Texas Electric Rates on the Rise, But Still a Good Bargain in Face of Higher Price Caps

October 16, 2016   By The SOE Team

Texas Electric Rates on the Rise, But Still a Good Bargain in Face of Higher Price Caps

Texas customers may have noticed electric rates have slowly crept upward over the past few months, but it’s not just the normal summer price spikes driving the increase.

It’s also part of a long-term trend under which Texas electric rates will be under increasing pressure to rise.  Specifically, it’s an impact from the Public Utility Commission’s decision last year to increase the price cap in the wholesale market from $4,500 per megawatt-hour (MWh) to $5,000/MWh on June 1, 2013, $7,000/MWh in 2014, and $9,000/MWh in 2015.

SaveOnEnergy.com previously noted that the higher price cap in the wholesale electric market would eventually lead to higher retail electric rates, but competition among retail electric providers had largely kept any increase in check for much of late 2012 and early 2013.

However, with summer weather, and increased likelihood that the new, higher price caps will be hit under the summer heat and air conditioning demand, retail providers have begun adjusting their electric rates upward in a material way.

Notably, the increase in the cap from the 2012 level of $4,500 to the summer 2013 level of $5,000 was relatively small, compared to the larger forthcoming increases to $7,000 and $9,000 in 2014 and 2015, respectively.

That means Texas electric rates will be under continued pressure to rise.  While pricing should continue to moderate during the fall and spring (the shoulder months when less power is used), the lows might not be as low as the record low electric rates Texans have enjoyed over the past few years.

The long-term trend for higher electric rates means customers should rethink shopping for an electric rate right now, during the summer.  Normally, the summer is the worst time to shop for an electric rate, because rates have been lifted by summer heat and demand.

However, while Texas electric rates are up a little bit, they still represent a good bargain, relative to where prices could go if Texas hits the new $5,000 price cap this summer.  Although rates are slightly higher, today’s electric rates still represent the calm before a potential storm, if the grid becomes strained and the new $5,000 price cap is hit.

For example, residential customers in the Dallas/Fort Worth area can still find rates in the 8-cent range (at Oncor), which is only about a penny more than the low rates available a few months ago.

Shopping now for a still reasonably low electric rate may be the wiser decision, if rates spike to 11 cents or more later this summer, which they may easily do if Texas experiences multiple days of record demand which push wholesale prices to the $5,000 price cap.