Archive for Energy News
Report on Texas Electricity Deregulation
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Texas Commercial Electricity Deregulation and Now
Texas electricity prices have had quite a remarkable history since deregulation started in 2002. Who does Texas have to thank for deregulating the energy service markets in Texas? Enron was the influential company that successfully lobbied the state of Texas government with who knows how much money to make deregulation come to pass. When 2002 deregulation went into effect the natural gas markets flew out of control. Some of the highest electricity prices in the history of the Texas electricity market occurred during the year of 2002. Because natural gas controls the cost of electricity in Texas it had a negative impact on the perception Texas energy consumers had with the deregulation process. Energy consumers in Dallas were accustomed to paying a fair price for electricity service to TXU Energy which was the monopoly electric company in that area prior to deregulation. To switch from TXU Energy and then be charged what appeared to be an inflated price for electricity made many people mad. Complaints were filed by the hundreds with the Public utility Commission of Texas. Many consumer sites like ripoffreport and pissedconsumer have now become the sites of choice to list complaints people have with Texas electricity companies that overcharge their customers. In 2002 sites like this were not as popular and so complaints were lost within the archives of the PUCT and not readily indexed on the search engines as what we have now.
Consumers Have a Large Voice in the Retail Electricity Markets
If you do a search for “TXU Energy rip off” or “TXU overcharging” you will find some corporate sites and maybe some related sites about TXU Energy rates and jobs. You will also find many consumer sites with complaints about the company. Electric service customers in Texas are beginning to list their complaints by the thousands on the internet with consumer sites. These sites allow consumers to quickly research and put the pieces together about an issue they experienced that maybe other people have experienced as well. Going back to our discussion about Texas deregulation in 2002 we find that many people had issues with the government deregulating the markets but people did not have the choices they have now of expressing their dissatisfaction. Enron was a heavy hitter in lobbying the Texas government t o deregulate the energy industry. Consumers took up issue with Enron and deregulation as Enron was known for inflating California electricity prices and now here we are in the beginning stages of Texas deregulation with historically high electricity rates. The governor of Houston even conceded eventually that deregulation was just not working.
Is Deregulation to be Blamed for Rises in Electric Service Prices?
Evidence suggests that deregulation in Texas is not the real cause for occasional high electricity prices. The issue has to do with natural gas prices rising to unreasonably high levels at times. This first started in 2002 and then happened again in the summer of 2008. Most of the country was impacted by a barrel of oil rising to as high as $140 a barrel last year. Natural gas rose directly with crude oil during this time. Natural gas doesn’t always have as close as a correlation as it did the summer of 2008 but at its peak natural gas was trading close to $14 per mmBtu during July 2008. Consider that natural gas is currently trading at $3.70 per mmBtu as of today. Electricity in Texas has a 90% correlation with natural gas prices and so people are really feeling the recovery in the drop in energy prices right now. Unfortunately electricity prices don’t always drop as fast as people would like when natural gas falls because there is another factor at play. Heat rate is the component of the electricity rate of transforming natural gas energy into electricity. This cost historically rises as natural gas prices fall. The heat rate can make electric rates fall at a slower rate than natural gas prices fall.
Texas Energy Prices and Trading on Commodity Desks
Many conspiracy enthusiasts and some news journalists theorized that the summer of 2008 oil and natural gas price increase was due to energy markets being manipulated by investment banks and subsidiary energy companies of more well known companies. Trying to trace the culprit within the commodities trading market is impossible as the trading desks remain anonymous for the most part to protect investor’s positions from being known by competitors. These energy companies that may have pushed energy prices up through complex investment strategies involving large volumes of investors is not a proven allegation but some energy experts believe there isn’t another answer for the fast rise in prices considering there was plenty of supply and not enough demand to lead to the speculative rise in oil and natural gas prices.
Picking a Bottom in the Price of Electricity
Picking the right time to lock into a fixed electricity price is a no brainer this spring of 2009 as Texas electricity prices plummeted just as fast as they rose and are now at near historical lows. For the risk averse it is recommended to lock into a 2 or 3 year residential electric service agreement. If you are a large commercial or industrial facility sometimes a 5 year or longer agreement can be locked into at a decent price. For longer term fixed electricity service agreements it is important that your company has impeccable credit or you will be asked for a very large sum of money for a deposit. For most Texas commercial businesses it makes more sense to go with a standard 1 or 2 year fixed electricity agreement. Many are now concerned that Obama’s green and renewable energy laws and regulations will lead to higher electricity costs. It was just last year that we saw a residential electricity customer in Texas paying over 30 cents a kWh with First Choice Power during the rise in electricity prices. Just imagine if you were a large commercial business using 1,000,000 kWh a year. This would represent having to pay .20 cents more per kWh than before. That represents $200,000 more that a company would have to pay per year to run their company. These additional costs get pushed to the consumer and could potentially cause this business to outsource to China where electricity prices are cheaper.
Pursuing Clean Technology to Produce Texas Power
If Texas is allowed to continue to pursue clean technologies using coal and natural gas power plants as well as nuclear facilities we should be able to keep the state’s electricity rates down. If Texas is required to expand wind generation facilities and solar as well as invest in the infrastructure to get this power to cities like Houston and Dallas we may experience some higher prices for the next 10 – 20 years or more in order to pay back this money. Investing in this will be expensive but it would not be the end of the world. If Obama is allowed to achieve his goal of encroaching in on the state of Texas laws and regulations we may find that Texas accepts the money for these renewable energy projects from the federal government. Instead of letting the state pay for the electric grid renewable energy expansions we may end up agreeing to larger federal income taxes that never go away because we accepted federal loans or grants. In the UK people are now faced with 61 % income tax rates. Let’s hope that Texas does not fall prey to the temporary loans from the federal government in exchange for rights we will never get back. The federal government power grab is an issue Texas energy consumers cannot afford.
Energy Spikes Related to Market Speculators
Posted by: | CommentsWhy Did Energy Prices Go Up So High?
Many remember when just a few months ago a barrel of oil was as high as $150 a barrel. Senior energy analysts and experts all had different opinions if the price of oil and natural gas futures had to do with supply and demand or investors speculating on the price of energy. A recent 60 minutes special did a detailed report and what they found was that JP Morgan had a large controlling interest in commodities like natural gas that were delievered to residential homes. Keep in mind that JP Morgan and other brokerage houses were involved in marketing investments in energy commodities to investors as a package deal and way to pull money out of the stock market and into more profitable energy futures. While energy commodity retailers that actually buy the real energy commodities and physically sell them were saying that $150 a barrel was way out of line with supply and demand the JP Morgan’s of the world were all saying that the price was directly related to supply and demand.
Investment Firms and Enron Traders
Now which energy companies would really know if the price was really based on supply and demand or not? The retail companies physically selling the energy like natural gas and oil or the investment firms like JP Morgan? The 60 minutes special went on to explain that the same Enron traders that succesfully manipulated electricity prices to gouge their customers out of billions of dollars are the prized possessions of the investment firms. The report explained that they believe the Enron traders are now at JP Morgan and other investment firms and were the ones responsible for manipulating the price of oil and natural gas futures that caused these energy commodities to triple in price. The price has come back down now as energy speculators bet that the price would fall back down based on the realization that there is enough supply out there to meet demand. Now prices are in a much more comfortable price range for car and truck owners and for those heating their homes this winter.
How Do Energy Commodities Relate to Texas Electric Prices?
How does this all relate to Texas energy prices? Texas electricity is generated primarily with natural gas powered power plants. This steam turbines are fueled using natural gas which causes steam that turns these very large turbines that then produce the electricity that goes out to all the cities on the Texas power grid. When electric service customers had their energy prices jump on them to as high as 24 cents kWh in some cities it caused some businesses to close their doors as the price was much to high for many Texas customers to be able to even conceive. Much of the electricity price jump had to do with Texas’ own Market Clearing Price for Energy but with already high natural gas prices it made the situation even worse.
Energy Futures and Why it Happened
The energy futures situation has started to become clearer as to who was responsible and why it happened. This energy price spike had a lot to do with little government over site that allowed Enron traders to do some of the exact market manipulations they had done with Enron. The only difference is that these energy futures traders are now at investment firms with little government regulations and checks to even know what they are doing. Much of the claims made by us and 60 minutes are unsubstantiated to some degree because no one can prove who it was that manipulated the energy markets because companies and individuals can buy and sell energy futures in secret. Just how much price manipulation there was and by who is still up for debate but according to those who physically sell energy and based on govertment storage reports there was plenty of supply to meet demand.
Points to Consider When Picking an Energy Provider
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What are the major points to consider when choosing a Texas electric rate for a home owner?
There are a few things to consider. How long the electric company has been in business is important. An electric provider that has just started up could be a fly by night company, like we have seen in the past that would offer a very low fixed rate for the first few months and then attempt to raise this fixed rate later on in the contract by using fine print and legal jargon in the energy contract. The Public Utility Commission of Texas usually fines electric providers who do this but the mess and costs caused to Texas consumers by these dishonest electric companies is never made up. Riverway Power and National Power company are both examples of electric providers in Texas who attempted to raise their fixed electric rates on their customers this last summer.
What is a normal amount of time for a Texas electric company to have been in business and to have established a track record of accurate billing, good customer service, and good business practices?
Usually a couple of years of being in business are all that is necessary to build up some type of customer feedback about how the electric provider does business. Texas was only deregulated in 2002 so many of the energy providers are only a few years old to begin with. If after two years they are still listed on the state of Texas’ Power to Choose website you at least know they are a viable company. The state website isn’t enough though as Riverway Power and National Power was both found on this site. It costs to be on the state website and a Texas electric provider has to opt in to be on it, so simply by not being on the state website doesn’t mean the electric company in question is not a good electric provider. There are several consumer sites on the internet that list consumer complaints and comments about bad electric companies. These consumer sites are the best places to find out if the electric provider you are considering is worth becoming your home or business electric service provider. Some of these sites are Yelp.com, Ripoffreport.com, Electricitybid.com, Better Business Bureau, and the PUCT has documents on electric providers and the fines they have received.
What is the difference in a commercial electric service rate and a residential rate?
There is basically no difference as they both have a TDSP charge and they both have an “energy only” charge. The small difference that they do have comes in how the TDSP charge is calculated for commercial in comparison to residential. Residential electric rates are quoted as an “all-in” rate that includes TDSP charges and energy only charges. The residential electric provider can quote you an all-in rate because the TDSP charge is fixed for residential homes. A commercial businesses TDSP charges are variable because a main component of the TDSP charge is the demand charge. About 90% of the TDSP charges are demand charges and businesses all vary in how much electricity they demand at any one time. A residential homes electricity demand can be averaged out over several thousand customers by the state and then fixed for everyone. In contrast to residential demand a manufacturing facilities demand charge is much more expensive then say a Curves fitness studio franchise. The manufacturing facility may pay several thousand dollars for their demand charges and the Curves may only pay $30 a month.
How would you explain the demand charge so it can be easily understood?
The demand charge of an electric rate is easily explained. When you have several appliances, machines, and lights all on at the same time they are demanding a certain amount of Kilowatts of energy at that time, that is demand. No matter how long those machines are on your demand is set. So if during an entire month a commercial business uses only 1,000 kilowatt hours but for 5 minutes they turn on all of their machines and appliances they may get hit with a very high demand charge which is abbreviated as KW on your electric bill. In this situation the business could have a higher percentage of their electric bill costs associated with demand charges then the total kilowatt hours they used during the month. For a company that just doesn’t use that much electricity it can really pay to manage what machines are turned on at the same time during a monthly electric service billing cycle.
How can a residential home owner or commercial business learn more about their electric service?
You can visit our website at www.texascommercialenergy.com or on our blog at www.texascommercialenergy.com/blog and learn more online and contact us for more information. An energy consultant would be glad to assist you in procuring a commercial electric rate by taking your commercial electric usage out to bid in a reverse auction to work down the electric rate among multiple electric providers in Texas. We also have several residential electric rate choices in Texas available on our website.
Texas Nodal System
Posted by: | CommentsTo Do or Not to Do the Nodal Texas Electric Grid System?
The Electric Reliability Council of Texas has had its share of corruption and allegations in the past and the new nodal system which has been postponed a few years out from its previous scheduled launch has created additional skepticism and lack of confidence in ERCOT’s ability to operate a sound, efficient ethically run Texas power grid. The original 2008 nodal launch is now scheduled to go into effect December 2010. The cost of the 4,000 "nodes" and nodal grid system and pricing infrastructure has doubled to $660 million so the PUC of Texas decided it might be smart to check on ERCOT and make sure they are making the right decisions.
Outside Experts Confirm System will Create Cheaper Texas Electricity
The Public Utility Commission of Texas hired a consulting company to check and see if the new nodal system will be worth the money. Based on the analysis it appears that Texas will be able to reduce their electricity costs by going ahead with the new nodal system. Based on the new study the information provided by the nodal system will allow for more efficient dispatch of power plants, a change expected to save money and reduce use of natural gas energy to generate Texas electricity. The expected savings by going ahead with the nodal system Texas electric grid project is $5.6 billion in savings over a 10 year period. The current hang up with implementing the nodal system have been several software glitches in the current design.
How the Nodal System Works
With the new nodal design there will be over 4,000 "price points" to allow for the ability to allocate resources and curtail energy resources where necessary instead of overcharging because of a less efficient design. The nodal points are also known as generation locations in the ERCOT grid and will allow the grid operators to identify transmission congestion issues faster and respond with the appropriate action in a timely manner.
The recent analysis done by a Boston consulting firm has confirmed that the nodal design is still the right decision for Texas. This new study may help to increase confidence in the Texas ERCOT grid operator, who many have written off long ago, as well as the nodal design. This nodal system may actually happen after all which is a pleasant surprise for many Texas energy consumers and industry professionals in Texas.
Comparing Current Zonal System to the Nodal System
The study made some clear understanding of what the state of Texas can expect when the nodal system goes live. When comparing the nodal system with the current zonal system ERCOT uses now the state can expect to see lower fuel costs, power-plant operations, and environmental permitting. With the new system in place, power generation plants will be rewarded for building in places in the state that will avoid the most grid congestion. This free market system will reward power generation businesses with better profits when they make the overall electric grid system more efficient. The best way to do this is by building in locations in the state that will avoid the most congestion.
The way the zonal system is now is a system that remains very volatile during the coldest winters and the hottest summers. The faster ability to dispatch power plants will cut down the real time volatility that historically has been created by congestion issues on the grid. This congestion has been seen in its worst form in and around the Houston area. The most populated area of the state of Texas will be relieved to be able to not have to worry about their electric rate doubling and even tripling because of a grid congestion issue. During the summer of 2008 many Houston residential and Texas commercial energy customers blamed tripling variable electric rates on their current electric provider not realizing that these prices were close to the same no matter what provider they might have been on. Many in Texas still do not realize this issue was the blame of the current zonal market design.
ERCOT and the public utility commission have until early next year of 2009 to decide if they are going to go ahead with the nodal project or have it suspended.