The Cost of Power
Why Are Electric Bills Going Up?
At New Braunfels Utilities, we’re aware that our customers’ electric bills have risen sharply and that many people are upset and confused about their higher bills. We’re getting lots of questions – and we want to do the best we can to provide answers. Here are a couple of important factors to keep in mind.
- Home electric bills across Texas are increasing – the Texas Tribune in a recent story described the increases as “skyrocketing.”
- The biggest reason bills are increasing is that the cost of natural gas has increased 200% over last year, mostly because of Russia’s invasion of Ukraine and that Texas is exporting more natural gas than ever before.
- Texans are still paying the price for Winter Storm Uri, for the increased cost of power during the storm. State officials in Texas decided to change how the power grid is operated, and as a result, officials are prioritizing reliability over affordable power.
- These factors are out of NBU’s control and as a not-for-profit energy distributor, we are not making more money or higher profits from higher bills.
- We know times are tough. We’re in this with our customers. Anyone struggling to pay an electric bill should contact NBU’s customer service representatives at 830.629.8400 or customerservice@nbutexas.com.
Here are more detailed answers to the most common questions we’re hearing.
There are two main factors that are causing increases in NBU customer electric bills this summer.
- The amount of energy most customers are using has increased due to our prolonged, above-normal temperatures since April. The South Texas region has experienced extremely hot weather for a sustained amount of time. For example, San Antonio has had more than two dozen days of 100-degree temperatures so far this year, compared with an average of nine such days. Because of this persistent heat, combined with little to no rainfall (97.53% of Texas is in some form of drought condition), customers’ air conditioners are working harder, increasing utility bills.
- The cost of power has been increasing over the last several months, due also to the rise of natural gas prices and regulatory changes made to the Electric Reliability Council of Texas (ERCOT) electric market following Winter Storm Uri.
ERCOT, the main operator of the Texas power grid, is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers, and municipally owned electric utilities. ERCOT is the energy market exchange, or clearinghouse, for utilities such as NBU and we purchase the power we distribute to customers through it.
New Braunfels Utilities’ electric rates, like other utilities across the state and nation, are being affected by world events.
Ongoing issues include:
- Rising prices from inflation and supply chain disruptions that affect things like the availability and costs of materials and equipment.
- Effects on the global energy market caused by the war in Ukraine.
- The extraordinary increases in the cost of natural gas – most Texas power plants operate on natural gas.
- Changes to the ERCOT energy market from Winter Storm Uri. After Uri, when millions of people lost power for days, Texas officials decided to prioritize reliability over supplying affordable power. Companies like ours must now pay the price to work towards power grid reliability, especially during extremely hot or cold weather. That’s a positive change, but it has also caused the price of power to increase because power plants now must be online all the time in case they’re needed. Before Uri, power plants in Texas went on- and offline depending on market demand.
The energy market is one of the most volatile commodity markets; prices vary in as much as 15 minutes depending on market situations and supply and demand. Utilities typically take long-term approaches to hedge energy. Some enter into long-term contracts at a contracted amount for all their energy needs (20 + years). This type of hedging is known as a full-requirements contract. Some utilities enter into energy deals for portions of their needs, then contract with another entity to handle the remainder of their energy needs. This approach is the riskiest and is known as a load-following contract. Some utilities build power plants and must acquire the fuel to run the plant; this doesn’t remove risk; it just transforms it into a different type of risk. Other utilities apply various combinations of the above. New Braunfels Utilities takes a cost-blending approach that blends the cost of power for any one moment across multiple power purchases bought at different periods of time.
When considering the larger picture of the energy market landscape, utilities will almost never have the same energy costs because they buy different products from various supplies at different times.
While ERCOT does run both the day ahead and real-time energy markets, most utilities are getting very little power from those markets, especially the real-time market. The reason is that those two markets, while sometimes cheaper, are more volatile in price than contracting with another energy supplier at an earlier point in time before we need the energy.
New Braunfels Utilities’ cost of power prices differ from GVEC and PEC due to the fact that each entity purchases energy in different ways and at different times. Buying energy from the same supplier for the same delivery period can have vastly different pricing if the time entered into a deal differs.
Natural gas is the primary fuel used to generate electricity – 44% of the power generated in Texas starts with natural gas. It is both the largest and the most reliable way to generate energy in the market. So, when natural gas prices go up, we feel it in Texas. Natural gas prices are affected by both national and international events.
The cost of energy is essentially calculated by multiplying the cost of natural gas by the cost to convert natural gas to energy, known as the heat rate.
And, natural gas costs are up 200% over last year.
The cost of natural gas has increased; however, customers typically use less gas at home in the summer, so customers may not notice the price rise. The high usage season for gas is in the winter, when customers use it to heat their homes.
According to the U.S. Energy Information Administration, U.S. residential natural gas usage in the winter can be more than 30 billion cubic feet per day (bcf/d), while in the summer is three bcf/d, which is 10 times more in the winter.
Natural gas has two peaks: one in the winter for residential and commercial heating and one in the summer for producing electric power. Read more at https://www.eia.gov/todayinenergy/detail.php?id=42815.
A drop in the U.S. supply of natural gas storage paired with Russia’s invasion of Ukraine has impacted the world’s energy market. Natural gas prices are the highest that they have been in almost 15 years.
And again, we’re feeling this more in Texas because since the war in Ukraine began, Texas has been exporting more natural gas than ever to help European countries that had been dependent on Russian natural gas exports. Put simply, the cheaper natural gas that once stayed in Texas hasn’t been available.
A portion of the volatility in the ERCOT market is from the regulatory changes made by the State of Texas following Winter Storm Uri. All Texas utilities experienced record power costs during Winter Storm Uri. Some utilities took on debt for up to 30 years to pay off costs they incurred to serve customers during the storm.
New Braunfels Utilities took on costs as well. In February 2021 alone, NBU paid $93 million in power costs, compared with $4 to $5 million in a normal February. Though ERCOT mandated rotating outages, NBU incurred the costs to provide customers with power during Winter Storm Uri. With the storm behind us, we are paying for those unexpected costs. New Braunfels Utilities took on short-term debt to reduce the long-term impact of the cost of the storm on customers. The cost of that short-term debt is much less than taking on the long-term debt would have been; resulting in a savings of more than $40 million in interest costs.
In the long run, that will help reduce customers’ bills because we won’t be paying high interest over three decades, but it is a cost we must pass on to our customers.
Uri also exhausted NBU’s reserves. This fall, when the storm debt is collected, we will work to refill the reserves to protect our customers from events like Uri and maintain a favorable bond rating and financial resilience – which again benefits customers.
New Braunfels Utilities publishes its Annual Comprehensive Financial Report (ACFR) each fiscal year. An ACFR is a set of financial statements for a state, municipality, or other governmental entity that comply with the accounting requirements established by the Governmental Accounting Standards Board.
All of the financial information included in the ACFR is audited by an independent auditor using generally accepted government auditing standards and made available to the public.
Conservation of energy is the best way to reduce your energy usage and lower the total cost of your bill. Techniques such as raising the temperature of your thermostat even a few degrees, using ceiling or floor fans, and completing an AC check-up are some of the best ways to help lower your monthly usage. Visit NBU’s conservation webpage to learn more techniques and access tools to help monitor, understand, and reduce your monthly usage.
We know times are tough. We’re in this with you. If you’re struggling to pay an electric bill, contact NBU’s customer service representatives at 830.629.8400 or customerservice@nbutexas.com. Our team is experiencing high call volume, but we’re committed to working one-on-one with you to help.
The NBU Utility Bill Assistance Program also may be available for qualifying households experiencing financial hardship.
The Code of Ordinances set by the City Council of New Braunfels, Texas, governs NBU’s electric rates.