SAN ANGELO, TX — The high price of gasoline for your automobile is hurting pocketbooks in the Concho Valley. More pain in on the way, according to a new study by Vault Energy Solutions in Plano.
Electricity rates for your home are the highest in 13 years and are about to get much worse, said a co-founder at Vault Energy, Jason Thomas.
“Electricity providers are pricing new contracts near all-time highs. A perfect storm of conditions is converging that could make this summer and beyond the most expensive period ever for electricity in the history of Texas,” he said.
ERCOT reports that 46 percent of the Texas power grid is fueled by natural gas. Natural gas prices have tripled in price in the U.S., Thomas said. It’s not better in Europe because of the war in Ukraine. Pressure to import more natural gas into Europe will put more pressure on US natural gas prices.
Meanwhile, the heat, as we have experienced over the past 10 days, is higher than normal summers. Hot summer days drive up electricity demand in Texas, and with high demand the wholesale electricity prices are pushed upward.
There is more.
NOAA is predicting “a 70% chance of 14-21 (hurricane) storms forming, with as many as ten potentially becoming hurricanes. Three to six of these storms could become major hurricanes.”NOAA reports that this year’s hurricane season will be “above normal.” Peak season is August through September.
Because of the uncertainties in the energy markets, electricity providers are extremely cautious right now, Thomas said.
Adam Sinn, an entrepreneurial commodities trader and owner of Aspire Commodities in Houston who specializes in power generation financial instruments. He said wholesale power is much lower in futures for two years from now than it is for next month. Electricity in wholesale markets is generally priced in 12, 24, and 36-month strips, he said.
“If natural gas stays the same or does not come down, these rates will stay the same. Everything is correlated to the price of natural gas,” Sinn said. During power surges, such as during hot summer days, natural gas is almost exclusively relied upon for the uptick in demand, Sinn noted. This is another reason why the price of natural gas is driving the price of electricity.
“Electricity providers in Texas are pricing in the current high natural gas prices as well as the risk of an additional significant increase in prices,” Thomas added.
If you were lucky or smart enough to have signed a multi-year contract as recently as six months ago for 8 or 9 cents per kWh, you will not need to worry in the near term
For those with no contract or whose contract is up for renewal, residential rates are in the 15 to 18 cent range right now.
“Many providers have stopped offering new sign-ups altogether.,” Thomas said. It is more difficult to get a good rate on a 12-month contract than a 24- or 36-month contract.
The dilemma for customers without an energy contract is to decide whether or not to continue with a month to month plan hoping for lower prices in the 12-24 month term to lock in, or should you lock in these much higher rates for longer terms?
Most of the price uncertainty is caused by the volatility in natural gas wholesale prices.
“Until Europe settles down, we will not see much relief,” Thomas said.
You can shop for the best rates in Texas at the Vault Energy website.