Texas may be the nation’s energy capital, but Texans aren’t getting a break on their energy bills — and many are feeling the squeeze.
Nearly 45% of residents said they had to forgo spending on basic necessities, such as food and medicine, in order to pay their energy bills, according to a Census Bureau Household Pulse Survey.
That was 11 percentage points higher than the national average of 34%, and Texas ranked worst among all states, LendingTree reported in a study on energy bills.
As temperatures cool and people start cranking up the heat again, the cost of electricity is likely to grow, along with the financial strain.
“I don’t see any relief in sight,” said Tim Morstad, a senior associate state director for AARP Texas. “Not in the short-term, not in the mid-term, not in the future.”
Many AARP members have struggled with high electric bills this year because prices soared and high summer temperatures drove up demand for power. At the same time, people were dealing with higher costs for practically everything else, from fruits and vegetables to used cars and gasoline.
“It’s really been a one-two punch,” Morstad said.
The Census survey, collected July 27-Aug. 8, had 46,801 responses nationwide. In addition to asking about forgoing the basics, the survey asked whether households were unable to pay an energy bill and whether they kept their homes at a temperature that was unsafe or unhealthy.
On each question, a higher share of Texans reported difficulty than the U.S. average. It’s telling, Morstad said, that nearly half of Texans cut back on things like medicine and food in order to pay energy bills.
“We’re not talking about giving up steak for ground beef,” Morstad said. “We’re getting down to the nub here, we’re getting down to people’s ability to stay safe and take care of themselves.”
One reason so many Texans are stressed by the cost of energy: The state has a high number of low- and moderate-income families — over 40% — that don’t have the financial resources to easily absorb big price increases, said Margo Weisz, executive director of the Texas Energy Poverty Research Institute.
“The less money you have, the more energy-stressed you’re going to be,” said Weisz, whose group works for affordable, sustainable energy solutions for underserved communities.
Low-income families, including many Blacks and Hispanics, are much more likely to be “energy burdened,” which means that a significant share of income goes to household energy expenses, she said.
When energy costs are greater than 10% of income, that’s considered an extreme burden. Texas had many low-income families in that category before electricity inflation took off about a year ago. Since then, she said, some low-income Texans have been forced to spend up to 28% of their income on energy if their electric bills rose by an average of $1,000 a year.
“That’s why so many people are struggling now,” Weisz said.
Electricity inflation is especially high in Dallas-Fort Worth, surging almost 31% for the 12 months through September. That increase was twice as large as the nation’s, according to the U.S. Bureau of Labor Statistics.
For many years, electricity was cheaper here, in large part because natural gas prices were low. That commodity fuel sets the rates in Texas’ deregulated electric market, and the pandemic and Russia’s invasion of Ukraine sent natural gas prices soaring.
In February 2020, just before the pandemic, natural gas futures contracts were selling for less than $2 per million BTUs, according to the U.S. Energy Information Administration.
By August 2021, the price was up to about $4. In August 2022, the price hit $9.68. This month, natural gas futures were trading for about $6 to $7.
High prices are likely to persist, given sanctions against Russia — and European and Asian countries buying natural gas from the U.S. and others.
“I don’t see the price of natural gas coming down a whole lot,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. “I think it could get worse before it gets better.”
Other factors are also driving up the cost of electricity in Texas. The winter storm of February 2021, which shut down much of the grid for days and killed over 200, generated billions in energy-related expenses. Many of those costs will be added to consumer bills, presumably for years.
ERCOT, which runs the grid that serves most of the state, also has taken “a conservative operating posture” to ensure there’s sufficient power to avoid rolling blackouts. While the approach has improved reliability, it’s also driven up costs.
Transmission bottlenecks are another problem with the Texas grid, and they contribute to high electric bills, too.
“Some drivers that have been pushing prices higher are likely to stay,” Morstad said. “My concern is that more costs are still to come.”
He was referring to design changes in Texas’ deregulated electric market. Regulators are pushing to boost reliability and increase the amount of generation that can be dispatched when solar and wind power fall short. Those moves are likely to add upward pressure on prices.
One way to offset rising bills: Create more renewable energy, which produces electricity for much less money than traditional natural gas and coal plants.
Texas has more wind generation than any state, and solar installations are growing fast. Batteries are getting a foothold, too.
From January to August, when electric bills were climbing, solar and wind energy saved Texans nearly $1 billion a month in electricity prices, according to a recent clean energy study from IdeaSmiths LLC.
But renewables pose challenges for reliability because bad weather can cripple production. That’s why regulators want to increase dispatchable generation – led by more natural gas plants – and that’s likely to lead to higher electric bills.
“Whether it’s wind or solar or natural gas, we have to attract more power to the state,” SMU’s Bullock said. “That’s going to require higher operating margins, and that means higher prices.”
