Power, water issues deal area restaurants another blow.
The state’s power crisis is spilling into the retail electricity market, reducing the number of plans offered on the state’s electricity shopping site and raising prices, at least temporarily.
Fewer than 30 plans were listed on the Power to Choose site, down from the usual 250 as retail electricity providers try to navigate the power shortages that have sent wholesale power prices soaring to the state maximum of $9,000 per kilowatt hour. Wholesale power averaged $22 per megawatt hour last year, according to the U.S. Department of Energy.
Retail power companies typically buy futures contracts to supply electricity to their customers and buy on spot markets as needed. Those needing to buy now are getting slammed by the soaring electricity costs, which exceed what they are charging retail customers in contracts.
Rob Cantrell, president of Pulse Power, a retail electric company, said this is longest stretch he’s experienced that prices have stayed at the $9,000 maximum, hovering there for much of the past three days. He expects that many companies that buy power on credit could end up bankrupt.
“I think you’re going to see a massive number of defaults, you’re going to see lots of companies unable to meet their obligations,” Cantrell said. “Half of the retailers that currently compete in Texas could probably be out of
business.”
Retail electricity companies are trying to reduce their exposure to the wholesale market. Cantrell said his company is offering his customers a chance of winning a Tesla if they lower their power consumption by 10 percent. Other companies are also making pleas to their consumers to conserve.
Austin-based Bulb is offering up to $200 to customers for saving energy, according to Bloomberg News. Reliant Energy has been urging customers to conserve
energy sending out releases with tips on how to conserve energy.
‘Market not working’
Some companies have asked customers to leave, offering, via Twitter, to waive termination fees and pay bonuses. Griddy, which allows customers to pay wholesale power prices, is now telling customers that they would be better off moving to another company that offered fixed prices.
“The market is not working right now. It’s penalizing us the retailers, because the generators can’t get their plants back up and running,” Cantrell said. “So, it’s
just a, it’s just a bloodbath, right now in the marketplace.”
Increases in wholesale prices typically filter into retail prices, but how big an impact they have depends on factors such as market conditions and competition. In highly competitive markets, for example, retailers might absorb some of the higher costs to hold onto or win customers.
Customers with retail plans won’t be affected by the wholesale price surge for the duration of the contracts. Those shopping for power are not only seeing fewer choices, but higher prices.
Prices on Power to Choose are running about 10 cents a kilowatt hour, compared to less than 7
cents a few weeks ago.
If the power crisis winnows the number of retail companies, it could mean less competition and higher prices, said Cantrell. But Fred Anders, founder of Texas Power Guide, which helps people find low-cost power plans, said such an effect would likely be short-term.
“That happens every time we see consolidation,” Anders said. “Then someone new always enters the market.”
Beware providers’ demise
Both Cantrell and Anders warned consumers to be vigilant about the status of their electricity provider. If a company fails,
its customers are assigned to a provider of last resort, often larger energy companies that are sometimes twice as expensive.
Trent Crow, founder and president, of Real Simple Energy, recommends that if this happens, consumers should act immediately and find the cheapest provider available.
It’s difficult to forecast what prices will look like in the future, he said, but the ups and downs of the market provides opportunities to make money — opportunities that can create competition.
“So, more companies, when they see the opportunity to compete and win business, will enter the market,” he said.