How Natural Gas Prices and Power Cost Recovery Factor Affect Member Costs

September prices
Prices Calculated Sept. 8, 2022

United’s  all-in electric rate (wholesale power and delivery) will be north of 15 cents per kilowatt-hour in September, and the two drivers are the cost of natural gas used to fuel power plants and ERCOT market prices. While higher than anyone prefers, United members are receiving a better deal compared to the average rates for Oncor (18.29 cents), CenterPoint (18.78 cents) and Texas-New Mexico Power (20.43 cents) consumers. Prices for natural gas have surged in the past year. Higher natural gas prices mean energy providers have to pay more for wholesale energy. United does not put a markup on wholesale energy it purchases for the membership.The Brazos Electric power cost is passed to members directly. Here’s a good explanation on energy price conditions in Texas: https://www.energybot.com/electricity-rate-increase.html

If you need assistance with bills, here is a list of helping hands out in our community.

Here are some facts to remember when trying to understand today's higher prices.

  • United delivers power. It does not generate electricity.
  • United is required to purchase wholesale power from Brazos Electric Power Cooperative (Brazos), which generates a portion of the electricity and purchases the remaining wholesale market electricity for United’s members to use in their homes and businesses.
  • The Brazos energy charges are directly passed through to members with no markup by United. Learn more about United’s billing here.
  • The primary fuel used to generate electricity in Texas and the ERCOT market is natural gas. Natural gas prices have increased anywhere from 150 percent to as much as 300 percent during the last year, depending on the month. Natural gas has been as low as $2 per MMBTU to as high as $9.71 per MMBTU in the past months.
  • Coal is also a source of fuel for generators in Texas and coal prices have increased anywhere from $140 a year ago and now hover near $400 per ton.
  • ERCOT market prices have also felt upward pressure in the wake of winter storm URI as the generation fleet in the state was required to implement new weatherization measures. In addition, ERCOT has required more “back-up” generation (spinning reserves) to be available if the grid conditions get dangerously low. Those generation reserves’ costs are applied in ERCOT market costs.
  • Power Cost Recovery Factor, or PCRF, is the amount of money charged to generate electricity that was not included in United’s rate base when the rates were established in 2021. The PCRF is the part of your electric bill that directly reflects the fluctuating cost of generating power, with Natural Gas being the primary fuel to generate power. The PCRF is higher than last year, reflecting the higher cost of fuel to generate electricity.
  • A base rate for the Brazos generation and transmission of electricity of 0.06051 cents per kWh is already included in the monthly energy cost. On the bill, this is called the “Brazos Energy Charge.” When the cost of wholesale power rises above the base rate, the difference is directly passed through with no markup. On the bill, this is called the “Brazos PCRF.” The current PCRF is 0.066 cents.
  • The PCRF charge is calculated monthly and allows United to smooth out drastic market fluctuations. Utilizing the PCRF adjustment is a common practice among utilities nationwide.
  • Whenever you see the PCRF charge go up or down, it means the costs to generate or purchase electricity changed. The PCRF can be negative if the price to generate or purchase electricity is less than the energy price established in the base rate.

Why does the cost to generate electricity or purchase power fluctuate.

  • Either a surge in demand or a decrease in renewable generation are two factors that may result in higher energy costs both which may cause the need to deploy less efficient peaking plants with higher ramping rates and higher operational cost, including the fuel for the combustion turbines.
  • Generation utilities such as Brazos must deal with a host of highly variable costs including fuel, environmental expenses and purchased power above estimated projected levels for a given period.
  • Variable production costs subject to Brazos include:
    • Purchased power
    • Coal and natural gas
    • Environmental costs including emission allowances and environmental equipment fixed costs
    • Variable power plant operations and maintenance costs
    • Transmission costs through the ERCOT grid operator

Can Brazos protect against price volatility?

  • Brazos implements measures to that aim to provide the least cost exposure possible to its member cooperatives. One way is it "hedges" prices on certain commodities such as natural gas to lessen market risks. Hedging takes place through advance product purchasing to help avoid price volatility and keep prices from making catastrophic swings.
  • Another risk management measure is “Economic Dispatch” of its power plants. If the wholesale price for electricity is lower in the market than what Brazos can generate the electricity for at its facilities, Brazos will ramp down the generators and purchase power on the wholesale market. Conversely, when the wholesale price is higher, Brazos runs its generators at greater length to allow for the least cost power it can provide at that particular time.

You can help curb the impact of high-energy prices by working to conserve energy within your home or business. Take a look at some energy- and money-saving tips, and we always recommend a free home energy audit. You can save money by signing up for United Community Solar here. Learn how you can even out high and low energy bill months with Budget Billing here.