Even though the Public Utility Commission and the state's grid operator are rushing to fix problems that have caused Texas electricity rates to soar, the changes aren't guaranteed to bring lower prices, and may even carry unintended consequences that still result in high electric rates for customers who haven't locked-in a fixed price.
While the news is filled with reports about regulators trying to calm the wholesale market, Texas businesses should remember that even with the changes, the wholesale electricity price will still be designed so that, at times, it hits $2,250 per Megawatt-hour, or about 30 times higher what may be considered a "normal" price. All that means is that businesses should still be looking for fixed-price deals to avoid summer price spikes and volatility to avoid being left open to anymore unexpected turmoil in the wholesale market.
Last week proved again that as businesses shop for a good fixed rate, they need an expert to help them avoid picking an unreliable or unhealthy energy provider. Riverway Power became the fourth electric company to fail, stranding over 6,000 customers on high-priced Provider of Last Resort rates. Some 40,000 customers of four different energy suppliers have shared that fate, exposing them to prices as high as 30¢ per kilowatt-hour, or nearly triple the average rate.
High electricity rates and market turmoil make the ability to shop for a new rate more important to businesses than ever.
Even if the Public Utility Commission fixes the problem of unprecedented prices in the wholesale market, the summer still promises to see extremely high prices. The Market Clearing Price for Energy (MCPE), or spot market price, will still be allowed to rise to $2,250/Megawatt-hour, meaning customers who buy on the spot market will be exposed to wild price swings, as the spot market price normally falls around $50, with $100 considered a high price seen at peak times. All the factors driving high electricity prices remain -- record natural gas and oil prices, hotter weather, increased electricity demand, and a congested power grid. What regulators are doing is making sure prices don't go above the $2,250 cap, which has happened because of some quirks in the system. But that's still a high and volatile price.
And the question of unintended consequences looms as well. The solution being considered by regulators is a highly complex, complicated mechanism. While it might fix one problem, some industry experts have questioned whether it will transfer high costs from one area to another, in affecting the value of so-called "Transmission Congestion Rights," or instruments that protect power marketers from paying certain costs when the grid is overloaded. A few industry experts are blaming a little-debated March decision concerning the wholesale market "shadow price," or price arising from congestion, for the spot market prices in excess of $4,000 that have caused the turmoil. It just shows how in a system as complex and interdependent as an electricity market, one small change can wind up having big consequences. The price protection offered from fixed-price electricity products is more appealing than ever in light of this uncertainty.