As the war between Russia and Ukraine continues, back in Texas, residents are seeing a spike in the cost of their home electricity bills this summer – reaching rates as much as 70% higher than this time last year.
The price increase comes at a time when Texans are already facing rising costs at the pump and in grocery stores due to inflation. Mitchell Ferman, who has been reporting on this for the Texas Tribune, spoke with the Texas Standard to discuss why Texans are seeing these higher energy costs, which he attributes to the current price of natural gas. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Let’s talk a little bit about those energy prices. It’s not just prices rising at the gasoline pumps. It’s also home electricity bills this summer that are spiking. Tell us a little bit more about what Texans are seeing.
Mitchell Ferman: Texans are seeing skyrocketing home utility bills this summer, and there are a variety of reasons for that. Most prominently, the price of natural gas has really jumped, especially since Russia invaded Ukraine. Russia is a top gas-producing country, and there has been a lot of hesitance in the global energy market, especially in Europe, of continuing to import Russian gas. And, as a result, there is a huge demand for natural gas globally.
Texas is a gas state. Texas produces a lot of natural gas. And as a result, that gas is being exported. The demand has made home electric bills rise because most power plants in Texas that make electricity run on natural gas.
President Joe Biden has been pushing pretty hard for energy companies to pump more gasoline, and perhaps push the cost at the pumps down. What about natural gas? Is it possible that there could be more production on that front? Could we see prices drop?
Sure, but there is already elevated production of natural gas right now. Texas is producing a lot of it, and there are some obstacles to producing more. Some of that is supply chain related, like getting the equipment that companies need to produce more natural gas. And a big part of what energy experts like Garrett Golding with the Federal Reserve Bank of Dallas — he’s their energy economist — he made the point that there’s also a shortage of labor across most of the oilfield services. He said that the Dallas Federal Reserve Bank has seen it for several quarters now, that it’s a struggle to get qualified people into positions companies want right now.
You mentioned in your reporting how the higher cost of natural gas is actually benefiting some Texans. Can you say more about what that means?
Yeah, oil and gas are so tightly intertwined with the Texas economy that the industry employs so many people in the state. And not only that, the state gets a lot of oil and gas production taxes. The state coffers are generally in good shape when the price of oil and oil gas is up. And, cities that are in oil fields generally benefit as well because of taxes and jobs and what it means for their local economies.
Of course, there’s the issue of rising energy prices, not just gasoline, but electricity. How hard hit are Texans going to be and do we really know yet?
We don’t know yet. And the degree to how hard Texans will be hit is compounded by the effects of inflation broadly. I mean, Texans are facing elevated costs at grocery stores, at the fuel pump. And, home electric bills are just yet another impact of the state of the economy.
And I understand that some are concerned about the way ERCOT is managing the grid.
Yeah, ERCOT’s new approach to operating the grid means asking power plants to be online and available in case they’re needed. And that means paying generators a prescribed price to operate no matter what happens. But before the 2021 deadly winter storm, power plants ramped up or went offline based on market demand.
And so, this makes it more expensive to produce electricity using this supply reserve approach?
Yes, this approach adds costs, according to energy experts.
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