Electricity prices could rise even higher in Houston thanks to natural gas prices, CenterPoint rate hike

Consumers across Texas have already received sticker shock as they've renewed or signed up for electricity plans in the state's deregulated power market.

Twelve-month plans, which could cost 10 cents a kilowatt hour in 2021, are now at least 16.8 cents and as high as 25.4 cents in parts of Houston.

As I wrote back in June, most of that spike has been caused by a surge in demand -- and prices -- for U.S. natural gas. Within the Electric Reliability Council of Texas, or ERCOT, about 44 percent of all power generation came from natural gas in 2021, and power traders and retailers use the price of gas as their benchmark for setting power prices.

The price of natural gas began to spike after Russia invaded Ukraine in February. Russia provided Europe with about 40 percent of its natural gas in 2021, which was all but cut off as the war has dragged on. That has created a huge new demand for U.S. natural gas, which companies here have been working overtime to export to European countries.

But in the past few weeks, the price of electricity in Europe and natural gas has begun to stabilize, according to Rystad Energy. an independent research firm. In Germany alone, the price of electricity was cut by about half in three weeks.

Electricity prices across the continent, however, remain historically high largely due to natural gas costs. The European Union also announced earlier this month it would institute a mandatory 5 percent reduction in power demand during peak hours, with an overall target of a 10 percent cut in total electricity demand.

While that could weaken overall demand for natural gas, Europe will still rely more heavily on U.S. natural gas than before the war, especially as Europeans turn on their heaters -- largely powered by natural gas -- to stay warm this winter.

In turn, that will continue to put pressure on natural gas and electricity prices here.

Meanwhile utilities in Texas have continued to raise the rates they charge for delivering power to their customers. No utility has raised their rates more than CenterPoint, according to filings with the Public Utility Commission.

As of Sept. 1, CenterPoint residential customers that use 1,000 kWh a month can expect their bill to rise by $9.98 a month thanks to an increase in the utility's Transmission Cost Recovery Factors, which utility companies charge to recoup expenses for upgrading transmission and power lines. The second-highest rate hike in the state, by Texas-New Mexico Power, is $6.06 a month, and Texas' largest utility Oncor's rate for the Transmission Cost Recovery Factors will rise by $5.17.

CenterPoint did not immediately respond to a request for comment.

CenterPoint will also raise their distribution rates by the highest amount in the state -- up $1.48 a month for a household using 1,000 kWh. All told, the additional costs charged by CenterPoint will mean residential customers will pay an additional $11.45 monthly.

Those additional costs are on top of the roughly one-penny per kilowatt hour rate hike CenterPoint instituted in fall 2021, which was the equivalent of adding about $10 a month to residential customers that used about 1,000 kilowatt hours monthly.

While CenterPoint had the largest rate increases this year, the utility does not have the highest transmission and distribution rates in the state. CenterPoint is second to Texas New Mexico Power, whose combined rates for transmission and distribution translate to about $27.56 a month for a house that uses 1,000 kilowatts; CenterPoint's translates to about $25.88 a month.

But that could soon change.

The Public Utility Commission will also decide in the next month or two whether CenterPoint can raise rates to pay for mobile generation units they leased in 2021. CenterPoint has asked the PUC if it can recover $200 million from ratepayers for leasing 345 megawatts of generation. That request will go before a State Office of Administrative Hearings judge in October, and some industrial consumers, power generators and civic groups have raised concerns about the request. But if the PUC ultimately approves it, it will add more to consumers' bills.

Those utility-side expenses, coupled with the sky-high price of natural gas, likely won't lead to lower electricity bills for months -- or even years -- to come