Consumers shopping for a new electricity plan this summer are in for a shock as electricity rates are at historically high levels.
Just a year ago, residents could lock in a fixed rate electricity plan at 10-11 cents per kilowatt hour. Now, rates as high as 15-20 cents per kilowatt hour are more typical.
The high rates are part of inflation that’s hitting our wallets everywhere.
The biggest factor in rising electricity rates is the price of natural gas, since more than 40 percent of electricity in Texas comes from natural gas-powered plants. The ongoing conflict in Ukraine is causing global natural gas shortages, driving prices to three times what they were in 2020.
Those natural gas prices are pushing wholesale electricity costs through the roof. On Monday the wholesale cost of a 12-month electricity contract in Houston was 10 cents per kilowatt hour, a 10-year high. When you add in the cost of CenterPoint Energy delivery (around 4 cents per kilowatt hour), plus other fees and the retail energy company’s profit, it quickly adds up.
If you’re in the market for a new electricity plan this year, you should work to cut your usage, shop carefully and budget for this bigger expense.
To reduce your usage, focus on your air conditioning. Cooling your home accounts for 50 percent or more of your electricity bill. To cut this cost, keep your blinds closed on sunny days, set up your home office on the north or east side of your home and set your thermostat to 76-78 degrees when you are home. Use a ceiling fan to stay cool.
When your electricity contract expires, don’t take your provider’s renewal offer without shopping for options. Typically, retail electricity providers offer renewing customers a higher rate than they offer new customers. Switching to a new provider may get you a better rate.
When shopping, make sure to fully understand what’s being offered. If an electricity rate is much
cheaper than others in the market, read the fine print. These electricity plans usually have a tiered rate or a usage bill credit. That can mean a great rate if your electricity usage matches the plan. But if you use more or less than the targeted usage, you’ll pay a much higher rate.
One other approach for shopping is to look for an electricity company with a satisfaction guarantee. These companies will let you switch to a different electricity plan within your first 30-60 days. And if you still aren’t happy, you can switch away with no early termination penalty. That lets you sign up now, then switch to a different plan or even a different company if electricity rates fall.
Take a look at your home budget now and start factoring in a higher electricity bill for the summer.
New home buyers also need to factor in the cost of electricity. Says Garden Oaks resident and realtor
“With this current seller’s market and rising interest rates, it’s important to make sure buyers are looking at all of their expenses and not purchasing outside of their monthly budget,” said Garden Oaks resident and realtor Cheryl McCleary of Berkshire Hathaway HomeServices Premier Properties. “The electricity expense, especially during the summer months, has become just as important as mortgage, taxes and insurance.”
Rebecca Bridges is a resident of Oak Forest and is chief marketing officer of ElectricityPlans.com, a website that helps consumers shop for the best electricity rates. The site also offers tips on conservation, including their most recent article, 89 Ways to Save on Your Electricity Bill.