Texas business electricity prices remain lower than the U.S. average

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By Arthur Murray September 16th, 2019
For business

Lower Texas business electricity rates aren’t unusual

During the past two years, Texas monthly average business electricity rates have stayed consistently below the U.S. average.

Commercial rates in Texas ranged during the period from a low of 7.70 cents/kWh in December 2018 to a high of 8.53 cents/kWh in February 2018. February 2018 also was the last month that the national average was less than 20 percent higher than the Texas  rate, and even then it was 19.9 percent higher. On average, Texas commercial rates were about 24.7 percent lower than the U.S. average.

Industrial rates in Texas ranged during the period from a low of 5.12 cents/kWh in December 2017 to a high of 6.20 cents/kWh in July 2018. Again, that was the month that the spread between the Texas average and the U.S. average was the lowest – 15.5 percent. On average, Texas industrial electricity rates were 22.5 percent lower than the U.S. average.

What do these rates mean?

Rates in cents per kilowatt hours don’t mean much by themselves. It’s difficult to tell whether 8.53 cents is meaningfully higher than 7.70 cents. That’s because rates aren’t the only factor in electricity cost. Usage, of course, means at least as much as the rate when calculating Texas business electricity prices.

The average commercial electricity usage in Texas, according to the latest EIA numbers, is 7,564 kWh – higher than the average U.S. usage of 6,141. How does this translate to average bills? Texas commercial electricity bills averaged $592.26 in June. U.S. monthly commercial electricity bills for the month averaged $668.75 a month. That lower rate in Texas, despite higher usage, resulted in average savings of $76.49 a month.

The average industrial electricity usage in Texas, according to the latest EIA numbers, is 87,043 kWh – much lower than the average U.S. usage of 97,610. How does this translate to average bills? Texas industrial electricity bills averaged $4,552.35 in June. U.S. monthly industrial electricity bills for the month averaged $6,744.85 a month. That lower rate in Texas, combined with lower usage, resulted in average savings of $2,192.50 a month.

How do Texas business electricity rates compare with other states?

Texas commercial rates were the nation’s lowest in June, finishing just ahead of Idaho and Nevada. Hawaii, Alaska and California finish in the bottom three in that category.

The Lone Star State’s industrial rate in June was the nation’s fourth-lowest, behind Washington, Montana, and Oklahoma. The highest industrial rates were in Hawaii, Alaska, and Rhode Island.

Why are the rates lower in Texas? There are a number of reasons, including the following:

  • Natural gas. About a quarter of the nation’s natural gas production comes from Texas (and that’s not counting what comes from the Gulf of Mexico).
  • In June, Texas wind farms generated nearly 28 percent of the nation’s electricity that came from wind.
  • One growing factor is solar – Texas generates the fifth-highest amount of electricity from solar sources.

The ready availability of these sources and others helps keep costs down.

What methods are used to generate electricity in Texas?

Texas generates the most energy by far of any state, nearly double the output of second-place Florida. Following are the percentages of the state’s electricity generation from each source:

What has happened to Texas business electricity rates since June?

The numbers aren’t available yet from EIA, but Texas energy rates have increased in the months since June. The state’s electricity rates always go up as usage increases in July and August. In addition, for the past two summers, Texas electricity reserves have decreased because of the closure of two coal plants and other factors.

The result: As demand hit its peak this summer, Texas wholesale electricity prices increased as well. Some customers felt the results during an August heatwave – those customers’ prices were tied directly to the wholesale market.

Other customers could feel the results later this year, as the wholesale price increases make their way into the retail market.