We recently caught up with Energy Ogre CEO, Jesson Bradshaw, to find out what Texans can expect regarding electricity prices going into 2020.
June and July of 2019 were pretty calm. Then all of a sudden, August 2019 came with some big demand spikes that caused the wholesale price of electricity to skyrocket to $9,000 per kWh. Before we go into the history of what that means, let's get to the critical question.
Are we going to see increased electricity prices in 2020?
"I think you will. That's inevitable since not a whole lot has changed on the system. I mean, the good news is there's actually quite a bit of new generation capacity that's scheduled to come online this year before next summer.
But 2019 was sort of an interesting year. We had this issue where our temperature-related consumption was high, but we had a large base consumption profile as well. Last year was a big jump, year over year. It's not just because people's homes are less efficient than before, we just had a lot of people moving here. And we still have people moving here.
Ultimately, our overall excess generation supply is starting to catch up with the retirement of several power plants and the new demand coming into the system. So the easiest way to fix that is for Texans to become more efficient in how they use electricity. And obviously, new generation coming into the equation. Both of those I'm sure are happening. Just is it going to be enough to have a huge impact on pricing before we get there?"
So why are prices going up?
"It's all in anticipation. There is no way to know with perfect certainty what's going to end up happening in July or August of 2020. But we use forecasts and historical patterns to make projections.
This past year, we knew it was going to be tight. As it turned out, although we did have some price spikes, for most consumers, they didn't really feel any of that. We didn't have issues with cascading blackouts. Power still got where it needed to go. We just had less excess than we're used to having.
This is just the market figuring it out."
How much will electricity prices go up in 2020?
"It's not going to be a whole lot different I think than what we saw going into last summer. It might be slightly higher, but it's not like it's moving far away from what we've seen historically. It's definitely going to be higher than what we've seen in the last six months.
For our members, a little bit of a difference is we've been able to push people into some lower price plans. In the last few months, we put people on relatively low-cost plans because they're avoiding summer.
Right now, we're selecting a lot of six-month plans. We may end up popping back into some of the price levels that we saw across last summer again, but while the prices are low enough we're absolutely going to take advantage of it.
That's our philosophy. We want to be able to pick up these value opportunities and make sure we're making these plans selections to minimize that cost for the whole year."
Is deregulation really still the best thing?
"The competitive market has been around for upwards of almost 20 years. And, I mean, people still pay less than 10 cents in competitive plans. What do you have elsewhere from an inflation basis that costs less than it did 20 years ago? We just don't think about it that way.
The reason is that it's not like in the past when someone would make this massive capital decision. So a big investment would be made and then you're stuck paying for it for the next 30 years. Now, there are a lot of smaller individual decisions. They start to add up, but the competitive market has made it accessible to people to lower their bills.
People have bad outcomes sometimes because one, unscrupulous providers make offers that are hard to figure out. And they're done that way on purpose, right? Then two, people tend to not pay attention. It's 100% understandable because they're focused on other things. We all have busy things going on in our lives. Plus, it wasn't part of our childhood experience, seeing other people do this stuff. So it's easy to forget.
A lot of people do that because, you know, they don't really understand the magnitude of how much it's costing them. If they knew, well it's sort of like anything. If I'd known that... If I'd only taken better care of myself, or if I ran every day, then I wouldn't have this.
It's not obvious I think what the benefit is versus the time. So that's part of what we're trying to do."
Nothing Energy Ogre Can't Manage
Well, folks, you heard it here. Get ready to see some slightly higher prices as we move into 2020. Energy Ogre members can rest easy knowing we are ahead of the game in minimizing your exposure to next year's summer prices. We will continue to match our members with plans that fit their needs and keep their bills nice and steady.
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