Wednesday, December 17, 2008

Are Texans Paying Too Much?

This question has come up quite a bit recently because of the big drop in the energy markets. With the drop in natural gas and oil - many feel that resdiential electricity rates here in Texas should be much lower.

Well, credit helps run the electricity market in Texas and we all know what has happened recently in the credit world. In order to purchase power to sell into the market - Texas retail electric companies need credit to hedge the power they've purchased. Since the credit standards are much tougher, Texas electricity providers have access to less power and are less aggressive with their pricing at this time - simply because it's much harder to get.

So, are Texans paying too much for their residential electricity? I don't think so. The market is what it is - there are plenty of companies out there that rely on being the low cost provider. If they could lower their rates - they would. It's simply a tough market right now, plus prices have dropped 30%.

Anytime you see a drop of 30% - it's a good time to lock in. Will the credit markets get better and help lower electricity rates come to the market? That's certainly possible, but with the cold winter upon us there should be an increased demand for natural gas - thus an increase in natural gas and electricity costs. Do you know how long our nation will be in this credit crunch? I certainly don't.

My advice would be this - Prices are favorable right now and I'm recommending my clients lock into a rate for 12 or 24 months.