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Category: Electricity Prices

  • Electric Rates Are Going Up!

    Texas Commission Approves Southwestern Electric Power Co Rate Increase

    The Public Utility Commission of Texas has approved a base rate increase for Southwestern Electric Power Company (American Electric Power). Southwestern Electric Power Company serves 187,500 customers in Northeast Texas and the Texas Panhandle.

    Southwestern Electric Power Company orginally filed its request at the Public Utility Commission of Texas on October 13, 2020. The Public Utility Commission of Texas decision authorized an annual increase of $41.6 million in its order.

    The Public Utility Commission of Texas approved the increase in base rates to recover Southwestern Electric Power Company’s investments in generation, transmission and distribution facilities since 2016, plus increased operations and maintenance costs to provide reliable and safe service to Texas customers. The Commission also approved cost recovery for the Dolet Hills Power Plant, which was retired Dec. 31, 2021.

    The bill for a Texas residential customer using 1,000 kilowatt-hours (kWh) will increase approximately $8.31 per month, or 8.48%. The increase will begin with bills issued March 1.

    The overall increase includes new base rates, a surcharge to recover retroactive amounts for the base rate increase, and cost recovery for the retirement of the Dolet Hills Power Plant. By Texas law, new rates are retroactive to March 18, 2021. The surcharge for the retroactive amounts will be in effect for an estimated six months. The Public Utility Commission of Texas found the early retirement of Dolet Hills to be prudent and established cost recovery separate from base rates through a rate rider, estimated to be in effect through 2046, the previously Public Utility Commission of Texas-approved life for the plant.

    For commercial, industrial, municipal and lighting rate classes, the new base rate impacts vary by rate class and usage characteristics.

    “The base rate increase is necessary for Southwestern Electric Power Company to continue meeting customers’ expectations and to maintain and operate a strong, reliable electric system,” said Southwestern Electric Power Company President and Chief Operating Officer Malcolm Smoak.

    “We recognize that customers are concerned about their energy costs, especially during the pandemic,” said Smoak. “We will continue to work with customers to help them stay on track with their electric bills.”

    Base rates refer to the costs of building, maintaining and operating Southwestern Electric Power Company’s electric system, including power plants, transmission and distribution lines, and facilities to serve customers. Base rates do not include the fuel portion of the customer’s bill, which pays for fuel and purchased power and is passed through to customers with no profit to the company.

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  • What’s Coming to Texas in 2022 Electricity Market

    The pandemic has been a major driver in fluctuations in the energy market this past year. So what can Texans expect in 2022?

    Matt Smith, lead oil analyst at Kpler, joined Texas Standard to talk about key developments, including with renewable energy, that could have big consequences for the Texas economy and the global energy market as a whole.

    Listen to the interview with Smith in the audio player above or read the transcript below to learn more about how oil is bouncing back as investments in renewable energy sources continue to grow.

    This interview has been edited lightly for clarity.

    Texas Standard: What do you see as the highlights and lowlights of 2021, and what are some of the factors we should be thinking of as we ponder 2022?

    Matt Smith: We’ve been seeing this demand recovery coming through, and that’s going to be a theme for for next year. But in terms of the immediate factors, you’ve got a really wild situation at the moment in terms of Europe and Asia where you’ve got a cold winter there. And that’s been wreaking absolute havoc on electricity prices there and is actually driving demand for U.S. LNG [liquefied natural gas] as well because they’re pulling that from the U.S. It’s at a record pace there.

    But what is interesting is that it’s even driving oil demand this winter in these regions because electricity prices are spiking so high that these utility companies are switching from burning coal and natural gas to fuel oil and gas oil and whatever they can get their hands on just to keep the lights on.

    But that’s all actually just juxtaposed with a warm start to winter here in the U.S. And so U.S. natural gas prices are easing lower, which is really important because natural gas prices are the key driver of electricity prices across the U.S. And so lower prices there is good for our utility bills.

    And just, finally, we are seeing gasoline prices edging lower here towards the end of the year, but we did actually just see them at the highest price for Christmas on record. So that just shows that they are putting it in context how elevated they are.

    What should we be fastening our seat belts for in 2022? Any time we talk about energy, I think a lot of people’s thoughts turn to renewables and whether any of the developments we’ve seen over the past several months might tilt us past that tipping point where the demand reaches that critical mass.

    There is definitely that momentum behind renewables at the moment, and we’re set to see them increase by 60% or something like that over the next decade, in terms of that capacity coming online. So that’s going to be a consistent theme through next year, especially with some iteration of the Build Back Better act being passed, which will really kind of propel the investment side of renewables in the U.S.

    But in terms of other energy sources and joining the dots back to Texas, you’re going to be seeing the oil market starting in 2022 in much better shape than it was last year – over $70 a barrel. We’re likely to see global demand growth continuing to rebound after the impact of the pandemic, while a big chunk of the supply-growth side of the picture is expected to come from the U.S. and the Permian [Basin] as well. So, higher oil prices is going to be ultimately supporting the Texan economy into next year.

    Would higher oil prices mitigate against investment in renewables?

    In Texas, you know, more than 20% of electricity generated comes from wind power. And actually, an amazing stat to me is still that if Texas were a country, it would be the world’s fifth largest wind-power producer, which is crazy. But going forward, investment and focus is actually pivoting towards solar power capacity instead. And so growth next year is set to double in terms of capacity to 20 gigawatts and then up to 31 gigawatts in 2023. So the future is is definitely looking bright for Texas solar going forward.

  • Why Gasoline, Heating Gas & Electricity Are Going Up

    The U.S. Consumer Price Index was up 7.5% in January… This is a 40-year record!

    You need look no further than the gas pump or your utility bill to witness a punishing run-up in energy prices.

    Motor fuel costs — mirroring a surge in oil prices — are at heights not seen since 2014. Heating bills are bloated. Electricity prices are rising.

    Energy prices always are inherently volatile. That’s why the federal government breaks them out — along with food prices — when tabulating “core inflation.” In January, year-over-year core inflation rose 6%, the biggest jump since 1982.

    Including energy and food, the U.S. Consumer Price Index in January increased 7.5% — also a 40-year record. Energy costs have been the biggest pocketbook villain, soaring 27% nationally and 30% in Minnesota in January over a year ago, CPI data shows.

    Q: How high are gasoline prices?

    A: The increase is high, but not quite historically high. On Friday, Minnesota gasoline prices on average were $3.44 per gallon, compared with $3.58 nationally, according to AAA. A year ago, Minnesota prices, which often track below the national average, were $2.62.

    Prices in Minnesota haven’t hit $3.50 per gallon since summer 2014, according to GasBuddy.com, a price tracker. The prices were even higher in 2012 and 2013, with Minnesota gasoline prices hovering between $3.45 and $3.75 for several months — briefly spiking to an all-time nominal high of about $4.25 in May 2013. Adjusted for inflation, notably ugly years for average U.S. gasoline prices, according to InflationData.com, were: 2008 ($3.86 per gallon); 1981 ($3.83); and 1938 and 1934 (both $3.66).

    Q: Why are prices climbing so much?

    A: Gasoline costs are driven mostly by oil prices — which are on fire. Oil cost around $60 a barrel a year ago, before rising steeply in 2021’s second half. West Texas Intermediate (WTI) — the benchmark U.S. crude — traded above $80 a barrel for most of October, before retreating some. But WTI began another ascent in late December; it was around $92 a barrel Friday.

    Oil’s latest surge is powered by the Russian move on Ukraine. War brings uncertainty to commodity markets. Plus, Russia is one of the world’s largest suppliers of oil and natural gas. As western sanctions pile up, “Russia could retaliate by using oil as a weapon,” said Patrick De Haan, GasBuddy.com’s head of petroleum analysis.

    Even before the Ukraine crisis, global oil demand had outstripped supply for months, buoyed by economic recovery from COVID-19. OPEC held the line on oil production. Even U.S. shale oil producers — known for burning up profits by chasing new wells when prices rise — have become disciplined. “They have learned their lesson,” De Haan said.

    Q: How high could gas prices go?

    A: “This isn’t going to get a whole lot better, and it will probably get worse,” De Haan said. “It’s not impossible to hit $4 a gallon in the Twin Cities. It really depends on how bad the Russian situation gets.”

    Q: Why is my heating bill so hefty this winter?

    A: The largest part of your winter bill is the commodity cost of natural gas, which your utility passes down to you with no mark-up. (It’s a state rule.) Natural gas prices have also risen over the past six months as demand has outstripped supply. Plus, record U.S. exports of liquid natural gas have put pressure on domestic supply.

    In January, residential customers of CenterPoint — Minnesota’s largest natural gas supplier — were paying 27% more per therm of gas than a year ago, according to data provided by the company. And commodity gas prices in January had actually fallen from December and November.

    Q: What is the natural gas price outlook?

    A: It’s likely that the Henry Hub price — the benchmark U.S. gas price — will stay above $4 MMBtu for the next few months, said Emily McClain, vice president of North American gas markets for consultancy Rystad Energy. That price has been below $4 for most of the past six years. “But we do see a light at the end of the tunnel,” she said. Supply is ramping up: U.S. gas production — unlike oil output — surpassed its pre-pandemic high late last year. And unlike oil, U.S. natural gas prices are not as influenced by global markets.

    Q: How has the weather affected my gas bill this winter?

    A: It has made matters worse: January and February temperatures in Minnesota have been uncomfortably below normal. Last month, the average CenterPoint customer used 18% more gas than a year earlier.

    Q: Are other charges higher on my gas bill higher this winter?

    A: Yes, but the financial pain here is less than from higher commodity gas costs. The Minnesota Public Utilities Commission (PUC) approved interim rate increases for CenterPoint and Xcel Energy, the state’s second-largest gas supplier, which went into effect Jan. 1. CenterPoint and Xcel’s residential gas rates each rose 3.9%.

    Also, customers of CenterPoint, Xcel and two other investor-owned gas utilities are paying a special “February 2021 weather event” charge (a separate line item on your bill). The charge stems from the “extraordinary” – as the PUC deemed them — $660 million in costs racked up by the utilities during a brutal storm in the southern U.S. last winter.

    Gas fields in Texas and elsewhere — which weren’t weatherized for cold — froze up, sending Midwestern gas prices rocketing over 4,500% at one point. The PUC allowed utilities to begin passing on the extra costs last fall over a roughly two-year period, though it later extended that time to 63 months for all CenterPoint customers and Xcel’s residential customers. The PUC hasn’t decided whether the utilities will be able to recover the entire $660 million.

    Q: What about propane?

    A: Just under 10% of Minnesotans use propane for heat. Propane is derived from gas and oil, so its price also has soared nationally. Residential propane prices in Minnesota last month were up 23% over a year ago, data from the Minnesota Department of Commerce show. Propane users often fill their tanks well before winter. But Minnesota prices have been consistently above $2 per gallon for four months — the only time that’s occurred in the past five years.

    Q: Are electricity costs rising too?

    A: For January, the U.S. Consumer Price Index showed a year-over-year spike in electricity prices of 10.7% — the largest such increase in at least a decade. In Minnesota, the year-over-year January jump in electricity prices was the highest since late 2020. This January’s bill for the average Xcel customer was 7% higher than a year earlier, data provided by the company show. The majority of that stemmed from a 6.4% interim rate hike granted by the PUC to Xcel — by far the state’s largest electricity provider — that went into effect Jan. 1. The addition of a fleet of new wind farms in 2021 also boosted Xcel bills over a year ago, as did higher prices for natural gas — a key fuel for electricity generation.

  • ERCOT & Brazos Electric to Resolve $1.9B Dispute for Texas

    Brazos Electric Power Cooperative and the Electric Reliability Council of Texas agreed Thursday to mediate their dispute over a $1.9 billion utility bill stemming from last February’s winter storm after U.S. Bankruptcy Judge David Jones urged both sides to do what’s best for Texans.

    “I want a resolution,” Jones said, “for the person that lives in a trailer in Central Texas and lives somehow on $1,800 a month that can’t afford a doubling of their electric bill because that means they can’t buy groceries on the last week of the month. That’s who we need to be working for.”

    After the judge’s not-so-gentle encouragement, the two sides in one of the largest bankruptcy cases pending in Texas broke for more than two hours and came back with news to please Jones who had suggested it.

    “ERCOT worries about Texas and Texans as much as anyone does,” said Jamil Alibhai, one of the lawyers for the nonprofit entity that manages the state’s power grid.

    Brazos, the state’s largest and oldest electric co-operative, filed for protection under Chapter 11 of the federal bankruptcy code after being socked with extraordinary bills for power it purchased during the crippling storm of February 2021 that left millions of Texans without electricity. In court filings, Brazos blamed its bankruptcy on ERCOT for imposing a staggering rate of $9,000 per megawatt-hour – hundreds of times the normal rate – on electricity buyers during the storm.

    On HoustonChronicle.com: Ex-ERCOT chief says Abbott directed freeze blackouts to stop before decision to run up billions in bills

    ERCOT contends that price was justified, given the extraordinary market conditions created by the storm and, moreover, that it had no choice but to impose the high rate because it was ordered to do so by the Texas Public Utility Commission.

    The matter presently before Jones, who is overseeing the Brazos bankruptcy case, is an adversarial proceeding Brazos filed against ERCOT challenging the grid operator’s creditor claim of $1.9 billion for power provided during the storm.

    Jones’s suggestion that the two sides find a solution to their differences came during testimony Thursday by Kenan Ögelman, ERCOT’s vice president of commercial operations. Ögelman explained that ERCOT is a nonprofit, “invoice in, payment out” entity that matches buyers of electric power with sellers in a fluid market. If one party defaults on paying for power, he said, everyone else in the market, ultimately, has to make up the difference. Those costs, he said, eventually are passed on to ratepayers.

    Jones, frequently interrupting Ögelman’s testimony, said: “We ought to be trying to figure out a way to make this all work. The ERCOT grid is not just a company. It’s a lifeblood for everybody that lives in this state.”

    After a series of recesses and closed-door meetings, ERCOT and Brazos returned to Jones’s courtroom to say they agreed with his distinct suggestion that they mediate their dispute before U.S. Bankruptcy Judge Marvin Isgur, Jones’s colleague on the bankruptcy bench in the Southern District of Texas. Isgur and Jones are longtime friends and former law partners.

    Depending on what happens in mediation, the bankruptcy proceeding before Jones is scheduled to resume in mid- to late April.

  • Electricity Prices & Debt Are Rising

    Electric and gas customer accounts 90 days or more past due are now in excess of $500 million, according to the National Consumer Law Center!

    Retail electricity prices in 2021 rose at their fastest rate since 2008, the U.S. Energy Information Association (EIA) said Tuesday. The average nominal price increased 4.3% from 2020 to $0.1372/kWh in 2021, and is expected to reach $0.1426/kWh in this year.

    That $0.1372/kWh price is the “highest on record,” EIA noted, before adding that prices have tended to slowly decline when accounting for inflation.

    There are signs that the increases are weighing on consumers in the waning days of winter. On Tuesday, New York Gov. Kathy Hochul, D, directed the state’s utilities to assist consumers struggling to pay. “The extreme utility bill increases all of us are seeing are having a serious impact on our household budgets, and in response we are taking action,” Hochul said in a statement.

    The grid operator for New England on Tuesday warned colder weather, higher demand and spiking natural gas prices “converged in January to push wholesale electricity prices to their highest levels since February 2014.”

    The rising rates have consumer advocates concerned about growing customer debt and the potential for service shutoffs now that many COVID moratoriums have lapsed.

    There is inconsistent data collection by states on past-due utility accounts, known as customer arrears, but experts say they are rising. “The numbers are going up and it’s only going to get worse,” National Consumer Law Center (NCLC) Senior Policy Analyst John Howat said.

    Inflation

    The cost of natural gas for power generation more than doubled in 2021, accounting for much of the rise in electricity prices, according to EIA. Increased investments in distribution and transmission have also contributed, say experts.

    Customers already struggling with a global pandemic must now also contend with rising energy prices. And with many states dropping disconnection moratoria, the potential impacts of growing arrears could spiral, say experts.

    The National Association of Regulatory Utility Commissioners ceased maintaining a map of disconnection moratoria in 2021, but the last update in September shows a patchwork of mostly expired and voluntary protections.

    “Inflation continues to add insult to injury with COVID,” said Tyson Slocum, director of Public Citizen’s energy program. Rising prices are challenging energy affordability, he said, making it vital for state and federal regulators to focus on protections for low-income consumers.

    “We’re still in the throes of a pandemic and now facing unprecedented levels of price inflation,” Slocum said. “Now is not the time to disconnect people from access to utility service because they can’t afford to pay through, sometimes circumstances beyond their control.”

    Consumer advocates say they need better visibility into arrears and service disconnections in order to understand the scope of the problem, but it is clear that past-due accounts are on the rise.

    The Edison Electric Institute, which represents investor-owned utilities, did not respond to questions regarding rising arrears or the potential for disconnections.

    NCLC works to make existing rate relief programs more accessible to more people, said Howat. The organization also looks for funding for programs and has pressed for states to collect better data on arrearages and disconnections.

    “We need better, more consistent data to really understand what’s going on in the field … to inform the design of programs and policies to address energy insecurity that we’re seeing,” Howat said. “But without data we’re limited in that regard.”

    Billions Overdue

    There is some data, however. Data from investor-owned utilities shows arrearages are on the rise.

    For customers in discount rate programs, combined gas and electric arrearages that are 90 days or more late are now about $222 million, compared with $169 million in March 2020, said Howat. The number peaked at $234 million during August 2021, began to decline but has now starting rising again, he said.

    For general rate customers, arrears 90 days or more past due are now $336 million, up from $218 million in March 2020.

    “So when you add them together, you’ve got [more than] a half a billion dollars in very serious arrears” said Howat.

    “The numbers are going up and it’s only going to get worse,” he added, noting a 2-6 month lag between wholesale price increases and retail bill spikes.

    “On the electric side, while there may be a slight lag in the pass-through of increased wholesale market prices to retail customers, we know the hammer is coming down and there will be suffering and there will be increased disconnections, and we’ll see more and more households forgoing necessities,” Howat said.

    Large electric utilities offer a variety of payment assistance options for customers struggling to pay, including budget billing and programs to help lower monthly bills or reduce past due balances. And the utility said there are a variety of restrictions on utility disconnections in place.

    We went into this winter with the price of natural gas about 20% higher than last winter due to an increase in demand and extreme weather in gas-producing states in the U.S. that further constrained supply. As approximately half of the region’s electricity is generated using natural gas, there will be an increase in electricity costs as well.

    Gas Prices Drive Up Customer Bills

    EIA data shows the cost of natural gas delivered to U.S. power plants in 2021 averaged $4.98/MMBtu — more than twice the 2020 average of $2.32/MMBtu.

    The American Public Power Association (APPA) says its members have seen “some small growth in rates for the last several years.” A sample of rates showed increases of about 2% in 2021, the group said.

    The rising cost of fuels is definitely a factor, said APPA Director of Policy Research and Analysis Paul Zummo. But rising distribution and transmission costs are also a factor.

    “We’re seeing some increases in transmission costs in the [regional transmission organization] and [independent system operator] markets, and so that’s factoring into these increased electric rates over the last several years,” Zummo said.

    Public Citizen’s Slocum agreed that rising distribution and transmission costs are a factor.

    “I know the popular narrative is we don’t invest in transmission and we don’t invest in reliability, but actually utilities do,” Slocum said. “There are constant transmission upgrades. Some of this is affected by increased storm activity and some of it is more routine, but you know, it is a big driver of the retail price increases.”

    More Pain Ahead

    There may not be much immediate relief for consumers, according to David Springe, executive director of the National Association of State Utility Consumer Advocates.

    “I can’t say I’ve heard much from the membership about shutoffs and arrearages being incrementally worse due to recent electricity price increases,” Springe said in an email. “But, given the extremely high level of arrearages from COVID, and the post[-]pandemic shut-offs where moratoriums have been lifted, any incremental increase in shut-offs may just be masked.”

    Springe said that right now he is more concerned with high residential gas bills over this winter, and how those impacts will play out in the months ahead.

    “Going into winter, most utilities were increasing the gas portion of the heating bill substantially. I think in New Hampshire it was a 70% increase,” Springe said. “I don’t know that we’ve seen the arrearage and shutoff impact from those bills yet, since it’s still winter. It could be a difficult spring.”