In this blog, we’ll discuss what’s causing electricity rates to be high as we head into Summer 2022. We’ll also show you what Energy Ogre is doing to make sure our members are being put in the best Texas electricity plans available at this current time.
- Texas Electricity Heading Into Summer 2022
- How the Natural Gas Market is Contributing to Higher Texas Electricity Prices
- The Price of Natural Gas
- How Energy Ogre Members Get the Best Electricity Prices in Texas
- Energy Ogre is Constantly Comparing Electricity Rates in Texas
- A Reason To Smile
Here’s the good news–with Energy Ogre, you won’t be paying any more for electricity than you have to. We are committed to always finding our members the best prices for their usage profile, no matter the market conditions.
Energy Ogre's Laura Thornquist: Summer 2022 Electricity Pricing
“Hi, everyone. I'm Laura Thornquist, Chief Operating Officer here at Energy Ogre. As Energy Ogre members, we know you are accustomed to getting very low electricity rates. This year, the market, it's a little different. Let's think about it. Grocery prices are up. Prices at the gas pump, they're up. And yes, electricity prices are up, too. But we want you to know that we are watching this for you every single day. We are making sure that we are enrolling you in the lowest possible rate at this time. We also want you to know that we continuously monitor the rates in the market. And when the price is lower, you will be the first one to know. We appreciate your trust. We appreciate your membership. And we're glad that you're part of Energy Ogre.”
Before we go into how Energy Ogre selects your electricity plan, let’s see why rates are higher than normal in 2022.
Texas Electricity Heading Into Summer 2022
In any year, summer weather brings higher temperatures and with them, higher electricity prices.
Generally, when that Texas heat hits, we all start sweating buckets. What do we do next? We crank up the AC for that sweet, sweet relief. High demand, the amount of electricity that's available, and the challenges to generate more in the heat of the summer all combine for higher prices.
How the Natural Gas Market is Contributing to Higher Texas Electricity Prices
Natural gas is a major player in producing electricity. In 2021, 42% of the electricity in Texas came from natural gas, according to ERCOT. Right now, we’re dealing with a couple of unique circumstances.
While the war in Ukraine has had more of an impact on gasoline prices, it still has had some effect on natural gas prices. We talked with Energy Ogre’s Sr. Vice President of Automated Operations, David Kinchen, to provide more insight for our members.
“There's only a little bit of our natural gas capacity that can be exported to Europe or Asia through liquefied natural gas,” Kinchen said. “That has been absolutely maxed out for a period of time, and we probably won't get incremental capacity even in the next several years. That ability to put it on a ship at a terminal and move it outside the U.S. is very, very limited.”
Kinchen added, “There's not a ton of capacity that can come online very quickly. But there is a perception that high prices and shortage of global natural gas translates into a shortage of domestic natural gas. That's probably been overdone, but that fear does show up in prices.”
Another factor is the last two winters have been very cold, which has led to using more natural gas to heat our homes.
This all comes together as the U.S. is currently experiencing low levels of underground storage for natural gas. You can see that in the following graph from the U.S. Energy Information Administration.
The Price of Natural Gas
Okay, so we’ve taken a look at the challenges of production and distribution of natural gas, and how we’re in a low period of storage. Kinchen points out another big issue.
“The other problem we're having is we're in a very extreme period of volatility for natural gas prices,” Kinchen said. “If you go on to some of the sites with the trading information, you can see that this stuff (natural gas pricing) is getting kind of whipsawed around by six, eight, 10% on a day-by-day basis. What we're running into is a shortage of a commodity that we need and periods of extreme volatility. That's what's happening this year.”
The following graphic from barchart.com shows natural gas futures pricing for June 2022. As you can see, the pricing from 2021 through the present are much higher than normal over the last ten years.
How Energy Ogre Members Get the Best Electricity Prices in Texas
When it comes to picking out Texas electricity plans for our members, Energy Ogre is always focused on enrolling our members in the most competitive, cost-effective plan available at the time of enrollment. We consider the market circumstance now and in the future.
Of course, we select plans that are custom fit to each member and their electricity usage. We search from hundreds of providers and sometimes can even offer custom, below-market rates available only to our members.
That being said, here are a few key things we look for in a contract:
Contract term ranging between 3 and 12 months
Which plan delivers the most savings throughout the year
We consider the offered rate as well as the projected rates that will be available when the contract ends
With electricity prices being high right now, “teaser” contracts from a retail electric provider may seem appealing if you’re solely looking at rates. Kinchen explains why we try to avoid those contracts in the following video:
Energy Ogre’s David Kinchen: “Teaser” Electricity Contracts
“The part that sometimes gets people a little sideways is term is of a huge amount of importance to us. What happens is a lot of retail electricity providers will drop out a rate that seems really good on the surface, but it puts their renewal period into a bad time. We avoid that as much as we can. So sometimes, like right now, and it's especially challenging in spring, we're looking for a plan that will weight them over the summer and get them out of that period of volatility. A lot of the times that means a 12 month rate because a nine month rate would weight up too high because there's so much summer weighted in. A 12 month gets us weighted down. But what happens is you might see a "teaser" rate like a three month rate, and they're dropping them off in peak summer, July, August, or specifically even August. And then what happens when we get to that renewal period? We're in an extreme volatile environment and they get into a really bad, subsequent plan. So that next plan, you saved a little bit of money inherently, and then you get to your renewal period and then you get into a much higher price. And the reason we avoid that is that mathematically that doesn't work for us. But the other reason is that we don't want to put you in that pitfall because you'll enter into your highest use period in July and August, and then they'll renew you in a plan that's higher at your absolute period of peak usage. Most people consume the most in summer.”
To sum it up, shorter term contracts are often priced lower, but there’s a catch. The contract could end in a peak pricing season, like July or August. Those are really high use months for electricity. If you’re out of contract then, you’d be trying to find a new one when the rates would likely be even higher. That could ultimately result in minimal or no overall savings.
Another question people ask is, why not select a longer plan that could be for multiple years? Kinchen let us in on Energy Ogre's strategy.
"In general, we've found that for the last few years, we've had the best value out of 12-month plans," Kinchen said. "Right now, most longer-term plans aren't discounted to the degree that they should be looking at Natural Gas Futures, and they generally carry higher early termination fee (ETF) amounts - making it less economical for us to break that contract if the market goes down."
Kinchen adds, "It also takes off a key tool we use called a Blend and Extend, where if the market goes down, we try to add a small amount of term to the contract and 'blend down' the contract price immediately without having to incur an ETF at all."
As you can see, Energy Ogre is always looking at the big picture for power prices in Texas. That’s another reason why we select fixed-rate electricity contracts. Over time, these have been shown to be the most cost-effective plans. Again, maximizing your savings throughout the year is our main goal.
Energy Ogre is Constantly Comparing Electricity Rates in Texas
One of the biggest benefits of being an Energy Ogre member is we constantly check the latest electricity rates. If, let’s say in the fall, prices start to come down and there’s a better contract available, Energy Ogre is your electricity advocate. We can offer you the option to switch to a different contract if it makes economic sense. Remember, just because you’re in a contract now, doesn’t mean you’re stuck in it.
Energy Ogre works with retail electricity providers to negotiate better rates as well. We are doing everything we can to get our members the best plans possible.
A Reason To Smile
Alright, we know it’s not super fun to hear about things being pricier, so we’ll leave you with just a little moment of humor. Hey, if Ogres can’t laugh, well, things just wouldn’t be as fun!
If you’re still not an Energy Ogre member yet, check out our free electricity savings calculator. Remember, you have the power to choose better electricity management. This video shows how easy it is to use the calculator!
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