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How Texas’ heat wave will affect your electric bill. (Hint: It’s not going to be good)

Texas energy pricing is soaring at a historic pace over the past several months, which could mean even higher electric bills going into summer amid a record-breaking heat wave.

“Prices are higher and I expect that they will be much higher,” said Doug Lewin, president of Stoic Energy.

In the past month alone, the average rate has increased almost 30%, according to EnergyBot, a Dallas company that compares Texas energy rates. Rising energy costs are hitting Texans at a time when gasoline prices have hit almost daily records, up to $4.29 a gallon in Fort Worth on Tuesday; inflation is causing grocery prices to skyrocket, and even summer camp costs have more than doubled.

Average residential electricity rates per kWh in Texas over the past year
Average residential electricity rates per kWh in Texas over the past year

How much are energy rates increasing in Texas?

Over the past year in Texas, the average rate increased by 70%, from 10.6 cents to 18.4 cents per kilowatt hour.

“Those are outrageous prices historically for Texas,” Lewin said. “We haven’t seen prices like this in more than a decade at least.”

So if you’re renewing your energy contract, you will likely see an significant increase in your rate. Rates from 2020 were generally lower than 10 cents per kilowatt hour, but you now may see a rate above 15 cents per kilowatt hour.

Why are rates increasing?

Energy providers are paying more for wholesale electricity, causing rates to increase, according to EnergyBot.

Market conditions have caused the cost of natural gas to increase, which is driving up electricity prices.

Additional factors that have led to higher prices include the invasion of Ukraine, weather-related disruptions from the February freeze, halted oil production in the Gulf Coast due to Hurricane Ida, and supply constraints.

After Winter Storm Uri in February 2021, there were several changes to laws, regulations and market rules made by the Public Utility Commission of Texas and the Electric Reliability Council of Texas, or ERCOT, some of which increased supply costs in the state. As a result of these changes being finalized, Texans will see increased charges.

What does this mean for you?

If you’re shopping for electricity, you’ll likely have to pay more per kWh than you have in the past. Most market indicators do not expect rates to decline significantly in the short term, and rates may continue to rise, EnergyBot says.

“People should be expecting to pay higher rates next time they go to shop,” Lewin said.

Short-term contracts, for three to 12 months, are best if you want to wait to see whether rates decrease in the future. But if rates continue to increase, you could end up paying more down the road. You can also sign up for a plan with a $0 termination fee, so that you can shop sooner if market prices decrease.

Long-term contracts, for two years or more, are best if you want to lock in a rate, so that you’re not worried about rates increasing in the future.

How can you save on electricity?

When rates increase by 20% or more, you’ll probably notice a difference when you pay your electric bill. Reducing your energy consumption in simple ways can help soften the blow.

In the spring and summer heat, your AC will likely make up a huge portion of your energy consumption, so adjusting your thermostat up a few degrees and turning off or unplugging unnecessary devices can help offset an increase in costs, according to EnergyBot.

Lewin says Texans should look into energy efficiency programs that often provide incentives.

“I would encourage people to look and to see if they can get an incentive, if they could have somebody do an energy assessment of their house,” he said.

Using a smart thermostat, which automatically adjusts heating and cooling temperature settings, is another step that can help you save money on your electricity bill, Lewin said.