What is going on with Energy Rates?
It has been predicted for several months now that the Summer of 2019 will have low electricity reserve margin. ERCOT’s recent Seasonal Assessment has forecasted an historically low reserve of 7.4%. What is reserve margin? It is the amount of generated electricity available above the projected statewide demand. Ideal levels are around 10%. In other words power will likely be in low supply and high demand.
What does that mean for electricity pricing? It means VERY HIGH fixed pricing for the summer of 2019. At the time I am writing this article 1 month fixed contracts in Oncor territory for this summer cost per kWh are:
- June 2019 – 5.618 cents
- July 2019 – 10.186 cents
- August 2019 – 15.451 cents
- September 2019 – 5.045 cents
10 cents in July and 15 in August is an enormous cost increase from the near 4 cent rates many Texans enjoyed from 2015-2017. These high cost summer months are the drivers of typical fixed rates being above 5 cents per kWh.
Why do we suggest an Index option in the midst of the uncertainty? Fixed rates insulate customers from wholesale rate spikes. However, the monthly average of Texas real time Wholesale electricity rates has been above 10 cents only once in the past 12 years! That was August 2011 during the “North American Heat Wave.” By the numbers Index may be an option to consider if your current fixed offers are above your comfort zone.
Kevin Krajewski – Senior Energy Analyst
North Texas Monthly Index Averages 2007-2018 in $/kWh