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Winter Energy Prices and Houston TX Electricity Bills

Sep 19

Winter Energy Prices and Houston TX Electricity Bills

HOUSTON, TEXAS - September 19, 2022 - Texas Electricity Ratings

Retail prices for energy in the United States are nearing multi-year highs as we enter the winter of 2022-2023. Due to changes in energy supply and demand patterns, the high prices are a result of the war in Ukraine and the COVID-19 pandemic. Due to the higher energy prices, and because it is expected that the winter will be colder than usual in the United States, households will likely spend more money on energy this year.

Even with weather uncertainties, the EIA expects this winter's increase in residential energy bills to be higher because of the US's return to economic growth.

The EIA expects that nearly half the U.S. households that heat their homes primarily with natural-gas gas will spend 30% less than last winter. It is possible that they will spend 50% more if it's 10% colder than the average winter, or 22% more when it's 10% warmer than the average winter.

Learn more about how to get the cheapest electricity rates at TexasElectricityRatings.com where you can easily compare and shop electricity plans and rates.

The National Oceanic and Atmospheric Administration (NOAA) forecasts the expectation of a colder winter. The EIA expectation of a colder winter is based on NOAA's energy consumption forecast.

To provide this outlook, the winter heating period is defined as being between October-March. The average household winter energy consumptions, which are used to compare the recent winters, are broad measures that allow for comparisons. They include energy expenditures for all uses and not just heating. Individual household fuel expenditures depend on the size of each home and its energy efficiency. Also, weather conditions and thermostat settings are important. Every fuel has its own market structure and physical infrastructure. There are also regulations and limitations that may affect the connection between wholesale market events and retail market events.

In the United States, average prices for all fuels will be higher than during recent winters. Retail prices are rising due to higher wholesale commodity prices for natural and crude oil. We can attribute price increases over this past year to many factors. However, the main reason wholesale commodity prices for natural gas, crude oils, and petroleum products have risen in the past year is that fuel demand has increased faster than production. This has resulted in falling inventories (in the case of crude oil and a number of petroleum products) and inventories rising by less than historical averages during summer, such as the case with natural gas and propane.

Petroleum products have the advantage of commodity price changes being quickly passed on to consumers. Brent crude oil spot prices at $79/barrel (b) were up 51% compared to last winter's. We expect propane retail prices to rise by 49% and heating oil prices to rise 33% this winter.

Since these costs are integrated into regulated rates, price changes for commodities have an impact on residential prices of natural gas and electricity over longer periods. Even with a slight lag, the retail price of natural gas and electricity are increasing this winter because of increases in spot commodity costs over the past 12 months. This price increase is contributing to our forecast for residential natural gas prices this Winter will be 27% lower than last Winter and residential electricity pricing will be 5% above last winter.

According to NOAA's latest winter forecast, temperatures in 2022-2023 will likely be slightly lower than the last winter for most of the country. However, they will still be similar to the average winter over the past 10 years. As a way to compare cold temperatures with a base temp, we use heating degree days or HDDs. More HDDs mean colder temperatures. For the winter of 2022-2023-23, the average HDDs will be 3% higher in America than last winter. It is also 1% higher than the 10 winter average. There have been no significant changes in the region since last winter. We expect the Northeast, Midwest, West, and West to have 3%-4% more HDDs next winter than winter 2020-21. HDDs in the South will remain about the exact same as last year.

Weather uncertainty is a significant factor in these forecasts. Therefore, the Winter Fuels Outlook also includes scenarios where HDDs measure all regions as being 10% or 10% colder than the baseline forecast. Extreme energy market disruptions are possible even when it is a close to average winter, as last year showed. An earlier cold snap in February that affected large parts of the country, including Texas, caused disruptions to energy supplies and continues to impact energy markets. Even though these weather events may seem unavoidable, the prevailing high prices for fuels and low inventories mean that even short periods of severe weather could have an impact on energy markets.

In two ways, cold weather can have an impact on household heating expenses. It increases the amount required to maintain a temperature house at a particular level. It raises demand, which can lead to supply disruptions. Second, it can also cause energy prices and fuel prices to rise. This can be especially acute during low fuel inventories.

This effect is present for all fuels but propane is most affected as wholesale-to-retail prices pass through quickly. Also, cold weather can have a significant impact on market dynamics and prices. In the Midwest, for example, where past cold winters have caused problems with propane supply, we predict that propane retail price would rise to about 12% and that households would consume 12% of it. This would cause propane expenditures to increase 26% over our base scenario.

However, for natural gas, the immediate effects of a cold winter are more on the consumption side. In a 10% colder scenario, U.S. natural-gas retail prices would be 2% lower, with 13% less consumption. This would mean that expenditures would be 15% higher than in the base case.

Winter Energy Prices and Houston TX Electricity Bills

Texas Electricity Ratings

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