Texas

Energy and Environment Reporting for Texas

Oil Boom Raises Electric Rates in Parts of Texas

Photo by Jim Weber/The Commercial Appeal

As the drilling boom grows in parts of Texas, so has the demand for power, leading to an energy crunch. In this photo, Michael Stephens repairs a power line in South Memphis.

Texas is often called the energy capital of America, so it might come as a surprise that the oil and gas boom has substantially driven electric prices up in some parts of the state. And in those same areas, prices are expected to spike again this summer.

To understand why, it’s best to start with the small city of Seymour, which is somewhere between Wichita Falls and Abilene. Fewer than 3,000 people call it home.

“We are a small West Texas Community that, like all West Texas communities, is struggling with every cent is important to us,” says John Studer, Seymour’s city manager.

The town of Seymour runs its own electric utility. It buys on the wholesale market and sells power to its citizens. Voters have control of their utility, and profits go to the city. Studer says it’s worked pretty well. Until last year when the electric bills started going up.

“Every one that came in, it just kept progressively getting higher and then when you get one up for ten percent of your bill for congestion charges,” Studer explains. “It kind of takes your breath away.”

If the city was paying $200,000 dollars on a bill, it suddenly owed $20,000 more for congestion charges. That’s a lot of money for a place like Seymour.

What are congestion charges? Those are fees charged for an overtaxed electric system. And small towns like Seymour aren’t the only ones paying more these days.

On a recent Thursday, at a banquet hall at the Petroleum Club of Midland, Kent Saathoff, from the Electric Reliability Council of Texas (ERCOT), had some bad news for local municipalities. Not only would prices go up again in West Texas this summer, but it was kinda their own fault.

“Essentially, the transmission system we have out here today was largely built to serve the load that was there before this great increase in oil drilling activity,” Saathoff said.

All those pumps jacks and drill rigs working overtime during the fracking boom use electricity. It used to be that cost was spread across the state, so no one consumer was hit too hard by it. But since ERCOT changed the way the grid worked a few years agom to what’s called a “nodal system,” the price of congestion stays closer to the areas where it exists. That’s why some areas near the South Texas oil fields have seen congestion costs rise as well.

“It’s very much like in Austin for example,” Saathoff told the audience. “Roads can’t be built fast enough to take care of all the additional people moving there.”

As John Bick put it, “the problem is that the toothpaste is already out of the tube.” He’s with the energy consulting firm Priority Power Management. He works with the city of Midland, where prices have also gone up, and he says grid planners should have seen this coming.

“The planning for transmission to serve oil and gas production in West Texas, there were some short comings in that process and so it takes time to build transmission,” Bick said.

Bick is lobbying for price caps on congestion fees. But there’s a catch. Some people are actually profiting from those fees. ERCOT auctions off something called congestion revenue rights. So power companies and investors can make money when the lines are overloaded.

StateImpact Texas asked ERCOT for a list of the companies that had made money off this recent round of congestion, but was told that information is protected by competitive secrets rules.

In Midland, some oil and gas companies talk about the possibility of buying them themselves as a way to hedge against future price hikes.

But far from the oilfields back in Seymour, City Manager John Studer says his town probably couldn’t afford to dabble in the transmission markets.

“You can’t write the rules to fit everybody, but it sure does come down sometimes hard on some people,” Studer said.

He says Seymour has a new electric contract that should provide better rates in the short term.

In the long term, West Texas will have to cut down on electric use or build more transmission lines to see lower electric bills – at least as long as the current drilling boom lasts.

Comments

  • http://www.facebook.com/MongoLord Kevin Lord

    Good! Another nail in poisonous fracking’s coffin and a big thumbs up for solar and wind energy! I’ve seen the aerial view of Midland/Odessa, anything renewable would be better than that much destruction to a landscape. I guess they’ve given up on anything growing there ever again…

  • Paul Felix Schott

    “Buy a Electric Vehicle (EV) or Hybrid Electric Vehicle
    (HEV) Recharge Them Free From The SUN”

    Doctors now going to SOLAR ENERGY were the MONEY IS as always.

    More Money in solar energy then the Sick and Poor.

    Doctors
    have now formed CAUSE (Californians Against Utilities Stopping solar
    Energy) , what took them so long to come on board GOD Bless them for
    doing so..

    Solar Industry to Skyrocket with the help of Solar Shingles.

    SOLAR ENERGY SOON WILL POWER ALL OF THE EARTH

    ELECTRIC HYBRID VEHICLES & ELECTRIC VEHICLES SOON TO OUT SELL ALL OTHERS

    Energy
    has driven the world for over a thousand years Wind, Hydro and Solar
    are the oldest forms of energy giving power to all smart enough to use
    it.

    In the last 200 years Coal, Oil and Nuclear has given energy
    to many worldwide and great power and wealth to only a few. At the cost
    of many lives in coal Mines, Oil Spills, Radiation, Cancer and
    Polluting the Air and Water on all of the Earth.

    Unfortunately
    for the wicked there is not an unlimited amount of oil on earth. Just
    the same as the Forest Trees that clean the air and make Oxygen we
    breath and all living on earth need to Live. As some in denial are not
    able to recognize or ever see or live with blinders on.

    Doctors now going to SOLAR ENERGY were the MONEY IS as always.

    Doctors
    and Drug ceo’s have been making millions prescribing drugs to many
    that live near or by High polluted areas. From dirty energy that hurt
    breathing our lungs, water we drink and harm our children and all. That
    we all pay for. When all on earth need is Clean Air and Water, and Clean
    Cities.

    Now common sense would be for all to look for a Clean
    Fuel Source like Wind, Hydro, Geothermal and Solar. Renewable Energy is
    eliminating the need for Dirty Energy Worldwide at a record pace. With
    SOLAR ENERGY Clearly the front runner.

    To the fear of some of the richest people on Earth. They to surprisingly are doing
    something extraordinary investing in Solar Energy. After years of many of them trying to under mine it.

    Fuel that makes energy to ship goods, or make electric for homes and
    manufacturing. Can transform whole nations into prosperity and wealth
    or poverty and economic hardships for most all. Just as taxes on
    taxpayers has done. For over two thousand years. Making slaves of many
    to the wicked and unjust few. History Lesson Roman Empire, Persian
    Empire now OIL Empire oh sorry OPEC.

    The Freedom to get your own
    Power from the Wind and Sun, Solar Energy has been there for years. Are
    Libraries and Schools should have been the first to have gone Solar and
    Renewable Energy. And why are they not? Churches are all over the Planet. They are going to Solar Energy.

    Thank
    GOD for the Pioneers like John Schaeffer that Started Real Goods The
    first and Best catalog for Renewable Energy and Dr. Addison Bain one of
    NASA top Scientist and Scientist Bill Young at the FSEC Florida Solar
    Energy Center and Monica D. Key Lindbergh for many years wrote to
    legislators promoting Solar and Renewable Energy and many
    others.

    These Pioneers helped put Wind, Solar And Renewable
    Energy in the Spotlight for all the World to see.

    Very
    soon Hybrid Vehicles and (EV’s) Electric Vehicles will out number the
    ones that need oil and gas to go. With the ability to recharge them at
    home and work from the sun.

    Tesla Motors with its new Model S
    electric sedan, is one of many the World will see. Honda, Nissan,
    Audi,VW, BMW and Volvo are just some of the Car Companies putting into
    production Electric Vehicles a (EV), and many more are and many are
    building
    Electric / Hybrid Vehicles. The DeLorean Motor Company has put
    into production a DMC-EV Electric DeLorean, that will have a
    body and power plant that will last you a life time. The DeLorean Motor
    Company will customize it to your wish. Just think you can
    recharge them at home and work free from the sun Solar Energy.

    Now
    to own a car that will never rust way and runs on the power from the
    sun that’s the one for me. Very soon most all on earth will be able to
    get energy by recharging from the sun and wind.

    Cities that want
    to be Clean clean-cities.org many of them are putting in recharging
    stations in their heart of their downtown of their city all over the
    Planet Earth. Many Thanks mostly to Scientist Bill Young and his team at
    FSEC for their many years of work at this..

    GOD Bless You
    Professor Takashi Ohira and your team for the good work they are doing.
    To promote Clean Cities with Clean Transportation that will let some
    drive all day without having to stop to recharge. As Neil Armstrong
    would say one small step for man, one giant leap for mankind. Just one
    step closer to the World being powered be the Sun Solar Energy.

    GOING SOLAR

    Germany,
    Denmark, Australia, Sweden, Norway, India, Nepal, Tibet, and Israeli
    clearly a leader in Solar companies and Renewable Energy is helping many
    World Wide and a long list of Nations Going Solar. Even Iran with its
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    Nations on Earth know the World is going to SOLAR Energy.

    Solar Powered Desalination Plants are being built around the world by many countries.

    SAFE DRINKING WATER IS RUNNING OUT.

    GOING GEOTHERMAL

    Iceland, Philippines, Kenya…..and more then 50 other Countries.

    WIND ENERGY in use

    More then 75 Countries

    ALBERT EINSTEIN’S DREAM COMING TRUE

    The Earth Powered By SOLAR ENERGY.

    GOD Bless

    all that Spot Light and use Solar Energy

    There is enough Energy from our Sun to Power all are needs on Earth and more.

    Solar Energy

    The Fastest growing energy on Earth.

    Albert Einstein 100 years ago showed the World it could get
    Free Energy, Electric from the SUN. (THE PHOTOVOLTAIC EFFECT).

    The Freedom to get your own Power from the
    Wind and Sun, Solar Energy has been there for years. Are Libraries and
    Schools should have been the first to have gone Solar and Renewable
    Energy. And why are they not? Churches are all over the Planet. They are going to Solar Energy.

    One of The Greatest Scientists ever Albert
    Einstein Stared it with a Dream that the day would come that all the
    World would use Solar Energy. His many
    years of work with the law of the “Photoelectric Effect”, and showing
    this to the World won him the Nobel Prize in Physics. For the
    “Photoelectric Effect”
    Free Energy From the SUN in the heavens above.
    We still do not teach this to our young why.

    Why
    Teachers and Leaders do you not know how to lead? In this Land of the
    United We Stand In Our GOD and Lord Jesus Christ We Trust. To Lead and
    Help Others to the best of our ability. Not do what some slow in the
    head or wicked tell us to do.

    The Lord’s Little Helper
    Paul Felix Schott

  • guitargodkc

    Why not have those with excessive usage pay instead of everyone having to pay for other’s congestion? If the oil and gas companies are creating the congestion, it should be their responsibility to pay the fee!

    • FDM

      That’s what the Congestion Revenue Rights are intended for, to hedge those congestion costs. The little utility says they shouldn’t be “playing” in that market, but in essense that’s what they’re doing when they ignore the hedging mechanism. That is, they are accepting a risk by not hedging. They are paying now for congestion, when they could have paid for the CRRs. Of course, the CRRs may eventually rise in price to the point where they cost as much as the congestion. You can’t win unless you have a long-term position taken before the value was realized.
      Why not have those with excessive usage pay? It’s a bit like trying to limit newcomers’ access to crowded existing roads simply because they’re newcomers. You don’t own the road and neither do they. When you all try to use it at the same time, you all “pay.” And you all have the same stake in finding a solution.

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