Electricity Prices Have Nowhere to Go But Up

Categories: Buzz

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On June 28, the Texas Public Utility Commission, the state agency that regulates energy, will likely vote on whether to sharply increase the top amount that electricity generators can charge retail providers such as Reliant and TXU for power when supplies run short. In other words, when we're all whimpering and cranking the AC. In other words: August, when the increase would take effect.

The change would raise the price cap from $3,000 per megawatt hour to $4,500, increasing costs for retail providers when the grid gets taxed. Supporters insist that allowing power generators to charge more will encourage them to build more plants, thus saving the lights from going dim in the future.

Opponents ask: Why so much, and why so soon?

And Buzz, being Buzz, asks: How much is this gonna cost me?

The answer: a lot. The Texas Industrial Energy Consumers, a lobbying group, offered the PUC some comments on the price-cap. The group noted that, based on 2010 and 2011 consumption, raising the cap to $4,500 would have added around $4.5 billion per year to wholesale electricity costs. Doubling it again would generate an additional $13-plus billion in revenue for power generators.

Those costs would obviously be passed on to consumers. How much? It's unclear. Last summer brought record-setting heat, and comparing electricity use among homes, businesses and industry is an apple-orange kind of thing, so it's hard to say just how high our bills could go. But look: $4.5 billion is a whole freakin' lot of dough, and you can bet the retailers aren't eating all those new costs.

State Representative Rafael Anchia is one of a handful of legislators who filed questions with state regulators about the rule change. He wants to see some evidence that the PUC is looking at all options to make sure Texas has adequate electricity and that consumers aren't getting sodomized in the wallet.

"I want to make sure we use all the tools in the toolbox," Anchia says, including voluntary conservation and more efficient construction, which could reduce the need for new power plants. "We want to send price signals, I get that. Now, what are the right measures? What are the right signals? That's what I'm trying to arrive at."

It's complicated, of course, and the PUC will be looking at a whole host of pricing systems and triggers in the months ahead. One thing is certain -- life doesn't get cheaper.

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1WhoKnows
1WhoKnows

Just a couple of things to add here about raising the price cap and it's effects. Face it. It will happen someday soon. My bet is this thursday 6/28.  First a few facts:       1) Texas has by far the largest electric usage of any state – roughly equivalent to Kansas, Colorado, New Mexico, Arkansas, Louisiana, Oklahoma, and Mississippi combined. We consume 40% more than the second place state, California. 2) We've had the largest load growth and  the lowest addition of new power plants of any area in the nation. The main reason is that future gas and power prices thru 2014 are too low to be profitable at current financing and construction cost. Power prices have to "average" above $60 to make the numbers work.           3) Our "surplus/emergency" capacity for high load days is one of the lowest in the nation and getting worse. Here's the outlook thru 2017.   2011: it was projected at 17% ( during the august heat wave it was actually 3.8%). Power prices went to $3,000 per hour for 19 hours during that time. Those 19 hours alone caused power prices to average over $61 "on peak" for the entire year. Every single hour at the new $4,500 cap will raise your ANNUAL bill by about 1%.    2012: 13.9% 2013: 12% 2014: 7.6%... getting nervous?? 2015: 3.6% ..we're in trouble  2016: 4.2%... big trouble 2017: 4.0% ...ditto...   4)  Since deregulation in 2002 we have continously had one of the nation's lowest "average"  prices for power and gas. It's primarily because we use gas as the primary fuel source, at a conversion factor of about 8:1. The industry callsit the "heat rate"   2002-2008: Gas $6.27, Power $49 2009-2011: Gas $4.01, power $36 "Future" prices published. 2013 Gas $3.50, Power $42 2014 Gas $410, Power $47  Bottom line is this this...  the gas and power markets are near 5 year lows. Stop bitching, pick up the phone and lock in your electric rate for the next 2 years asap.  Pass the risk of higher prices on to someone else. One less thing to worry about.. Oh, and make sure you have plenty of batteries.                                          

Mike
Mike

Are not we already paying the equivalent as the providers have already gone into the spot market as needed to purchase the power? The only number that matters is what you get charged, not what somebody calls the components. If someone charges too much, then go with another provider. A deregulated market works fine if you have price determine your actions. If you are too lazy to move or cannot because your payment history is bad, that is your fault.

Guest
Guest

Oh and the $4.5 billion dollar argument is a bit of a red herring.  Due to the cap being only $3k some REPs currently choose to go to the real time market to buy excess demand as part of their normal business strategy as they do not fully hedge their positions.  Obviously raising the cap to $4.5K or up to $9k by 2015 starts to change the business model for REPs and generators and we should expect to see less buying from the real time market as they hedge their positions better.  That's not to say that rates won't be going as up as the low price cap is also being proposed to be raised from $500 to $2.5k in order to shift the rate floor up in order to entice the building of more plants.

The Credible Hulk
The Credible Hulk

"The Industry" was deregulated. The consumer, however, remains mired in regulation. After all, how could they ever continue the "Heads, we win. Tails, you lose" standard state of affairs if we imposed regulations on them?

Oak Cliff Townie
Oak Cliff Townie

"the Texas Public Utility Commission, the state agency that regulates energy" I thought it was deregulated.    

Bubbabgood2u
Bubbabgood2u

Why do we have to keep paying more and more for what they are obligated to supply.  If they would quit putting their profits into their executives pockets and actually use their profits for what they were meant for (future expansion) there would be no need to raise the rates.  We as Texans need to stand up and fight this.  Seems a few years ago these companies were talking about building all these power plants and we would never have to worry about not having enough power.  Seems they have intentionally stopped building power plants so they can force these extragant increases on us.  We have an abundance of natural gas at very low costs, why are we not taking advantage of this and building plants to generate power using this gas.  Shouldn't this need for more capacity been seen years ago and the power plants have been built by now to meet the demand.

Republicscam
Republicscam

Done deal unless people actually write to their state senator, call, fax, flood the inbox. And then problem they will say hey look over here these immigrants are the reason we have to raise them electric prices so darn high.......GETTING ME SOME SOLAR PANELS......plus they have to bail out there buddy over at TXU I mean Oncor......

Anon
Anon

...and all the rest of the illustrious Pols down in Austin over a decade ago. Unfortunately the only ones with the power to fix this are the Pols we have now down in Austin.

Observist
Observist

This is not the oligopoly you're looking for... move along.

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