The cost of electricity soared in 2022.
TEXAS, USA — Last year, natural gas made a lot of Texans hold their noses and sign up for electricity plans.
After Russia invaded Ukraine, the price of natural gas went up and stayed high for much of the year. And since about half of the electricity generation in this state comes from natural gas, electricity rates were also up sharply.
In an unscientific spot-check, we got onto the state’s online retail electric marketplace to search for the cheapest electric rate in the downtown Dallas ZIP code.
Based on a 1,000 kWh usage, the lowest rate was 9.5 cents per kilowatt-hour in February 2022. Just after that came the Russian invasion of Ukraine.
By the time we checked that same Dallas ZIP code in June 2022, the lowest rate for 1,000 kWh had jumped to 13.7 cents per kilowatt hour, a 44% increase in the cost of power in less than four months. And the lowest rate plans at that time were requiring consumers to sign up for several years, which meant they either had to agree to stay locked into that relatively high rate for a long time, or they would have to pay the cancellation fee to get out of it.
After the price of natural gas peaked in August, it fell significantly by the end of the year, down to pre-Russian invasion levels. We checked back on those electricity rates in that downtown Dallas ZIP code at the beginning of 2023, and found electric rates had also come down, but not nearly as much as the price of natural gas had.
This fits the pattern we sometimes see with the price of oil and the price of gasoline. It can be described with the economic phenomenon known as rockets and feathers: A condition changes (like the price of oil or natural gas) and the price of something related to that condition (like gasoline in the case of oil and electricity in the case of natural gas) shoots up like a rocket. But when the changed condition (in our examples, the price of oil or natural gas) goes back to normal, the price of the other commodity that rose like a rocket comes down very slowly, like a feather.
The question facing consumers is whether they should shop now for a new electricity plan or wait to see if rates fall further. That is always a dilemma.
This may help some decide: Some of the lowest cost plans we saw in our latest spot check no longer had terms that required consumers to sign up for multiple years. The commitment period in many cases was just several months. That may be a gamble for many ratepayers to sign up for a plan like that now and then have to do it all again in a matter of months.
Who knows what natural gas will cost then? Or electricity? Here’s an educated guess: The experts at the U.S. Energy Information Administration expect natural gas prices in the region that includes Texas to be lower this year than last year. They also project that between now and this summer, wholesale electricity prices in Texas will continue to go down significantly. That’s been the trend since they hit a peak last summer.
Will that translate to lower retail electric rates in the months ahead? Stay tuned…