What’s Up (or down) With Texas Electricity Rates: Summer 2009 vs Summer 2008

By bouncey, June 17, 2009, Energy Efficiency, FAQs, News, Save Money

As I’m sure most people remember, the cost of electricity prices last summer were some of the highest in recent memory. I’m sure many of the people on here will remember a record scratching moment when they looked at their bill and saw that their electricity rates from their favorite electricity providers had jumped up as much as 50%, maybe higher. But for the most part, increased energy rates in the summertime in Texas is standard operating procedure. The cost of electricity goes up for a number of different reasons, and most of them are valid and logical. For starters, it’s hotter outside, and as a result the amount of energy it takes to cool a room is more expensive the higher the mercury goes on the thermometer. And that means that more generators have to run to keep up with the energy demands. And when the cost of generation goes up, just like when the cost of natural gas goes up, so does the cost of buying electricity from your power company.

So the real question to ask here, is will the summer of 2009 be any different from the summer of 2008, or any other year before now in terms of increased electricity prices? Surprisingly, the answer this year might actually be “no.” There’s been a perfect storm of different factors moving into this summer that might actually keep Texas electricity rates low throughout the summer. Lets take a quick look at these items one by one.

First off, and almost certainly the most important, would be the rock bottom prices on Natural Gas that are currently the watermark of the marketplace. As long as the natural gas rates remain low, so will electricity prices since a significant portion of electricity in Texas is created from natural gas burning generators. And the market price of natural gas hasn’t been this low in more than five years. Last summer the natural gas prices were reaching record heights, so it stands to reason that in general energy rates from providers will be much lower this summer than they were last summer.

But there’s another often overlooked factor that is affecting the price of energy in Texas this summer, and that is market demand. The Texas power market functions just like any other marketplace, and that means that demand will affect price. But does demand for electricity ever change in the summer? People want to turn up the A/C when temperatures rise. But there are more factors here than might initially meet the eye. Currently the United States is in the biggest economic downturn since the Great Depression, and that means businesses have closed, and homes of been sold or foreclosed upon. With many small businesses closing their doors, and larger businesses downsizing and cutting costs, this means there is less of a demand for electricity. The same principle works with more people moving out of their homes and into apartments in an effort to reduce their costs. And the average apartment uses 50% less electricity than the average home. The end result is another drop in electricity demand.

So what does all this mean to the typical retail electricity customer? In short, it means that the cost of electricity during the summer of 2009 will very likely remain extremely low compared to summer rates in the recent past. This is some welcome good news for all Texans during difficult times.

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