You might not know about it, but the current cost of natural gas could have an effect on how much you pay for your electricity, even if you don't burn gas. That's because fuel costs make up around a third of the price of electicity generation. In the state of Texas, that price is mostly related to how much it costs to create power by burning natural gas. So, when natural gas prices go up, your power bill does, too. This could cause some real confusion if you don't know how it works.
The 1999 Texas Electric Choice Act says that suppliers of retail electricity can change prices twice each year at predetermined times, basing their changes on what natural gas costs at the moment. That way, you'll alwyays know that your power price is closely related to the current conditions on the market. If you don't like the service you're getting or the price you're paying, the Act also allows you to look for a new supplier who will offer the kind of pricing, terms, and service contracts that you like. If you prefer a supplier with more environmentally friendly generation methods, you can also take the time to choose someone who does this.
So, how is that price arrived at? First, a composite natural gas price will be calculated, using what's called the NYMEX Henry-Hub natural gas index. The closing forward twelve month prices are averaged for every business day over a ten day period. Then, the price that's been arrived at will be examined. If it's over four percent higher than the price that was used to set the current fuel factor, the provider might file for an increase in their prices. It's unlikely that the prices will be reduced from the current levels, but they may increase.
Then, the percentage by which the price of natural gas has increased is applied to the current fuel factor, and the new fuel factor is created. It takes either twenty days or forty-five days for the new factor to become effective - depending on whether or not the supplier requests a hearing. When hearings are requested, the fuel factor doesn't affect your bill until the supplier wins the hearing, and the longer time period is the one that applies.
While increases may seem confusing, they're really quite simple. If natural gas costs more, so does all Texas electricity, even that which is not produced using natural gas. Next time you see something confusing on your bill, keep this in mind. It might help to explain a few things.
The 1999 Texas Electric Choice Act says that suppliers of retail electricity can change prices twice each year at predetermined times, basing their changes on what natural gas costs at the moment. That way, you'll alwyays know that your power price is closely related to the current conditions on the market. If you don't like the service you're getting or the price you're paying, the Act also allows you to look for a new supplier who will offer the kind of pricing, terms, and service contracts that you like. If you prefer a supplier with more environmentally friendly generation methods, you can also take the time to choose someone who does this.
So, how is that price arrived at? First, a composite natural gas price will be calculated, using what's called the NYMEX Henry-Hub natural gas index. The closing forward twelve month prices are averaged for every business day over a ten day period. Then, the price that's been arrived at will be examined. If it's over four percent higher than the price that was used to set the current fuel factor, the provider might file for an increase in their prices. It's unlikely that the prices will be reduced from the current levels, but they may increase.
Then, the percentage by which the price of natural gas has increased is applied to the current fuel factor, and the new fuel factor is created. It takes either twenty days or forty-five days for the new factor to become effective - depending on whether or not the supplier requests a hearing. When hearings are requested, the fuel factor doesn't affect your bill until the supplier wins the hearing, and the longer time period is the one that applies.
While increases may seem confusing, they're really quite simple. If natural gas costs more, so does all Texas electricity, even that which is not produced using natural gas. Next time you see something confusing on your bill, keep this in mind. It might help to explain a few things.
About the Author:
Author: Jerry Dyess has been managing companies in the Texas Electricity business for the past 7 years. He has published many articles on Texas Electric rates.
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