With the supply and reserve running close to being short in Texas in the next couple of years, business electricity rates are expected to be on the rise for the next couple of years. The cost of natural gas is also increasing, so that will also affect the electric rates in Texas. One electric retailer recently estimated that prices would rise 10 percent in both of the years 2012 and 2013. Even though business electric suppliers offer fixed contract rates, most only offer lock-in rates for multiple years. This past year, especially the summer, was already tight on the power reserve as demand was higher than they had anticipated.
With that information known, it is easier to see why rates are going to increase. The demand is becoming higher than the supply and it is decreasing the reserve that Texas has established. In August, the reserve margin went from 17.5 percent to just below 4 percent. That is a huge decrease. In addition, power generation plants are closing but not as many new ones are currently scheduled to open anytime soon – That decreases supply even more.
Texans have been spoiled with their lower business electricity rates for the past few years, so it will be a shock to them when the rates rise over the next few years. Even though having the power to choose lower rates will certainly help significantly, it is going to take less demand and more supply to start lowering those prices once again. Market participants are working and looking for ways to help with the power supply. One way they are exploring is to ask big companies who consume a lot of electricity to switch to back-up power on critical days as well as periods that they aren’t using much power. Also, they are exploring another way by seeing if big companies would consider taking lower rates if they could cut back on their power during times of shortage. It has also been mentioned that there should be a modification to the Texan Senate Bill 7, or the deregulation law, to allow for certain capacity payments. A capacity payment would be made to generators who keep their power at a specified spare capacity in case of emergencies.
There are two pieces of good news in all of this; first, the fact that supply may run out is known far enough in advance where solutions can be put in place to prevent it from happening and second, the prices have not increased yet. Demand may be increasing but with an ever changing industry, demand can still fluctuate and is never certain. More people are turning to renewable energy which may continue to grow and lessen the demand for generated traditional electricity. There are options that ERCOT is exploring to help solve the supply and capacity issue for the future by adding large transmission lines from wind power farms in west Texas. For now, Texans still have the power to choose their business energy supplier and they can get lower prices by using the business electricity services of Choose Energy. Suppliers offer the option to lock-in the business energy price for multiple years, which is certainly what we would recommend with this uncertain price future.