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Texas commercial electricity rates the nation’s lowest

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By Arthur Murray October 18th, 2019
2 min read
For business

Texas commercial electricity was the nation's cheapest.

Commercial electricity rates in Texas during July, the latest month available from the U.S. Energy Information Administration, averaged just 7.84 cents per kilowatt hour (kWh). That’s the nation’s lowest rate, just beating out Idaho.

The Texas price comes in nearly 29 percent lower than the national average for the month – less than half the rate of Vermont, Connecticut, Massachusetts, California, Alaska, and Hawaii.

Following are the lowest and highest commercial rates for July:

Where do year-to-date Texas commercial electricity rates stand?

For the year, the average Texas commercial electricity rate stands at 8.0 cents/kWh – the fourth-lowest in the country. Neighboring Oklahoma shows the second-lowest rate – 7.7 cents/kWh – and Idaho and Nevada tied for second at 7.8 cents. The national average was 10.6 cents/kWh.

Hawaii and Alaska recorded the highest average rates for the period, at 30.2 and 20.0 cents/kWh, respectively. Connecticut’s 17.3 cents/kWh was the nation’s highest year-to-date average commercial rate.

Following are the lowest and highest year-to-date commercial rates:

Where Texas industrial and residential rates fall

Texas electricity customers also benefit from lower than average industrial and residential electricity rates.

Industrial customers in the Lone Star State paid 5.41 cents/kWh, the nation’s fourth-lowest rates, in July. That rate finished nearly 25 percent lower than the national average rate.

Residential customers paid 11.76 cents/kWh – the nation’s 14th-lowest rate. That’s 11 percent below the national average.

Why Texas rates are low

All those low rates beg an important question: Why?

One reason is energy deregulation. About 85 percent of Texans have the power to choose their electricity supplier, and that means retail electricity providers must compete for customers – with price being a primary consideration.

Another reason is the presence of natural gas in the state. Texas produced nearly 26 percent of the nation’s natural gas in July. Natural gas generally is considered one of the cheapest forms of electricity generation. Nearly 57 percent of the state’s electricity comes from natural gas.

Following is a chart showing how electricity was generated in the state during July:

Texas gets most of electricity from natural gas.

How things may have changed

Unfortunately for Texans, the picture likely changed drastically in August and September. Although Texas produced more than 48 million megawatt hours of electricity in July – by far the most of any state and about 11.7 percent of the total generated in the U.S. – production since then hasn’t been able to keep up with usage in the state.

The result – with a blistering heat wave in August and September, the state has been forced to dig deeply into its electricity reserves, causing wholesale electricity prices to go up sharply. The final numbers aren’t in for those months, but they’re likely to be higher.