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In August, the Price Cap on Electricity in Texas Will Jump 50 Percent

In August, the Price Cap on Electricity in Texas Will Jump 50 Percent


Texas electricity regulators voted today to raise the price cap on wholesale electricity from $3,000 to $4,500 per megawatt hour -- the equivalent of powering roughly 330 homes for one hour -- by Aug. 1. It's only June and already the electrical grid is being tested by record peak demand, prompting calls for conservation.

Regulators are betting that the stuffing-cash-in-generators'-pockets approach will encourage them to build new power plants so rolling blackouts don't become a Texas summer tradition, like bitching about how hot it is. One of the PUC commissioners, Ken Anderson, abstained from voting on the rate hike. He's spoken with Unfair Park before, and told us he basically thought doing it this summer was a terrible idea. For starters, he bets we'll eke by this summer without shedding load, which is the electricity-nerd speak for cutting your power off.

What's more, given the spread between cheap natural gas prices and soaring wholesale electricity prices, gas-fired power plants will need Mack trucks to haul all the cash they rake in this summer. New power plants, on the other hand, wouldn't even come on line for several years at the earliest.

There's another side-effect to the commission's decision today. You've probably already signed a contract with retail electricity providers like TXU Energy or Green Mountain for example, for a certain term and at a certain price. Two things will happen: A) They're going to eat the difference, or B) They're going to pass it on down to you. TXU Energy, in a filing with the commission, has already said the rate hike gives it the right to break fixed-rate contracts.

We get why Anderson abstained -- generators get paid for some theoretical plants they may or may not build in the future, and we get hosed.


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