Why have electricity prices in Texas increased?

There are numerous reasons electricity prices have increased in Texas over the past decades.

Some of the causes have to do with the national economy, while others have to do with regulations and changes within Texas itself.

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In 2002, Texas Senate Bill 7 deregulated power companies in Texas. This created an open market for electricity resellers in most of the state.

Between 2002 and 2006, electricity throughout Texas spiked dramatically, nearly doubling costs in four years as market trends adjusted.

As more and more power supply companies began to offer services, the rates eventually dropped back to competitive averages.

In the spring of 2019, the Public Utility Commission of Texas agreed to power company lobbyists’ demands for the ability to create price adders.

During peak usage in the summer, if the operating reserves for an area like Houston dip below 2,000 megawatts, then a price adder will be added to wholesale costs.

What this means is that because your retail power company doesn’t generate the electricity, they need to buy it wholesale. When electricity is being used quickly in the summer, the costs may rise to a high wholesale rate of $6500 per megawatt-hour.

The new price adders regulations will allow wholesale electricity generating companies to bump that rate to $9000 per megawatt-hour when the reserves get too low.

If your power company needs to buy power at that rate, those increased costs will be directed to you, the consumer.

It may be that you won’t notice the rate hike until your flat-rate contract is over; your next bill will reflect the dramatically higher rate the power company needs to charge to account for the extra expense last summer.

Summer average temperatures in Texas are slowly on the rise, but the real issue is extreme weather.

Texas has received more extreme heat warnings in the last few years, and those numbers are expected to rise.

Extremely hot days tax the electricity grid with spikes in energy consumption from people running air conditioners for longer times.

As electricity gets used up in times of stress, it becomes a higher-priced commodity for retail electricity providers. Those costs will eventually be passed on to homeowners in the form of higher rates.

In the western part of Texas, numerous new oil and gas drilling operations use huge amounts of electricity, and the current supply chain of generators can barely keep up.

New wind power was supposed to help make up for the increased demand, but there have been numerous times the wind generators fell short.

When supply is low and demand is increasingly high, it is reasonable to expect costs to begin rising.

While the sale of electricity to households has been deregulated in most of Texas, the cost of transmission and distribution is still something the government controls, and those costs have been steadily rising.

Many transmission and distribution charges have more than doubled since 2003.

Transmission and distribution companies control and maintain the physical infrastructure like wires and towers.

Your power company must pay regulated fees in order to use the wires. These fees get passed on to you, the consumer.

Sometimes these charges are rolled into your per kWh rate. However, when offered super cheap rates, the fees are often added to your bill.

It’s important to look at the fine print in an electricity plan to check for this kind of additional fee.