Updated: Oct 8, 2022
Texans are noticing a steep rise in their electricity bills, and what’s more worrisome is that there doesn’t seem to be an end in sight. There is simply no escaping rising electricity prices, and residents can feel the difference every time they receive their monthly electricity bill. In such cases, it becomes increasingly important that the U.S. and Texas population is aware of the causes of rising electricity bill prices and their effect on their everyday lives.
This article will discuss the causes of rising electric bills in the USA and Texas and find the best possible solutions to overcome the upcoming inflation.
Why Are Electricity Bills Rising In The USA & Texas?
Did you know that Texas generates more energy than any other state in the USA? Knowing that Texans have enjoyed some of the lowest electricity prices in the country, they don’t have this luxury anymore. In fact, ever since Texas deregulated its power market, electricity bills have gone through the roof - most evident this summer and spring.
To make a comparison, according to Texas’ Power to Choose website, the average going rate per kilowatt-hour in June is 18.48 cents per 1,000 kWh used. An increase of 10.5 cents compared to June 2021 would amount to a nearly $80 monthly increase on an electric bill.
Thus, a family using 1,000 kWh of electricity per month translates into a monthly increase of approximately $80. Within a year, this would increase the family budget by $1,000.
According to John Ballenger, vice president at Texas retail electric provider Champion Energy, “I am worried people are going to be shocked. Realizing this is 50 or 60 or 70% higher than what they had paid before, I’m just not sure it’s real to people yet. If it’s not, it will be very, very soon when the bills hit this summer.”
There are multiple reasons why Texans are experiencing a steep rise in electricity prices, but the most significant among them is the rising natural gas prices. Natural gas prices have shot up 200% since February, when Russia, a top gas-producing country, invaded Ukraine and wreaked havoc on the world’s energy market.
In the 2010s, natural gas was being sold for $2 to $3 per million British thermal units. In 2021, natural gas futures contracts sold for $3.08, according to the U.S. Energy Information Administration. A year later, the futures prices for a similar contract were nearly 3x higher, around $8.70.
As a result, Texas, which had been providing its residents with cheap electricity prices for so many years, cannot do so now. This is because of the rising demand and increased export of natural gas Texas has been sending to Europe, as many countries try to remove themselves from Russian gas.
The other major reason is increased demand in Texas locally. Texas is experiencing the hottest late spring and summer period on record. San Antonio, Houston, Waco, and Austin are all predicted to have average highs between 98 and 102 degrees, or about 5 to 8 degrees above normal. This has driven the power demand, and as most Texas power plants run on natural gas, the residents are experiencing rising electric bills.
How Long Will The Prices Rise?
After this shocking turn of events, Texans are desperate to know how long electricity prices will continue to rise. With the war in Ukraine dragging on, Texas power plants are warning residents that the higher electricity prices can stay on for months or longer.
Although, the higher electricity price will benefit the economy by opening up jobs or state taxes on oil and gas production, especially for cities in the state’s oil fields. Despite the increasing demand, there is no production growth due to restrictions set during the COVID-19 pandemic. Thus, Texas is at a standstill.
Consumers can only save themselves from rising electricity bills by choosing eco-conscious alternatives. According to Alison Silverstein, an energy consultant who formerly worked with the Federal Energy Regulatory Commission and Public Utility Commission of Texas, “The most effective thing we can do is try to use less electricity. That means using automated thermostats, energy efficiency measures, and the like.”
Other Causes Of High Electricity Rates In Texas
While the rising natural gas price is the main reason why electricity bills are increasing in Texas, other factors contribute. Let’s discuss them in detail.
In February 2021, when millions of people were without power for days in subfreezing temperatures after a combination of cold weather across the state and increasing demand for energy, shut down power plants as well as the natural gas facilities that supply them with fuel, a critical situation was created and hundreds of people lost their lives.
According to Public Utility Commission chair Peter Lake, “Grid operators are no longer prioritizing providing Texans cheap power. Instead, its main focus is the grid’s reliability, especially during extreme hot or cold weather. But that has a price.”
ERCOT, Electric Reliability Council of Texas, Inc., new approach requires power plants to be online and available when needed; thus, they need to pay generators a prescribed amount to operate no matter what happens. Moreover, Texas is still paying for last year’s storm disaster. Lawmakers approved loans, went into debt, and are well on their way to bankruptcy if this is not handled immediately. Thus, some of these surcharges are present in Texans' electricity bills.
The electricity rate in Texas is based on supply and demand. Thus, the more electricity available, the lower the price will be. And when demand increases, electricity prices will increase. With the increasing population and extreme weather conditions, the demand is at an all-time high, resulting in electricity providers finding it difficult to meet requirements of residents.
With no proper investment in increasing the power infrastructure, electricity bills prices are on the rise and will be for a few months. Eco-friendly alternatives have recently gained popularity, but they require proper education and awareness to work.
Residents choose power or electric plans from multiple private utility provider companies, and this contract lasts anywhere from 1 to 3 years. According to their timeline, each resident will face a surge in electricity bill prices depending on when their contract ends. For instance, residents will have to renew their contract or upgrade to a monthly subscription plan with higher electricity prices.
Residents are locked in on their contracts at lower prices, but they have to face reality as soon as it ends. With a 70% increase in electricity bills and rising inflation affecting the gas and grocery prices, it will be difficult for locals and retirees with set incomes to manage their lifestyles effectively.
Inefficiency In Energy Consumption
Production is at an all-time low. In April 2022, the amount of stored natural gas was about 17% less than the five-year average. It is difficult to reduce natural gas usage, and Texas has failed to introduce efficient energy consumption habits, such as imposing heat pumps, insulation units, promoting solar panels, etc.
Although multiple assistance programs are available for low-income individuals, eligible households can qualify for financial help from the Comprehensive Energy Assistance Program.
As you can see, electricity rates are linked with economic conditions, international affairs, consumer demand, weather conditions, and power infrastructure. Thus, it is very difficult to predict future prices. As we all know, rising electricity prices are a national trend. With the current power infrastructure and economical prices, it seems unlikely that prices are going to decrease anytime soon.
Other causes of high electricity bill prices include growing population, increasing demand, extreme weather conditions, and rising inflation.
How Does the Texas Electricity Rate Work?
To find a cost-effective way to manage rising electric bills in the USA and Texas, we need to first determine how Texas's electricity rate works.
Understanding the Texas energy market is more difficult than it seems. The electricity rates depend on multiple factors, and it can get confusing easily with multiple electricity providers, electricity rates, and plans. Initially, Texans bought their electricity from a local utility that was often the only choice. Thus, utilities had very little incentive to keep rates low or go the extra mile for customers.
In 2002, the Texas energy market became deregulated. This means that rather than having a single natural gas or utility provider, customers have the benefit of choosing from a competitive market of multiple electricity providers that purchase electricity from wholesale sources.
Keep in mind that not all cities are a part of Texas's deregulated energy market. For instance, Dallas, Houston, Fort Worth, and other big cities and major metropolitan areas are part of the competitive energy market, while Austin and San Antonio are major exceptions.
Following deregulation, Texans are benefited from multiple choices and electric plans to choose from. This is advantageous because residents can pay precisely for what they need. All electric provider plans vary in rates, source, termination fee, contract structure, usage, etc. Thus, finding the best electric plan for your needs and requirements requires extensive research. If you don’t bother doing this, a random electric provider will be assigned to you.
The Texas energy market was deregulated to drive competition between electricity providers and reduce consumer prices. This worked perfectly as consumers could choose their preferred energy plans and manage costs effectively, but there are some downsides to this as well. Electricity providers have no incentive to improve efficiency or weatherization, and excessive competition leads to false marketing.
Moreover, the Texas weather conditions are extreme and unpredictable, as experienced in February of 2021. As mentioned above, the 2022 summer is the hottest summer on record. Likewise, the winters can get extremely cold, thus increasing energy consumption and forcing electricity providers to raise the electric rates per kilowatt-hour.
Types Of Electricity Rates In Texas
Now that we know how the Texas energy market works, let’s look at the different electric rates available and determine the best option for your household or business. Retail electric providers (REPs) offer the following 3 types of electric rate plans:
One of the most beneficial electric plans for residents is the fixed-rate plan. In this, the price you pay per kilowatt-hour remains the same throughout the contract duration, but that does not mean your electric bill will be the same each month.
Your bill amount will be determined by your power consumption, not energy market rates. Thus, if the market fluctuates upward, you would still be paying the same price in which you locked the contract. But there is a downside too. If the market fluctuates downward, you will still be paying a higher price, but that rarely happens.
In this electricity rate plan, the price you pay per kilowatt-hour depends on the market energy prices. Thus, your bill will vary monthly depending on the market situation, such as natural gas and petroleum prices. This is only beneficial when the market fluctuates downward; otherwise, you will be paying a hefty amount each month as electricity prices generally go up.
In this plan, the indexed or electric bill rate is directly correlated to the publicly available index, also known as market rates. It is similar to a variable-rate electric plan, as your monthly bill can vary month to month.
Among these, a fixed-rate electric plan is most advantageous. Thus, if a REP offers a contract for 3 to 5 years, jump on it and save yourself from the rising electric prices in the USA and Texas for as long as possible.
How To Find The Right Electricity Provider In USA And Texas
Now that you know the major role REPs play in saving up and managing electric costs, it is important that you choose the best electricity provider according to your needs and concerns. Below is a checklist you can follow when comparing retail electric providers in the USA and Texas. Let’s get started!
Since Texas is a large state, it's possible that a lot of retail electric providers might not service in your area. Thus, narrow your search to local REPs and create a list of potential utility providers. Complete a thorough review and see what their customers have to say about them.
Average Usage And Cost Per kWh
Then, you need to figure out your electricity usage per kilowatt-hour because that's how all providers tell their rates. You can do this by checking out your previous bill, or if you have newly moved to Texas, you can get an average usage of your area through the U.S. Energy Information Administration (EIA).
Aside from the fixed-rate, variable-rate, and indexed-rate plans, there are other plan types you need to consider when comparing electricity providers, such as:
● Commercial plan: these plans are designed for businesses and commercial buildings with special discounted prices. It also has additional amenities in place, such as an automation system that lets owners monitor the energy usage in each location.
● Green energy plan: some providers also have a small percentage of renewable energy in their offers. For instance, if a plan says 20% renewable energy, 20% of electricity will come from renewable sources.
● Pre-paid plan: as the name suggests, the payments are made in advance and are ideal for people who have a low credit score or are on a limited budget.
● Time-of-use plan: this plan will determine your electricity bill amount based on how much energy is used at what time. For instance, if you use more energy at peak hours, your electricity bill will be higher. This plan is ideal for promoting energy conservation and benefiting consumers and providers.
Carefully read the terms and conditions and see if any additional costs will be added to your electricity bill at the end of the month.
To find the best electricity rates, use the Power to Choose tool to determine the best electricity providers and coverage based on your service area. You can also compare electricity plans and make the decision-making process more manageable.
How To Reduce High Energy Costs In the USA And Texas
To fight against rising electric bills, consumers must take matters into their own hands and use energy conservation practices. Fortunately, there are many ways to save up on energy costs and move toward eco-conscious choices.
Weatherize Your Home
Weatherizing means sealing air leaks around your home to prevent excessive cooling and heating expenses. The most common sources of air leaks are doors, windows, and vents, and to prevent these air leaks, you need to ensure there is no opening between the wall and these sources. There are two primary techniques for sealing air leaks, caulking and weather stripping, and both offer ROI in less than a year.
Install Energy-Efficient Lighting
The traditional incandescent light bulbs we use consume an excessive amount of energy compared to LEDs. Thus, all residents should replace their light bulbs with energy-efficient lighting options, such as CFLs and LEDs. LED light bulbs produce less waste and more useful lumens than other lighting technologies. You can see up to 60 or 70% energy-efficiency improvement by replacing all light bulbs in a facility, school, or commercial building with LEDs.
Other benefits include:
● No heat emission
● Works well in cold temperatures
● Have a longer lifespan
● Operate in lower voltage
Shift To Solar Panels
Another way to reduce energy costs is to shift to solar panels. Solar panels have become increasingly popular recently, and many reasons contribute to it. For instance, solar panels reduce your reliance on the national power grid and your electricity bill by 70%. Moreover, the energy source is renewable and sustainable and thus reduces your carbon footprint by not producing harmful pollutants or gases.
As the solar panel demand increases, their prices decrease; thus, this is the best time to switch to eco-conscious electricity options.
Install A Programmable Thermostat
Upgrading your household equipment is also a sure way to reduce your electricity bill. Older appliances use more energy to maintain performance, leading to higher energy bills. The same goes for a thermostat.
Thus, it is recommended to switch to a programmable thermostat. It has advanced features like automatically turning off or reducing heating and cooling at times when you are away or asleep. They also indicate HVAC system problems and air filter changes and offer efficiency improvement tips.
Insulation is very important to reduce energy costs; thus, insulating your walls, attic, basement, floors, and crawl spaces are recommended for the best results. Insulation helps retain heat in winters and keep heat out during summers. This will lower your use of an HVAC system and help you save up on energy costs.
Other energy conservation methods include upgrading your HVAC system, replacing air filters, reducing water heater expenses, and installing energy-efficient windows.
Rising electric bill prices are a national trend, and there is no way to escape it. Thus, low-income families can only fight against rising inflation by choosing a suitable retail electric provider or using energy conservation methods to reduce energy costs.
Energy conservation is effective because it helps protect the environment and increases your home’s value. You can significantly lower your electricity bill by simply following the above mentioned practices.
If you want to join the solar lifestyle, Solar Connect can fulfill all your needs. It is a family-owned and operated company that aims to make the solar lifestyle simple and fun. From start to installation, they help you through every step to renewable energy conservation and offer a performance guarantee and an extended workmanship warranty.
So, what are you waiting for? Solar Connect Texas is just one example of how Texas is working to become more sustainable.
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