In Texas, natural gas helps set the price of wholesale power. When natural gas prices go up, wholesale power prices also should increase. When natural gas prices go down, wholesale energy costs should follow. This correlation exists because natural gas fuels many electric power plants in Texas. It’s also a sign of a healthy energy market.
But there’s not a 1-to-1 correlation. For instance, average residential prices in deregulated areas of the Lone Star State have increased by about 41 percent between 2002 and 2012, while natural gas prices have increased by only 13.3 percent over the same period.
As the chart above shows (you may have to enlarge it see it better), this is not too out of line when compared with other states that have a similar reliance on natural gas. Among such states — Delaware, Washington DC, Arkansas, Oklahoma, Rhode Island, Massachusetts, Florida, Maine, Nevada, California and Louisiana — six have had less severe price increases than those registered in deregulated Texas. Five states had steeper price increases.
The story is slightly different when it comes to average prices paid by Texans living in areas exempt from deregulation. These include areas with municipally-owned utilities (such as San Antonio and Austin) as well as areas with electric cooperatives and those areas outside the service territory of the state’s principal power grid.
Average residential prices for these consumers increased about 30 percent over the 2002-2012 period. That’s 9 percentage points less than the increase registered in deregulated areas of Texas. Only Nevada, California and Louisiana registered smaller price increases among states with a similar reliance on natural gas for electric generation.
The analysis extends only as far as 2012 because the relevant underlying data for 2013 and 2014 have not yet been posted by the United States Energy Information Administration. Some municipally-owned utilities have announced price increases in the meantime that could impact future analyses.
Is a policy analyst consultant for TCAP, a coalition of political subdivisions in Texas that purchase electricity in the deregulated market for their own governmental use. Because energy costs are typically a significant budget item to our members, TCAP is consistently looking for ways to save our members money, through cost-saving contracts, energy efficiency or demand response programs.