A not-so-perfect storm of high demand and power plant retirements could send electricity prices soaring this summer in Texas, potentially squeezing low-income residents and the agencies that provide assistance with energy bills.
“A growing economy and retirements of generating units will tighten reserves available on peak summer days,” Bill Magness, president and CEO of The Electric Reliability Council of Texas, wrote in a press release.
ERCOT is preparing for record-breaking use during from June to September, Magness wrote. ERCOT’s Seasonal Assessment of Resource Adequacy projects customers will demand 72,756 megawatts of power, 1,600 megawatts more than in August 2016, when use hit an all-time high.
But ERCOT, which runs the electric grid for most of the state and manages the market, said there is enough capacity to meet customer demand “under normal operating conditions,” with an estimated 78,184 megawatts of generating capacity available.
A scorcher of a season, however, could raise red flags.
This summer is the first since Vistra Energy last year decided to shutter three coal-fired generating plans it deemed obsolete. The plants, Big Brown, Sandow and Monticello, had 4,100 megawatts of generation capacity, enough to power more than 2 million homes, according to an email response to questions by Vistra spokesperson Meranda Cohn.
While not dismissing the impact of the closings, Cohn also said since 2014, Vistra subsidiary Luminant has added about 8,000 megawatts of natural gas-fired capacity, will activate a “utility-scale” solar facility this year, and continues to evaluate new technologies. It has generating capacity to serve more than 3.5 million Texas homes during peak summer conditions, Cohn said.
Still, high demand and relatively tight supply could send prices up, especially if the weather is hotter than expected.
Caritas Waco executive director Buddy Edwards said he fears a long, hot summer. Caritas offers assistance with utility bills.
“Even under normal circumstances, we handle a lot of requests from low-income families. Last year, we provided utility assistance to 379 households,” he said. “I’m pretty confident we will see an increase this year.”
He said Caritas works closely with TXU Energy, a major player in the power industry, to provide relief to TXU customers struggling to keep the lights burning. It also can pursue money from United Way Worldwide and receives grants from the Emergency Food and Shelter Program, a federal relief program.
But during summer months, the need for assistance outstrips the money available, Edwards said.
End of assistance program
Aggravating the situation is the demise of Lite-Up Texas, a bill-paying assistance program that ran out of money in August 2016. The Texas Legislature voted three years earlier to eliminate payments to Lite-Up, enacted in 1999 to subsidize energy payments from low-income residents.
It helped 700,000 families in 2015 and reduced monthly payments an average of 25 to 31 percent, according to the Public Utility Commission.
“If we have abnormally hot weather, we could have some potential system issues,” ERCOT spokesperson Leslie Sopko said.
She said regular generation resources should meet demand if conditions remain typical.
“What’s driving this situation is the thriving economy in Texas,” Sopko said. “We have population growth. More people are coming to Texas. We are seeing growth in West Texas, with oil and gas exploration and equipment that creates a lot of demand. Houston also continues to see significant load growth. I would highlight those two areas as key players in this matter.”
Market forces should remedy the situation over the long haul, Public Utility Commission spokesperson Andrew Barlow said.
“The margin between absolute peak power usage and peak available supply is tighter than in years past,” Barlow said. “Remember the big picture. Texas electricity is a competitive market, managed by ERCOT. Competitors have the freedom to decommission plants if they do not fit their business model.
“As demand increases or supply shrinks, the market typically responds with higher prices. The upside is that higher prices attract investors who enter the market to generate more electricity.”
Until that happens, the commission encourages customers to examine their existing electricity contracts and perhaps switch providers, Barlow siad. Choices and rates for each region are available at powertochoose.org.
“The best bet is a fixed-rate contract. A plan that changes month-to-month is not prudent under these circumstances,” he said. “Make the changes now so you are not worried about market prices come August.”
Most retail providers work hard to hold on to their customers, he said.
“They may make allowances for those not delinquent on payments, allow them to average out costs for a year,” he said. “If you can’t pay a bill at all, I encourage you to talk with your provider. Typically, they can set up some kind of payment arrangement.”
Matt Oberle, with a Houston-based consumer advocacy group called Texas Electricity Ratings, said he doubts the power grid is running near empty.
“I’ve been hearing the electricity crisis this summer, and it comes from ERCOT, as usual,” he said via email. “The problem is that we’ve been hearing similar things like every other summer since 2011 or 2012, and the only real unbearable summer came in one of those years.
“ERCOT talks about reduced capacity, but at the end of the day a lot of that slack has been picked up by more energy efficient appliances. I’m not saying it’s out of the realm of possibility at all. I’m just extremely skeptical it will go down as some say it might.”
The best response to ERCOT’s jitters is to get an electricity rate locked in before summer.
Customers on flexible plans “are the customers that show up with $500 bills in June, when they paid $150 in May kind of situations,” he said.
Waco City Councilman John Kinnaird said now is a good time for customers to consider the new Waco Power Switch program made available through Prosper Waco. Houston-based Discount Power recently won the bid to provide the service locally, and users can take advantage of a “12-month, fixed rate contract with no gimmicks and no floating rates,” Kinnaird said.
He urged consumers to visit wacopowerswitch.com for more details. He said the next deadline to sign up is May 22.