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Texas electricity rates are way up, so what is an energy expert planning to do when he shops for electricity next month?

Nationally renowned energy expert Ed Hirs talks about what is causing high electric rates and what he plans to do when he shops for a new agreement in July.

DALLAS — Remember in February when we had one of our Right on the Money "How 2 in ‘22" reports about how to shop around for an electricity plan in Texas

Please say you remember it, and that you recall it because when we checked rates in mid-February, they were a lot lower than they are now. 

At that time, 9.5 cents per kilowatt hour was the cheapest rate. There were several in that range and then it went up from there. 

When we did the exact same search at the beginning of June, the least expensive plan was 13.7 cents per kilowatt hour. And to get that, you would have to sign an agreement for up to five years. Also, some of those early cancellation fees have swollen to be much more cost prohibitive than what we saw several months ago. 

If we had really been shopping for electricity in those two searches, our least expensive alternative would be 44% more costly than it was just four months ago. That’s a big increase. 

But really, it’s even bigger than that, says Professor Ed Hirs, energy fellow at the University of Houston, "In fact, the rates were up 40% from last summer through December so you have another 40% on there." 

Hirs says part of the problem is that here in Texas, "Our economy is continuing to grow and the demand for electricity continues to grow and we don't have new generation coming onto the ERCOT grid except for the the wind and solar". Hirs believes that has a lot to do with...economics, “If I am Wall Street why would I invest in a new power plant in Texas just to make sure the prices stay low? I would much rather run the other plants that I have and charge and arm and a leg.”

Hirs says that makes electricity rates in Texas especially volatile, because the state doesn't have a system that incentivizes electricity generators for having the ability to create excess supply when there is extra demand...or when other generating plants go down. Hirs likens it to only paying pro baseball players who are actually on the field, "And the guys on the bench not getting paid--they're not ready to come into the game".

Another big factor hiking electricity prices is natural gas, which is used to produce about half of our electricity in Texas. Natural gas has almost doubled in price from just before the Russian invasion of Ukraine in February.

If your electricity agreement has recently expired. Or is about to elapse, this may leave you with some stark choices when you go to the state’s electricity marketplace

It turns out that Hirs is going to have to head to that site soon to shop for electric rates again when his current plan expires in July. 

This offered us a perfect opportunity to ask a nationally renowned energy expert what he’s planning to do. "I am just going to lock in for 12 months," he says. 

Rates for a 12-month plan can run even higher than the price per kilowatt hour we talked about at the beginning of this article because providers can charge a premium to give you the flexibility of not having to sign on to a much longer-term contract with them.

But Hirs, who studies global energy markets and trends more than most of us, believes that natural gas prices will fall significantly over the next year, and that Texas electric rates may go down as well. 

So, Hirs is planning to take the pain of a higher rate for the next 12 months and then shop again a year from now because he thinks in the long run that will be more advantageous than locking in the much inflated current rates for the next three, four or five years. 

Not telling you what to do — but it’s always nice to know what an expert is doing.

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