Rate drop in power bills likely coming to an end
Brokers suggest now is the time to nail down rates for summer
By TOM FOWLER
Copyright 2009 Houston Chronicle
May 16, 2009, 4:28PM
A 10-month decline in Texas electricity rates appears to be at an end, so it may be a good time to lock in a price ahead of the summer.
Power prices are down about 40 percent in Houston and 36 percent in Dallas since a peak last June, according to data collected by power shopping site ChooseEnergy.com. The decline followed the dip in natural gas prices, a key power plant fuel that hit a four-year low last month.
But natural gas prices appear to be on their way back up, with many analysts predicting the end of that free fall. Electric prices will likely follow suit.
“With summer quickly arriving, gas rates the lowest they have been since 2003 and the recent upturn gas did in the last week I would say a fixed rate contract is a strong buy right now,” said Mark Goodson, a North Texas electricity broker who helps cities and businesses negotiate contracts.
The lowest rate available in Houston on Friday was 10 cents per kilowatt-hour for a month-to-month plan offered by StarTex Power, according to the state Public Utility Commission's PowerToChoose.com Web site. Cirro Energy offers a 10.5-cent six-month rate, and Texas Power offers 10.6 cents for a one-year locked rate. The least expensive plan using all-renewable energy sources is an 11.5-cent six-month plan offered by Stream Energy.
In the Dallas area, where rates generally run lower, the lowest month-to-month plan is a 9-cent Gateway Power plan, while the lowest 12-month plan is 10 cents, offered by Kinetic Energy.
Natural gas fuels nearly 65 percent of Texas’ power generation. The primary power market is structured such that gas-fired plants generally set the price for all power, even if it’s generated by plants using less expensive fuel.
That means when the price of natural gas rises — as it did the first half of last year when it soared by 30 percent to a July 3 peak of $13.57 per million British thermal units — electric rates typically follow.
Natural gas prices reached six-year lows last month but have since started to rise. Recent comments by Ron Fort, an analyst with Legacy Energy, are typical of many in the industry, when he noted “expectations we have for future price action are for a sideways to higher pattern.”
Natural gas’ price may dip before the end of the months-long dropping trend, says Steve Madden, senior vice president of wholesale supply for StarTex Power, a Houston-based electric retailer.
“So you probably have a little more time to lock in your rate,” Madden said.
Customers in the middle of a long-term power commitment may actually find it worthwhile to break the terms of their current contract in order to sign on to a lower-priced plan.
That’s what Robert Eden, an information technology manager from Cedar Hill near Dallas, did for his home electricity plan. He has paid early cancellation fees twice in recent months to get lower rates and still expects net savings of about $1,100 over the remaining term of his contract.
He signed a two-year contract with Houston’s Reliant Energy for 14.2 cents per kilowatt-hour and was content.
“But earlier this year my brother suggested I look around,” Eden said. “I found a 10.9-cent plan with Champion and realized it would be worth it to pay Reliant a $295 cancellation fee.”
The switch to Champion took about six weeks, however, so by the time it went through, rates had dropped by more than another penny. This time the cancellation fee to get on a lower priced Champion plan was $150, but Eden said it was still worth it.
Making a midcontract switch might not work for everyone. Eden works out of his 3,000-square-foot house with the air conditioning running on high all summer, and he has a pool. So his usage tends to be high.
“The lesson to be learned from this is ‘do the math,' " Eden said.
tom.fowler@chron.com