June 29, 2008 admin

Natural Gas Prices and Texas Electricity

In Texas we rely on natural gas steam run power plants to produce our electricity. Much of our peak demand relies on natural gas in storage. We have limited capacity in salt domes across the state of Texas to store the natural gas and meet demand especially if demand is unexpected. That is why when we have a hotter then expected summer many times electric rates go up as supply is not able to meet the demand of all those Texas homes turning on their air conditioners full blast. There is about a 90% correlation with natural gas and Texas electricity so you can easily track why electric rates are so high right now by viewing natural gas price charts over the last year. You can keep daily track of it by viewing the symbol NG price on www.nymex.com. When NG is up Texas electric rates go up.

Bloomberg Quote on Natural Gas in Texas, June 27 2008

Moderate temperatures forecast for Texas and Florida will help curtail electricity demand. Those two states rely on gas- fired power plants to meet increased electricity requirements when hot weather increases air-conditioner use.

Hotter weather typically curbs the expansion of storage by increasing demand from gas-fired power plants for electricity to run air conditioners.

“There’s very little excessive heat” across the nation, said Jim Rouiller, senior energy meteorologist for Planalytics Inc. of Wayne, Pennsylvania.


About the Author

admin Donny started ElectricityBid.com back in 2007 from his parents basement and has since married his wife Melody and had three sons, John Adam (7) and Noah (4) and our new 20 month old son. He enjoys tech related things, softball, kickboxing, going to the gym, excursions and activities together with his wife Melody. Our service allows you to shop and compare commercial and residential electric rates and providers. Would you take the time today to try our service and see how you like it. Thank you! and God Bless You!

Comments (3)

  1. kdmcdonald

    They say demand is part of the cause of higher electricty prices. If that is so and the PUC is suppose to help regulate prices, why is every single rate plan advertised with higher rates for the less you use? If you wanted to at least help keep rates lower in general wouldn’t you incentivize using less instead of more?

  2. Jim Smithies

    The reason a shorter term contract is more expensive then a long term is because the electricity contracts have a direct relationship with natural gas futures contracts. An electric agreement is nothing like a cell phone contract. Texas electric companies work from very small margins. If they were to make a 12 month contract look like a 36 month contract they would be losing money.

    Right now a 6 month natural gas futures contract is more expensive then a 36 month futures contract. Last year it was exactly the opposite. Electric rates all relate to what the natural gas commodities market is doing.

  3. kdmcdonald

    I was not taking about the contract term rates but the usage rates. Example.

    You will sign up for variable or 6 month contract or 1 year contract or 2 year contract, doesn’t matter. The rates will be say 18.7 if you use under 500kWh, 17.5 if you use under 1000kWh but over 500 kWh, and 17.1 if you use under 1500 kWh but over 1000kWh.

    So if you use less you are charged more per kWh.

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