Why Should I Sign Up for a Fixed-Rate Plan? Summer Prep Series Part 2

By Vernon Trollinger, May 17, 2016, Save Money

May has arrived in Texas, so it’s time for music, weddings, Cinco de Mayo, and the first waves of summertime heat and humidity. In a state where the daily summer temperature hovers between “well-done” and “nuclear,” you know how hard it is to cool your home while not overheating your electricity bills. Don’t sweat it – our Summer Prep Series will show you how to get your home ready for summer, save energy, and keep your cool.

Why You Should Lock in a Fixed-Rate Plan Now!

It’s no surprise that summer has the highest electricity rates. As summer heat drives air conditioning use higher, the price of electricity climbs, and this definitely holds true in Texas. With everyone having their air conditioning running at full bore, it’s little wonder that electricity demand in the ERCOT region drives prices through the roof.

Why Should I Sign Up for a Fixed-Rate Plan? Summer Prep Series Part 2

A big chunk of your electricity bill each month comes from your HVAC system, so help it out with a fixed-rate plan before you actually see dollar signs.

We want to examine why spring (and often fall) is the best time to switch to a fixed-rate plan. Our goal is to deliver insight into the cycles of the annual energy market and what to watch for the coming year.

The Basics of the Energy Market

Not only does demand drive the price of electricity, the price of the fuel used to generate electricity does, too. In Texas, over half of the electricity supply is generated by natural gas. Because more power plants through out the US are switching over from coal to natural gas, the price of natural gas has a much more immediate impact on the price of electricity.

While the 2015-16 winter was the warmest on record and left a glut of natural gas sitting in storage, the hot 2016 summer already forecasted could burn up much of that surplus and start raising electricity prices nationally.

So, if your Texas retail electricity plan is a variable-rate (month-to-month) plan, you could be looking at a potentially expensive summer and higher winter electricity bills. Fortunately, there’s still time to switch to a long-term fixed-rate plan while demand and electric rates are still in the spring price trough.

What is this Spring Price Trough?

Why Should I Sign Up for a Fixed-Rate Plan? Summer Prep Series Part 2

Summer in Texas doesn’t have to mean sweating just to save money. Sign up for a fixed-rate plan in spring to secure a low rate before temperatures rise.

The yearly energy price cycle normally starts with a slight rise during the winter months. At the beginning of March, temperatures moderate all over the country and demand for heating slackens. Generators stop requiring as much fuel so fuel prices drop. From March to May, both natural gas and electricity prices fall; however, on June 1, electricity prices begin rebounding and don’t slack off until October when demand dips again.

This pattern is repeated every year with the cost for residential electricity trending upwards. The EIA states in its most recent Short Term Energy Outlook (April 12, 2016) that it “expects the average residential bill to be 8% higher than in summer 2015.”

So, if you are currently on a variable-rate plan or your current fixed-rate plan is about to expire, now is the time to lock in a great low priced long-term plan. Plus, not only will you snag the lowest rate for the year, but by locking it in for longer term, you could be shielded from rising electricity prices for up to the next three years.

But summer’s coming so you’ve got to move on this soon! After all, it’s your hard-earned money.

Stay Tuned for Summer Prep Series, Part 3 — Why You Should Tune Up Your HVAC.

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