electricity rates.
  • The hurricane season is forecasted to be busier than usual. This has the potential to produce power outages that will further drive up wholesale electricity rates.
  • Electricity providers are extremely cautious right now. They are pricing in the current high natural gas prices as well as the risk of an additional significant increase in prices.
  • Many providers have stopped offering new signups altogether. Others are cutting back on the number of 12-month plans they offer and pushing new customers to 24-month plans. Texans currently on fixed-rate contracts will not feel the increase until the current term of their contract expires.

Even as Texans struggle with the aforementioned, there is also the challenge connected with the Texas power grid. ERCOT has suggested that Texans keep the setting of their air-conditioner no lower than 78, and avoid using large appliances as much as possible to help avoid another shutdown of the grid. That, of course, happened in February 2021 during Winter Storm Uri, creating what is now referred to by many as “Snowmageddon,” when many residents went without power — some for several days.

Thomas offered some advice to help folks deal with the intensity of both the heat and their electric bill, as well as his thoughts on another possible grid shutdown and more:

RM: What can folks do to help themselves deal with ever-increasing energy costs?

JT: There are two steps you can take to help keep your electricity costs in check: Switch to a plan that has a cheaper electricity rate or lower your electricity usage. The first option is easy, while the second can be uncomfortable. To switch to a cheaper rate, simply go to VaultElectricity.com and choose a plan in your area with an attractive rate.

Lowering your usage means keeping lights off in your home when they are not needed and raising the temperature setting of our air-conditioning. Obviously, keeping an elevated temperature in your home doesn’t sound appealing, but the A/C uses more electricity than any other item in your home. Raising the temperature setting even a tiny bit will have a positive impact on your electricity bill.

   

RM: How should people be prepared in the event of a power outage in the hot summer?

JT: Power outages in the Texas summer can be brutal — even deadly — but there are products you can keep on hand to help you make it through. Battery-powered fans can be a literal lifesaver. They are relatively inexpensive to buy and can be stored easily when not in use.

A bigger ticket option would be to buy a gas-powered generator, and pair it with either a portable A/C unit or a window A/C unit. This is a costly way to go, but the generator can also be used in case of winter-time blackouts when paired with a space heater.

If the blackout appears to be an extended event, relocating to a friend’s or relative’s house may be the best way to go.

 

RM: How high do you expect prices to go this summer?

JT: That’s the million-dollar question. While it’s true that electricity rates have been accelerating to the upside (plus 40% in three months), we are starting to see some positive developments.

More than half of the electricity in Texas comes from natural gas. Over the last two years, the price of natural gas has risen over 500%. The good news is we have seen the price of natural gas drop by 35% in just the last few weeks. Hopefully, that price drop will soon begin to have a positive impact on our electricity rates.

 

RM: What is the status of the grid and should we expect it to go down again, only this time in the hottest time of year?

JT: ERCOT has assured us the Texas electricity grid is in good shape, with plenty of capacity to handle the demand that is taking place due to the extremely high temperatures. Unfortunately, that is only an outlook, not a guarantee.

While we are hopeful we can avoid rolling blackouts; it would be wise to be prepared in case they do materialize.

 

RM: Would you advise customers to go to a 24-month plan to lock in better prices?

JT: We are currently recommending customers go with a 12-month plan instead of a multi-year plan. Although the longer-term plans do have slightly lower rates than 12-month plans, it’s important to remember that rates are currently double what they were a year ago. Locking in to a long-term plan at a time of historically high rates is probably not the best option.

 

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