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Variables That Can Affect Texas Electricity Prices

By Tiffany Reynolds

Just like the costs of gasoline or food, electricity prices are influenced by several economic and environmental factors. In Texas, severe weather, energy regulations, and available supply are among just a few of the variables that influence the price of electricity for residential consumers. Meanwhile, the deregulation of the electricity market in Texas means that different Retail Energy Providers (REPs) can compete for customers, causing electricity prices to vary from customer to customer. At Power Wizard, we can help you find the most affordable rates among hundreds of REPs in Texas so you can save more money every year. Now, what affects your Texas electricity prices?

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Understanding what affects electricity prices can be challenging, especially considering the complicated nature of how providers operate in Texas. In addition, rising energy prices are quickly becoming a topic of concern among Texas residents. If you’re getting fed up with changing electricity bills in the Lone Star State over the past few years, you’re not alone. Read on to learn more about the variables that impact how energy companies in Texas determine their electricity prices and how you can protect yourself from price hikes in the future.

What Affects the Price of Electricity in Texas?

Fluctuations in the price of Texas electricity occur for a variety of interconnected reasons. To understand the dynamics behind these price swings, it’s important to dig deeper into the details. Here are the main contributors periodically impacting how much you pay each month.

Extreme Weather Conditions

In February of 2021, a large winter storm put huge swathes of North Texas under freezing temperatures, creating a surge in demand for heating. This demand spike was worsened by inoperable wind turbines and frozen gas lines which amplified the existing scarcity of electricity. In response,  wholesale power prices rose to more than $9,000 per kilowatt-hour, leaving thousands of Texas residents with unbelievably high energy bills for the month. While Texans paying fixed electricity rates saw little change in prices, those who selected the wholesale-rate provider Griddy were largely left holding the bag.

Our team at Power Wizard will help you navigate the deregulated electricity market. We will keep you insulated from unfair practices that all too often occur in the energy industry so you can keep more of your hard-earned cash. When wholesale energy prices rise, we’ll make sure your electricity costs remain stable by selecting a retail electric provider with the best fixed-rates.

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Natural Gas Prices

Since Texas relies heavily on  natural gas to generate electricity, any supply shortfalls can lead to higher prices for end consumers. During the winter storm of 2021, energy suppliers struggled to acquire enough natural gas to meet the state’s heating needs, resulting in widespread blackouts and higher electricity prices for many customers. Although prices quickly leveled out when the weather improved, the situation signaled a need for Texas to expand its energy capacity going forward to account for sudden surges in demand. As of 2020, up to 46% of  Texas electricity comes from natural gas, almost as much as wind, coal, and nuclear power combined. This reliance on a single source of fuel for power means the price of natural gas and electricity costs for residential consumers will remain intrinsically linked for some time.

Regulations for Utility Companies

In the mid-1970s, Texas established the Public Utility Commission of Texas (PUC) to provide statewide regulation of the rates and services of electric and telecommunication utilities. Since the electricity market in Texas was deregulated in 2002, the  PUC became the primary entity overseeing the transition to an open, competitive electricity market. During times of higher electricity prices, the PUC has the authority to take steps to protect Texas citizens from unaffordable energy bills. This is what happened in May of 2021 when the PUC required the Electric Reliability Council of Texas to keep the energy price cap under $2,000 per megawatt-hour for the remainder of the year.

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Electricity Supply

When the available supply of electricity is scarce during periods of high demand, prices will invariably rise. The Electric Reliability Council of Texas (ERCOT) often encourages residents to conserve energy when the grid is under strain, usually during the summer and winter months. These seasonal swings in the availability of energy can lead to higher bills for some Texans, especially those who are on a variable rate plan.

If you’re noticing abrupt changes in your electric bill in recent years, it may be time for a change. By simply providing your zip code and address, Power Wizard will find the right energy provider for you in seconds so you can keep your electric bills as low as possible every month.

Power Generation Changes

Texas electricity prices are also affected by how much power is being generated across the state at any given time. Recent initiatives to stem climate change have led to a ban on oil and gas leases throughout the country, and Texas is no exception. Earlier in 2022, a  federal judge halted new oil and gas leases in the Gulf of Mexico. This ruling limited the state’s access to offshore fuel needed to generate consistent power for its residents. With less natural gas available to create electricity, Texas must look elsewhere to fulfill its energy needs. This disparity between power generation and demand creates higher costs for energy providers who may pass some of that added expense onto consumers.

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How Can You Combat Price Spikes with Retail Electricity Providers?

The single best way to protect yourself from surges in electricity prices is to find a Retail Electric Provider (REP) in Texas that offers the most competitive rates for service. However, with so many options to choose from, finding the right provider for you can take a considerable amount of time and effort.

Power Wizard does all the leg work for you by comparing the rates of some 100 plus REPs to find the best price available. For a marginal annual fee, VIP Gold members enjoy hassle-free enrollment and enhanced protection from hidden fees or sudden surges in electricity prices. We’ll monitor your electricity plan throughout the year as well and notify you the moment we find a better deal. Best of all, you won’t have to worry about rolling in and out of contracts whenever you switch. Instead, Power Wizard will take care of the work for you so you can focus on more important matters.

Learn more about  how Power Wizard works today to start saving big on electricity in Texas.

Let us find you the best plan in seconds and start saving.


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