Back in November, SaveOnEnergy.com warned customers that all indicators are that Texas electric rates -- which have been at record lows for about the past 24 months -- will rise in the near future, because of looming generation capacity shortages under which demand for power will outstrip supply. Customers can avoid these expected electric rate hikes by shopping for a new energy provider, while rates are still low.
The fears of higher electric rates were further confirmed last week as ERCOT, the independent entity which manages most of Texas' electric transmission grid, reported bleak outlooks for both the forthcoming winter, and the summer of 2012.
In ERCOT's winter assessment of capacity and demand for power, ERCOT expects that, under normal weather conditions, the winter peak demand should be around 53,600 megawatts (MW). Available resources, based on normal generation outage rates, will be approximately 64,000 MW, meaning there will be sufficient capacity.
However, under extreme weather conditions, the winter peak demand could be approximately 60,000 MW. Available generation resources during such extreme weather, based on above normal generation outage rates, could dip to approximately 57,000 MW, meaning ERCOT would be forced to institute rolling blackouts similar to those which occurred last February.
As for the summer, the 2012 "reserve margin" is projected at 12.1%. The reserve margin is the amount of "extra" capacity on the grid, above the level needed to meet demand. ERCOT has set a target reserve margin of 13.75% for reliability purposes, in order to account for extreme summer heat, unplanned generation outages, or other conditions which may either cause electric demand to spike, or the available generating capacity to fall.
ERCOT's summer forecast, under normal weather, is for a peak demand of 64,618 MW, and capacity of 72,444 MW.
Since the expected summer reserve margin is below the 13.75% target, ERCOT warned Texas electric customers that there may be, "a repeat of this year's emergency procedures and conservation appeals." Rolling outages could be required if summer power demand outstrips available generating capacity.
Whenever electricity demand approaches, or outstrips, the amount of generation on the grid, the wholesale electric price in Texas jumps to $3,000 per MWh, which equals $3 per kWh. This is the price cap set in the wholesale market, and reflects the "scarcity" of capacity during times when demand is higher than available generation.
In contrast, most of today's lowest retail electric prices are in the 8 <b>cent</b> per kWh range for residential customers, and even lower for businesses. In other words, when demand outstrips the available generation supply, the price of electricity increases by 3,750%
When prices jump to $3,000 in the wholesale market, as they are expected to do frequently in 2012, retail electric providers are forced to raise their electric rates. That means the days of 8 cent power for residential customers may soon be over.