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Update on Electricity Rates in Texas

The rate Texas residents pay for energy has skyrocketed in recent days, as hotter-than-usual temperatures cause demand for electricity to soar across the state.

Power usage hit its most recent record of 85,435 megawatts on Aug. 10, according to the state’s agency. And, electricity usage in Texas has broken daily record highs 10 times already in the summer of 2023 as a stagnant heatwave cranks up air-conditioning demand from everyone and everything in Texas, homes and businesses. Temperatures in the state have been above the long-term seasonal average on 58 of the last 60 days according to data encouraging heavy use of air conditioning.

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electricity rates texas heat

Exacerbating the problem, the primary driver of record consumption has been the rapid growth in Texas’ population as well as the economy. Power consumption increased at an annual rate of 1.7% between 2003 and 2022 in conjunction with the population increase of 1.6%.

Rising population explains almost all the structural increase in power consumption over the last two decades, based on data from the U.S. EIA. Given underlying load growth, consumption will continue hitting new records each summer unless temperatures somehow drop below average, which is less and less likely every year.

In May, before the current heatwave, consumption hit 36.4 billion kWh, up from 29.3 billion kWh in May of 2013 and just 26.9 kWh in May of 2003.

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The Texas grid is still experiencing many of the same reliability challenges keeping up with the growth. Texans were paying about $275 per megawatt-hour for power on Saturday then the cost rose more than 800% to a whopping $2,500 per megawatt-hour on Sunday. Prices so far on Monday have topped off at $915 per megawatt-hour.

Demand for electricity hit a record-setting 83,593 megawatts on August 1, the energy provider said Friday, adding that there could be another record broken this week. The ERCOT power grid provides electricity to 90% of Texas.

ERCOT issued a weather watch for Monday, warning customers that the state may see higher temperatures, which will in turn put heavier demand on its electrical grid. The energy provider assured customers “there is currently enough capacity to meet forecasted demand.”

A giant swath of Texas is under an excessive heat warning, according to the National Weather Service. Temperatures are expected to reach between 108 and 102 degrees in Austin, Dallas, El Paso, Fort Worth, Houston and San Antonio. Texas has seen 26 straight days of above 100-degree temperatures.

This week’s expected electricity demand will mark ERCOT’s first big test since its grid crashed during a 2021 ice storm that caused a blackout and knocked out power to millions of homes. Since the blackout, Texas lawmakers say the grid is more reliable. Legislation passed this year that is designed to help the grid has still drawn criticism from Republicans in the statehouse.

Hot weather has not caused rolling outages in Texas since 2006. But operators of the state’s grid have entered recent summers warning of the possibility of lower power reserves as a crush of new residents strains an independent system. Texas mostly relies on natural gas for power, which made up more than 40% of generation last year, according to ERCOT. Wind accounted for about 25%, with solar and nuclear energy also in the mix.

Texas’ grid is still not connected to the rest of the country, unlike others in the U.S. Even though solar power in Texas has increased significantly over the past few years, there are ZERO options to pull power from elsewhere if there are failures. Regulators continue to warn that demand will outpace supply on the hottest days.