With the official start of spring, it means it's time for Texans to check their electric rate, to see if they can save money with a lower rate before the summer heat starts and electricity prices start rising.
Spring is traditionally one of the best times to shop for a new electric rate, because demand for power is at its lowest point during the year. Unlike the summer, power prices are not being pushed up by heat and increased demand from air conditioning load, and unlike the winter, prices aren't being driven up by electric heating demand and natural gas use.
But this spring, it's even more important to take advantage of today's low electric rates ahead of the summer.
That's because the price cap in the Texas wholesale electric market will increase to $7,000 per megawatt-hour (MWh) on June 1, 2014, from the current cap of $5,000/MWh.
This higher price cap means wholesale electric prices could be as much as 40% higher than the highest levels seen last year.
Additionally, the Texas wholesale market is implementing a mechanism known as an "Operating Reserves Demand Curve" this summer. This mechanism is meant to ensure that wholesale market prices properly reflect scarcity conditions when appropriate.
In the past, even as the Texas grid has been strained, with all power plants as well as "interruptible" load needed to keep the lights on, wholesale power prices haven't often reached the extreme "scarcity pricing" levels (such as $5,000/MWh) due to certain actions in the wholesale market which lead to "price reversal." The Operating Reserves Demand Curve is meant to curb such price reversals, meaning that, unlike in past years when retail rates might not have been seriously impacted by transient scarcity prices at the wholesale cap, that may change this summer.
Now, these potential wholesale price spikes are more likely to eventually make their way into retail electric rates -- if the grid is stressed enough and demand is high enough to put the grid into "scarcity" conditions.
That's why customers should shop for a new electric rate now, while energy prices are still calm.