There are several reasons why Texas power rates skyrocketed and are still on the rise. In May 2024, the state experienced high temperatures which caused increased energy use. As such, the rates increased significantly.
Currently, Texas has a deregulated power market, meaning homeowners can choose among the many electricity providers. And since the actual price Texans pay depends on their contract, some pay more than others even though they are in the same neighborhood.
Regulations play a critical role for the ever increasing electricity rates. Since February 21, energy providers cannot pass wholesale prices to residential customers. This results in high volatile retail prices.
Meanwhile, Texas has experienced some of the hottest summers in the last couple of years. The accompanying heat waves have significantly increased demand for electricity, leading to ever changing rates. In fact, in September, prices soared by 20,000%.
The influx of residents from other states such as New York and California did contribute to the high electric prices. People are leaving the said states due to the high cost of living. As such, more customers are connected to the grid.
Bitcoin mining has also played a role in the skyrocketing prices. Thanks to the deregulated energy market and cheap natural gas, bitcoin mining and other energy-intensive industries have set shop in Texas. With more data centers and artificial intelligence-powered companies moving to Texas, the electric prices will only assume an upward trend.
The average electricity rates in Texas have increased 26% over the last few years. The difference between the 2021 and 2024 rates is huge.
In 2021, the average price was 12.14 cents per kWh while in 2022 it increased to 13.5 cents per kWh. There was also an increase in 2023 as the average was capped at 14.28 cents per kWh. Currently, the average stands at 15.02 cents per kWh and is expected to increase in the coming years if construction of renewable energy plants continues to experience delays.
Why are Texas Electricity Prices Rising?
So, why are the energy rates expected to continue rising? Let’s find out.
Increase in Electricity Demand
There’s been a high demand for electricity in Texas. This is thanks to the influx of Americans to Texas. During the 2000 census, Texas' population was 20 million people. In 2021, the population had increased to 29 million people. It is evident that more people are flocking to Texas compared to other states.
With increasing population comes an increase in electricity demand as more residents are connected to the grid. As such, Texans pay some of the highest rates during peak hours.
Change in Social Behavior
While more residents mean an increase in households and demand for residential electricity, it also means an increase in commercial and industrial activity. There’s an increase in commercial buildings such as offices, coffee shops, and restaurants, which require more energy than a residential setting.
Furthermore, large industries are relocating to Texas from states such as California, New York, and Washington. This is thanks to the cheap natural gas to run their equipment. Energy-intensive companies such as Bitcoin mining and AI have also increased demand for electricity.
Finally, more people are working from home since 2020. This means more people are using washing machines, dry cleaners, and other energy-intensive appliances. And since solar energy declines as peak hours set in, the electricity demand surpasses the grid’s supply.
Hot Summer Months
Texas has witnessed the hottest summer months in 2011 and 2013. Higher temperatures increase the demand for electricity as more households crank up their air conditioners to keep their homes cool. And as you’d expect, air conditioners work extra hard during those hot days.
Likewise, high temperatures impact the cost of energy production since most power plants depend on natural gas. Equipment used in these plants are susceptible to inefficiency due to high temperatures. As such, more natural gas is needed to turn the inefficient turbines.
Increased use of natural gas leads to higher operational costs which is passed down to electricity providers and finally to the consumer. And since the market is deregulated, the providers cannot offer electricity at a lower price.
Extreme Weather Conditions
Hot summer months are not the only cause of high electricity rates. Extreme winter months also strain the grid. In February 2021, Winter Storm Uri caused a power outage across the entire Texas state. Millions were left without electricity. Unfortunately, several lost their lives.
Due to the extreme weather, the electricity rates increased significantly. This caused some electricity providers such as Griddy to shut down. This led to high demand in power and a strain to the state’s grid.
The winter storm also caused an increase in energy production cost. The natural gas piped to the power plants could not be delivered since some of the pipelines were frozen. This meant that the turbines could not be turned efficiently, leading to high rates.
Aging Grid
The Texas grid is aging, which contributes to higher electricity rates. Some of the pressing issues include the following:
- Winterization
Most power plants are not prepared for winter storms like Uri. They require immediate enhancement such as insulating pipes to prevent freezing and adding enclosures around the natural gas tanks. Without these enhancements, the next winter storm can wreck more havoc on the power grid.
- Interstate connection
Thanks to the deregulated power market in Texas, the state’s power grid is not connected to neighboring states.
This means there’s no backup incase of a disaster. If the grid is connected to other states such as Arkansas and New Mexico, there’d still be power even in the event of a disaster. In fact, the Uri Winter Storm would not have caused much havoc as it did.
- Improved infrastructure
Admittedly, Texas has been on the frontline to generate renewable energy. In fact, it generates the most wind power in the country. It is also among the leading states in solar energy production.
Unfortunately, there’s inadequate infrastructure to store excess energy produced by solar and wind plants. Without a robust storage system, the state cannot make the most out of solar and wind since the sun does not shine at night and the wind doesn’t always blow.
How To Lower Your Electricity Bill?
The most practical way to reduce your electricity bill is to install a robust solar system or use a home battery backup. Better yet, you can combine the two so you can become energy independent.
Having a battery backup system allows you to store energy from the grid or solar and use it during peak hours. And since most batteries are portable, you can use them for a variety of needs.
For example the AC300+B300 | Home Battery Backup comes in a portable and lightweight design allowing you to carry it wherever you need it. You can charge it using solar, AC, or lead acid batteries and use it at night. And since it has a 3072Wh capacity, you can easily connect small to large appliances.
Should the energy needs increase, you can add the expansion battery giving you a capacity of 12288Wh. Like most premium battery backup systems, it can handle 240V appliances. Thanks to its dust and water-proof feature, you can use it for outdoor and indoor activities.
Another viable option to lower your energy bill, is the BLUETTI AC500 + B300/B300S | Home Battery Backup. It has a capacity of 3072Wh, ideal to power most appliances. And thanks to the modular design, you can increase its capacity to 18432Wh.
It also features a 5000W running and 10000W surge power enabling you to use large appliances with ease. As a LiFePO4 battery, you can use it for up to 10 years without the need for replacement. There are 16 outlets allowing you to connect just about any device.
Another practical way to lower your electricity bill is to set your thermostat to 78 when you are not at home. And when at home, consider using the ceiling fan rather than your air conditioner.
If possible, avoid space heaters as they consume more electricity than their counterparts. Also, consider buying an efficient HVAC system with ductless mini splits. They consume less energy than conventional counterparts.
Final Thoughts
It’s no doubt that Texas electricity bills are on the rise. Factors such as influx of more people, extreme weather, and changes in regulations have contributed to rising rates. And as the utility company transitions to renewable energy, they should upgrade the existing infrastructure and ensure the grid can handle severe winter storms.
