Local Price Indicators Drive Informed Energy Spending in Texas

Part 2 in our 6 blog series exploring price drivers in core US markets takes a look at the Lone Star state.

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In the second installment of our series we are moseying down to Texas, read on to understand how Texas’ energy profile foundations affect your cost of energy. (To view other posts in this series, click here.)

Major deregulated utilities: Electric & Natural Gas

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Facilities that fall within in these utility markets have the ability to competitively shop for the supplier offering that is most fitting for your building’s energy needs.
 
If electric spend is left unmanaged, your facility will be placed on a post-term index or price of last resort (POLR) – meaning your energy spend is added into a back-up offering. POLR prices are typically month-to-month and are extremely punitive.
 
According to the Public Utility Commission of Texas, “POLR service is relatively high-priced due to the costs associated with planning and the risk of serving an uncertain number of customers with uncertain electricity loads.”
 
Similarly, if natural gas spend is unmanaged the facility will automatically be supplied through the utilities default services offering. This could result in higher, more variable rates as the default offering is historically 10-20% higher in cost.
 
Examining your energy needs for Texas-based operations, or relocation planning, can help procurement select the most competitive offering avoiding higher rates.

Wholesale Electric Market: Electric Reliability Council of Texas

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to 24 million Texas customers. Deregulated and municipal utilities in Texas are governed and managed by the ERCOT. This Independent System Operator manages 570+ generation units connected by more than 46,500 miles of transmission lines throughout the state. Nearly 90% of the state population sits within the ERCOT grid.
 
All end users in ERCOT are responsible for paying fees through their electric billing for the support services provided. The highest cost and most easily managed is the Transmission Cost Recovery Factor (TCRF), an annual ratchet determined by peak kW demand during the ERCOT system peaks in June, July, August and September.
 
Facilities will be charged for their average peak demand during these four months in bills the following year. As procurement utilizes energy spend, forecasting for TCRF rates and summer energy usage will be instrumental for smart spending.

Suppliers Registered With the Public Utility Commission of Texas

Texas has the largest base of suppliers in the nation with 221 retail outlets. For procurement, uncovering the optimal supplier can be complex due to the abundance of offerings. Utilizing a supplier that is not strategically aligned to support your unique needs could lead to paying a much higher rate than necessary, resulting in excessive spend and electricity waste. Procurement should mitigate waste, risk and cost by selecting the most competitive and financially stable supplier.

Wind Energy

Nearly 25% of the United States’ wind turbines are located in Texas. The Lone Star State leads the nation in the investment in wind energy, which has shifted the pricing structure. This has driven down ‘off-peak’ electricity cost, but created risk of strain in on-peak periods; namely weekday afternoons in hot summer months.
 
The leading investment in wind energy does amount to savings for the consumers in the Texas market though. On an average day, wind energy makes up 10 percent – or at a peak output of 14,000 megawatts – of Texas’ total electricity, saving consumers more than $950 million each year, cites The Wind Coalition.
 

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Balancing natural gas, the predominant fuel source for additional generation needs, paired with Texas’ growth in electricity demand makes state pricing significantly more susceptible to volatile swings in changing weather conditions. Procurement being aware of the volatility of the Texas energy market can better equip for appropriately budgeted spend during high-risk climate time-frames. 

Simplifying Energy Complexities

The Texas energy market has its own opportunities and challenges for mitigating risk while maximizing savings. Trane Building Advantage aids in simplifying the intricacies of the energy market for Corporate United members through supply audits and utility rate reviews. Members receive customized, expert analysis of your operations so you can make informed spend decisions while recognizing cost savings.

Want to learn more? Watch an on-demand webinar from our partners, the experts at Trane Building Advantage to take a deeper dive into understanding your electricity and natural gas pricing.

More Articles in This Series

OHIO: Understand how to make smarter energy buying decisions in the Buckeye state based on local price drivers.

NEW YORK: Find out how New York’s evolving energy profile affects your cost of energy.

ILLINOIS: Take an indepth look at localized spend indicators in the home state to the Windy City.

MARYLAND: Affect the cost of energy in your Maryland operations based on local energy predictors.

PENNSYLVANIA: Optimize Energy Spend in Pennsylvania and Eliminate Energy Guesswork


Trevor Joelson: Business Development Manager at Trane Building Advantage
As the Corporate United Energy Program Manager for Trane Energy Supply Services, Trevor partners with CU Members to ensure they achieve low cost electricity and natural gas supply for their facilities across North America. Trevor specializes in electricity generation trends and their impact on retail pricing. Trevor received his Bachelor of Arts degree in Sport Administration with minors in Marketing and Political Science from the University of Louisville in Louisville, Kentucky.