Electricity Costs High - Look at Natural Gas
You might not be aware of it, but the price of natural gas can affect the price of your electricity, even when you're not burning gas. You see, the cost of fuel makes up about a third of the costs of electricity, and in Texas, that's based mostly on the price of making power via natural gas fired generation methods. When the price of natural gas changes, so does your power bill. This can cause some pretty confusing results if you don't know what's happening. Sudden price increases may seem completely unexplained
The Texas Electric Choice Act of 1999 allows retail electricity providers to make changes to their prices twice each year, basing those changes on the current cost of natural gas. This lets the market and customers benefit, because the price of power always reflects market conditions. If you're not happy with the price of your power, you have the option to pick a new supplier if you can find one that will offer you better terms. The Act, simply put, lets Texans choose where their power comes from. That allows you to pick a supplier that generates power the way you choose - helpful for people who are worried about the impact of their usage.
So, how does that price get determined? First, a composite price for natural gas is calcuated from the NYMEX Henry-Hub natural gas index. A ten day period is chosen, and the closing forward twelve month prices for every business day out of those ten days will be averaged. Then, there's an examination of the price that's arrived at - if it's more than four percent higher than the price that set the fuel factor currently being used, the supplier can file for a price increase.
The percentage by which the price of natural gas has increased is applied to the current fuel factor to make a new fuel factor, which will affect your bill in either twenty days or in forty-five days, depending on whether or not the supplier decides to request a hearing. The longer period will apply if a hearing is requested, and prices go up if the provider is successful in the hearing.
Increases in your electricity costs might seem confusing, but they're really incredibly simple. When natural gas prices go up, so does the price on all electricity in Texas, even the power made without using natural gas. If you see something unusual on your bill, don't forget to take this into account.
The Texas Electric Choice Act of 1999 allows retail electricity providers to make changes to their prices twice each year, basing those changes on the current cost of natural gas. This lets the market and customers benefit, because the price of power always reflects market conditions. If you're not happy with the price of your power, you have the option to pick a new supplier if you can find one that will offer you better terms. The Act, simply put, lets Texans choose where their power comes from. That allows you to pick a supplier that generates power the way you choose - helpful for people who are worried about the impact of their usage.
So, how does that price get determined? First, a composite price for natural gas is calcuated from the NYMEX Henry-Hub natural gas index. A ten day period is chosen, and the closing forward twelve month prices for every business day out of those ten days will be averaged. Then, there's an examination of the price that's arrived at - if it's more than four percent higher than the price that set the fuel factor currently being used, the supplier can file for a price increase.
The percentage by which the price of natural gas has increased is applied to the current fuel factor to make a new fuel factor, which will affect your bill in either twenty days or in forty-five days, depending on whether or not the supplier decides to request a hearing. The longer period will apply if a hearing is requested, and prices go up if the provider is successful in the hearing.
Increases in your electricity costs might seem confusing, but they're really incredibly simple. When natural gas prices go up, so does the price on all electricity in Texas, even the power made without using natural gas. If you see something unusual on your bill, don't forget to take this into account.
About the Author:
About the author: Jerry Dyess specializes in the Texas Electricity segment. He has published many articles on Texas Electric prices.
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