Texas electricity customers face historically high electricity prices this summer. The rising energy rates are not so much a result of the cost of natural gas, the primary commodity used to generate electricity, but are a result of increased demand and anticipated shortages in supply. What does this mean for customers on variable rate, month to month electricity plans? High, high, high electricity rates for the dog days of summer. Who is most at risk? Prepaid electricity customers and customers on holdover rates from expired electricity contracts.
2018 Texas Summer Electricity Rate Predictions
How high could electricity rates go in the summer of 2018? It’s incredibly uncertain right now. Don’t be surprised if you see month to month rates in the 20¢ – 30¢ range or higher for an average $/kWh. Texas is experiencing unseasonably hot temperatures already hitting 100+ degrees in parts of the state in May. Texas electricity demand is expected to be a record breaking peak of 72,756 MW this summer which is 1,600 MW greater than the current record from August of 2016.
ERCOT, the Texas independent system operator that manages the power grid, has already experienced days where the demand for electricity has crept dangerously high. This higher-than-anticipated demand, combined with reduced supply of electricity, is causing the prices to spike. This measure, called the reserve margin, represents how much electricity is available on the grid. When the reserve margin gets low (or even negative), brownouts may result and wholesale electricity prices skyrocket. The reserve margins represent the electricity generated over & above the expected demand for electricity at peak usage times and it is very expensive.
Learn more about how the increased demand for electricity and supply shortfall impacts electricity prices >>
Texas month to month electricity rates traditionally peak in August. This year, May 2018 month to month rates already equal or exceed last summer’s peak rates, and are still on the rise.
Prepaid Electricity Customers at Risk
Prepaid plans are variable rate, month to month plans where the customer funds their account in advance and the money in the account pays for the electricity as it is used. When the balance gets low, the customer puts more money in the account and the cycle continues. Prepaid electricity plans are very popular. They are great plans for people who have credit scores that would otherwise require a large deposit to get electric service.
What’s the risk? The risk is that the prepaid energy rates change monthly. Prepaid electricity plans have variable rates (the opposite of fixed rates), and there is no requirement for the supplier to give customers the same energy rate twice.
In fact, a couple of well-known electricity providers have suspended prepaid plan offers because there is so much uncertainty about how high the summer month to month rates could go. The provider’s reasoning is that they want to protect prepaid customers from potentially devastating electric charges that they cannot afford.
Expired Electricity Contracts at Risk
Summer is the most popular time of year for people to move. As a result, many electricity contracts begin and end during the summer months. With all of the distractions of summer, it is easy for an electricity contract renewal offer to be overlooked. Customers must take action to renew a contract or switch providers when their contract expires. If a customer does not take action to renew or switch, they are put on a holdover rate with their current provider. A holdover rate is a variable rate, and there is no limit on how high that rate can go. Learn more about what happens when your electricity contract expires.
Texas law requires electricity providers to send notices of renewal offers at least 30 days before a contract expires. Customers that do nothing about it will automatically be moved to a month to month rate when the contract expires. For electricity customers that fall into this category, they will certainly be shocked when they receive an electric bill this summer with rates as much as 2 to 3 times what they have been paying.
Breeze Energy Customers at Risk
Has your electricity provider recently had issues? You won’t lose power, but you run a real risk of being moved to a very expensive month-to-month plan that is different from your original agreement. If your provider is going out of business or undergoes ERCOT-imposed transition, you will be moved to the POLR (provider of last resort) in your delivery area. Expect this to happen frequently this summer as electricity providers are forced to buy expensive wholesale electricity and could be forced out of business.
In the most recent example, customers of Breeze Energy have undergone an involuntary mass transition due to Breeze’s default on their ERCOT market participation agreement. This will cause approximately 9,800 Breeze customers to be moved to a new provider. It also means that Breeze customers will be moved to more expensive month-to-month plans unless they take action.
Protect Yourself Against High Texas Summer Electricity Rates
Shop for a fixed electricity price contract now. Prepaid electricity customers should ask their provider to switch them to a fixed rate plan. If the prepaid provider does not offer a fixed rate plan, find a provider that does. Most electricity providers will work with customers to help them pay any required deposit in installments. At least with a deposit, it will eventually be credited against electricity usage or simply refunded after the term of the contract. Paying a deposit now to lock into a fixed rate contract to get through this summer will save money in the long run.
Holdover rate customers need to find a provider and a plan and enter into a fixed rate contract as soon as possible. Anything less will literally result in hundreds of dollars of extra expense. Holdover rate customers will not incur a penalty for switching providers or plans because they are not under a contract.
ElectricityPlans.com can help. ElectricityPlans.com is an online marketplace representing reputable electricity providers with a wide variety of plans and terms to meet the needs of every Texas electricity customer. Need help choosing an electricity plan? Use our free PlanScan service to narrow down the choices and find the right electricity plan today.