On August 1, the wholesale electric price cap in the Electric Reliability Council of Texas, which covers 85% of the state, was increased from $3,000 per megawatt-hour to $4,500 per megawatt-hour.

As SaveOnEnergy.com has previously detailed, the higher electric price cap was approved by regulators to attract investors to build new power plants, which are needed to replace power plant retirements due to federal environmental regulations, and to keep pace with Texas' growing economy.

The $4,500 price cap is not directly paid by customers, but reflects the maximum wholesale cost of energy that a retail electric provider could pay, if relying on the ERCOT balancing market for power. Whether retail electric providers incur higher costs up to the $4,500 cap depends on several factors, including weather and electric demand, as well as their own hedging practices.

SaveOnEnergy.com has already warned customers that because of the change in the wholesale electric price cap, retail electric providers may attempt to modify their existing fixed rate contracts to reflect these higher costs.

For residential and small business customers (under 50 kW), whose service is governed by state customer protection rules, the Public Utility Commission (PUC) has not yet opined on whether retail electric providers (REPs) are allowed to modify fixed rate contracts as a result of the new $4,500 price cap.

PUC regulations generally prohibit any modification to a fixed price contract for a residential or small commercial customer, but does allow the fixed energy rate to be modified in cases of a change in law or regulation which occurs that, "impose[s] new or modified fees or costs on a REP that are beyond the REP's control." The PUC has not ruled on whether the change in the wholesale price cap amounts to a change in law or regulation that imposes new or modified fees or costs on a retail electric provider that are beyond the REP's control.

However, some retail electric providers have told the PUC that they believe they are within their legal rights to modify a residential fixed price contract due to the new $4,500 price cap. Although several retail electric providers have said they do not intend to change existing fixed rate contracts due to the new price cap, due to fear of customer backlash, other retail providers, hit with higher costs due to the new wholesale price cap, may seek to modify their fixed price contracts.

Notably, retail electric providers are not required to provide a separately mailed, written notice of a price change in a fixed rate contact due to a change in law or regulation. Rather, only a statement on the customer's energy bill is required stating that a change has occurred.

Customers, therefore, must be vigilant, and must check their energy rate on every bill to ensure they are getting the rate they expected. Customers should check their energy rate each month against the low electric rates available from competitive providers, to ensure their retail provider hasn't increased their rate.

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