Can A Texas Style Electric Shortage Happen In New England?

Neighborhood Energy has consistently focused on fixed rates because of stable pricing and budgeting. The reason for this strategy was because we did have an unpleasant experience early in our quest as a virtual energy department with variable rates that produced significantly higher costs over the last decade. The cause and effect of the higher prices is because the variable rate is based on the hourly rate set by a market that is as vibrant and active as the Nasdaq. It is also based on the old tutelage of supply and demand. The negative surprise of the higher cost caused emotional distress from our customers that was unacceptable. I understand that a recent blog had a positive spin on variable rates and is available for those that understand and expect wide fluctuations.

Recent events in Texas spotlight the effects of the variable rate that can erase years of accumulated savings in a matter of a couple of days. The state had record low temperatures a few weeks ago and it is deregulated for electricity and natural gas similar to the New England states where separation exists between the utilities and the generators. Many consumers opted for a variable rate and, unfortunately, despite low usage, the utility bills are in the thousands of dollars. Electric rates with those on a variable product were charged $9.00/kWh! The average supply rate in New England is about $0.09. Fortunately, those consumers in Texas with a fixed rate were spared the higher cost.

Can this happen in New England?

Not likely… Although $0.20 to $0.30/kWh can happen. The Texas grid is essentially an island by design, largely independent from the states around it and Mexico to the south. While New England’s grid is an island as well, but one with many bridges to the outside world. Nearly 20 percent of our power in 2019 came from our neighbors: New York, New Brunswick, and Quebec. In times of need, ISO New England can turn to them for help.

There are two factors that differentiate us. Our infrastructure expects low temperatures and the Capacity Market. Here, the powerhouses are insulated and heated. Gauges and other equipment use lubricants that don’t freeze. The pipelines that deliver gas to generators are deeper underground here than they are in Texas, which makes them much less susceptible to cold-weather disruptions, our water and sewer lines have similar safeguards that their Texas counterparts apparently lacked such as backup generators at treatment plants and pump stations, and pipes buried below the frost line.

Another difference is the capacity market that acts as insurance. Power plant owners in New England bid into this market to win payments so they are available to be called upon three years down the road in times of peak demand. Texas has no such system in place. The capacity market payments make it easier to finance infrastructure buildouts in New England, including those that help ward off winter disruptions.

So, all this to say that your virtual energy department is your insurance policy to keep budget certainty as a prime objective. We explain the energy options that bring peace of mind so you can focus on building your business.

Your friendly Neighborhood Energy!