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Dallas-Fort Worth Sees 17% Rise in Electricity Costs

The increase in the Texas metroplex is more than double the average rise for U.S. cities. At 15.3 cents per kilowatt hour, it’s the highest average since the Great Recession. Experts predict prices will continue to increase.

(TNS) — Just about everyone seems worried about rising inflation, including the Federal Reserve, and prices in Dallas-Fort Worth, Texas, have been climbing faster than most places.

One local item really stands out: Electricity in D-FW rose 17.3 percent in the 12 months ended in November. That was more than double the 6.5 percent increase for the U.S. city average, according to the U.S. Bureau of Labor Statistics.

D-FW’s price per kilowatt hour, estimated at 15.3 cents in October and November, was the highest monthly average here since the Great Recession, 13 years ago. For much of the past two decades, electricity prices in D-FW were lower than the U.S. city average, but that changed in the fall.

“Prices are up and they’re likely to continue to stay up,” Tim Morstad, associate state director of AARP Texas, said during a virtual presentation on the Texas energy market on Wednesday.

The cost of natural gas, which sets the price in Texas’ deregulated electric market, has jumped sharply in the past year. That’s usually the biggest factor in higher rates passed on to consumers and businesses. But more price pressure is on the horizon, including recouping some of the costs from last winter’s big freeze and the expense of hardening the Texas grid.

There are also design changes in the works for the state’s electric market, primarily aimed at improving reliability and keeping the lights on during severe weather. Those reforms won’t come cheap, either.

One estimate projects that average residential bills in Texas could increase by 14.3 percent next year – apart from increases tied to natural gas, according to a filing this month with the Public Utility Commission.

“These possible bill increases could apply for many years into the future,” said the filing by the Texas Consumer Association and energy consultant Alison Silverstein.

Manufacturers already are dealing with higher costs for most of their inputs, including electricity, said Tony Bennett, CEO of the Texas Association of Manufacturers. He cited higher natural prices and higher hedging costs that reflect greater risks.

Some pricing premium for electricity stems from last winter’s storm, he said, but most of those expenses have not kicked in yet: “Higher electricity costs are certainly in our future,” Bennett wrote in an email.

Most Texans live in a deregulated electric market, and shoppers can usually get lower prices than the averages reported by government agencies. For example, the average one-year fixed-rate plan without fees available in the region was 12.4 cents a kWh on Dec. 1, according to the Association of Electric Companies of Texas.

That’s lower than the average D-FW rate reported by the Bureau of Labor Statistics, but it’s nearly 23 percent higher than the group’s same metric a year ago.

“There is a bottom to the consumers’ pocketbook,” Morstad said.

Most inflation increases in Dallas-Fort Worth over the past year were relatively similar to national trends. Housing costs rose 5.9 percent here compared with 4.8 percent for the U.S. average city, for example. But in several categories, D-FW stood apart.

The gap in electricity was notable both for the size of the increase and the fact that local average prices surpassed the national benchmark. That wasn’t the case with gasoline.

D-FW had a sharper rise in gasoline prices than the average city – up 70 percent in the past year compared with 58 percent. But the larger jump stems, in part, from gas prices starting at a lower point here.

Despite the larger year-over-year increase, the price of a gallon of unleaded regular gasoline in D-FW was almost 40 cents lower than in the average U.S. city, according to government figures.

Higher energy prices, including oil and natural gas, have been a big contributor to the sharpest rise in inflation in nearly 40 years.

The Federal Reserve, which earlier said that rising prices during the pandemic were transitory, took moves to tamp down inflation. On Wednesday, Fed officials said they would reduce bond purchases earlier than planned and indicated they would raise the federal funds rate up to three times next year.

Despite the inflation threat and Fed moves, the stock market has remained strong and yields on government bonds have remained low. As a result, mortgages are still attractive with rates below pre-pandemic levels.

One of the big fears of rising inflation is that it will hurt the booming real estate market. Bond yields show that investors are confident about long-term trends, and a small increase in borrowing rates may actually have some positive effects, said Luis Torres, research economist at the Texas Real Estate Research Center at Texas A&M University.

“If it gets the [housing] market back to a more steady, normal trend, I think that’s a good thing,” Torres said. “It’s scary when you see the rates of price growth in Dallas-Fort Worth and other places. Some people are acting irrationally so they bid $20,000, $30,000 over value.

“That’s unsustainable, and a lot of people are getting priced out of the market,” Torres said.

On inflation, he primarily worries about low- and moderate-income Texans losing some purchasing power. They may get pay raises of 3 percent to 4 percent, but that’s probably not enough to cover rising costs of food, rent, gas and electricity, he said.

Wealthier households can make investments to try to offset inflation and can absorb higher costs for day-to-day living. “But when you live paycheck to paycheck, especially those on a fixed income, inflation hurts you more,” Torres said.

The cost of electricity – and its availability and reliability – are crucial issues for big users, such as auto manufacturers, refiners and others. Historically, Texas’ energy market has been a major strength in attracting those companies.

But last year’s shutdown of the Texas grid, which included a lack of natural gas to fuel generating plants, created doubts.

“Companies are smart enough to know that if you have a supply issue and a reliability issue, prices are going to go up,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. “That’s the kind of thing that makes a difference on the margin.”

In the past week, Texas was passed over on two projects worth billions of dollars: a Toyota battery plant that went to North Carolina and a Rivian truck assembly plant heading to Georgia.

Officials can insist the Texas grid will be improved, Bullock said, “but there’s no doubt it’s not gonna be free.”

©2021 The Dallas Morning News. Distributed by Tribune Content Agency, LLC.
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