Texans are bracing for higher electricity bills as temperatures rise

Houston-area restaurant server Robin Wright is preparing for another hot summer in Texas.

Wright works two restaurant jobs six days a week to care for her 12-year-old granddaughter. She knows how to make her money stretch. In the summer, this means never running the air conditioner.

“I haven’t turned the electric down below 74 degrees in years, because I can’t pay the bill,” Wright said. “I just take all the covers off. But I’d really prefer it to be really cold and cuddle up under the covers.”

Wright has experience adapting to extreme weather. She lost power for a week during the Texas freeze of 2021 and evacuated her home for about a month after Hurricane Harvey in 2017.

“We are coping by wearing almost nothing inside the house. That’s all we can do,” she said.

In Houston, the energy capital of the world, low electricity prices are not a given. Some consumers feel the heat.

Electricity rates in the Houston area are up about 16% over the past year, according to the Bureau of Labor Statistics. In 2022, Texans paid twice as much for electricity than pre-pandemic rates, according to a recent analysis by the Federal Reserve Bank of Dallas.

Prices have remained volatile since then, despite the falling cost of natural gas that feeds most of the grid and lower electricity prices in other parts of the country.

Ed Herz, who studies energy economics at the University of Houston, said: This volatility is related to how power plants get paid in Texas. “When these power plants deliver electricity to the grid, that’s the only time they make money,” he said.

He added that plants make more money when electricity is limited.

Other networks are operated more cautiously. They pay for power, which is basically the amount of energy they may use. Paying for capacity means having more protection in the event of a cold snap or heat wave. Herz compared it to fire department funding.

“Nobody likes paying for extra capacity,” Herz said. “But think about it. We don’t use fire departments all day, and we pay to keep them around.”

But Texas takes an unregulated approach, meaning that when electricity demand suddenly jumps, prices rise 10, 20 or 60 times. This volatility is bad for consumers during severe weather — but in previous years, this leaner approach meant cheaper bills.

“Texas has seen very low prices for a long time,” said Doug Lewin, an energy consultant and author of the Texas Energy and Power Newsletter.

But when the deadly freeze of 2021 led to power outages across the state, it was a wake-up call. Lewin said more money is now being spent on being able to create a bigger cushion, as is the case in other parts of the country. But this is happening in an ad hoc manner – with no reform to the unregulated structure of the state’s energy market.

“This kind of behavior frankly leads to the worst of both worlds,” Lewin said.

He’s not convinced the network is actually more reliable. “It’s open to interpretation what kind of reliability results come from that,” he said. “What you will definitely end up with is higher prices.”

Not only is Texas’ grid facing more scrutiny since the 2021 blackouts, but summers have gotten hotter, increasing peak electricity demand during heat waves, and more people and businesses are moving here every day.

Some people, like Hires of the University of Houston, have said the state needs to build more natural gas power plants to run when demand rises.

Others, like Lewin, said Texas needs to address demand, for example paying residents to conserve energy and investing in energy efficiency.

“This needs to be brought to market for reliability, because high demand is one of the biggest risk factors for whether or not we will experience a power outage, and to help lower bills,” he said.

But this summer, the bills will continue to impact low-income Texans. And programs that help struggling families pay those bills have less money to help them, now that COVID-19 funds have dried up.

“The need for the program, the assistance, far outweighs the amount of money we have,” said Desiree Davis, who runs the facility assistance program at the Houston nonprofit Baker Ripley.

The program receives some requests for assistance after the power has already been cut off. Last summer, BakerRipley helped 34 families turn their lights back on during extreme temperatures.

In hot months, electricity bills can rise by as much as 50%, which can be especially difficult for those with fixed incomes, Davis said.

“When I was a customer service representative, there was a senior employee who I still work with to this day. She was literally contemplating suicide because she was struggling to pay her energy bills,” she said.

She said many have to choose between keeping electricity and paying for medicine or food.