Texas Electricity Prices Are Sometimes Low and Sometomes High: How To Stay Predictable

by jsgs45 on May 11, 2010

Many have tried to find the perfect electricity service price by timing the market. You may have found that timing the stock market is virtually impossible if you do not have very good hedging and money management practices. You could very easily lose every thing you have ever earned if you are not trained on what to do.

With a fixed electricity rate you are hedging against a worse case scenario. Most people would rather live without the stress of watching their electricity rate go up and down every month.

Most states offer fixed electricity rates from several different companies and so it becomes very easy to pick a term you can be happy and confident about. While on a fixed electricity rate you can wait out until a time when you think electricity rates might come back down.

The important point is to pick a “fixed rate” so you will not have to worry what your electric rate will do in the mean time. Many think seasonality is a great way to time your locked in rate. The problem is seasonality is already built into your electricity rate.

Rates do change in the winter and summer but they don’t always go up or down they are just volatile in either direction. For instance, if it is the summer and things get much warmer than expected it causes a shortage in energy to produce our electricity because of the higher demand.

This than causes electricity rates to go up from now and usually on out in the future. This than means that rates have gone up on any fixed term you may have been thinking about.

An alternate scenario in the summer could be that it is a little cooler than expected. We end up not using all the energy we have available to produce electricity in the summer for possible high demand months. This causes electricity service rates to dramatically fall in price short term fixed rates while longer term prices are lower but remain higher than short term choices.

So everyone goes for the cheaper short term fixed rates. 3 months pass and those short term rates are up for renewal. However electricity rates are high again. Now those long term fixed rates look much better than they did just 3 months ago.

The point in all of this is that you cannot easily time the market when choosing a fixed electricity rate. I recommend going for 6 months to 1 year and simply try again and hope for a better outcome if you are not happy with what you locked in to.

For commercial electricity prices you can use a bit more strategy than this. About 5 years ago we encouraged a company to lock in at 7 1/2 cents for 5 years. They did reluctantly because a month or two prior rates were as low as 6 1/2 cents per kWh.

At that time period rates dramatically increased each and every year and at only one other time did it near that 7 1/2 cent range.

We still have that customer because he listened to our advice and saw the benefit of doing so.

To learn more about timing the Texas Power and Pennsylvania electricity market and to speak with an energy consultant please call us at 1-800-971-4020 or click here.

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