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Homeowners could save money and help the state’s power grid maintain its integrity during the hottest summer days under a new pilot program offered by the Electric Reliability Council of Texas.
The ERCOT board approved the program last week as a way to reduce electricity demand in the late afternoons during the summer months. The grid operator has warned that electricity could be in tight supply and there’s a significant chance that alerts could be issued.
To participate, residential customers should contact their retail electric provider or Oncor.
Homeowners will be pooled with other customers with the goal of cutting 100 kilowatts of electricity usage during a targeted 30-minute period.
Robbie Searcy, communications manager for ERCOT, explained it would take about 65 to 70 homes raising the thermostat and halting the use of appliances to make up the necessary 100 kilowatts.
Homes make up about 51 percent of ERCOT’s power consumption during peak periods.
“This really opens it up to a different type of consumer,” Searcy said. “We hope to see increased participation in residential consumers.”
Paul Wattles, senior analyst for ERCOT, said in most cases homes need special equipment on the thermostat or air conditioner so they can be controlled remotely. When it’s needed, the electricity demand can be reduced by the entity the homeowner signed up with. Then, the customer is compensated for reducing the load during the peak time.
“Whatever you give us, whenever we call you, we’re going to pay you for that,” Wattles said.
The pilot program is separate from the commercial incentive program where ERCOT pays big industrial users to cut back when the gap between load and demand shrinks. The businesses get paid for reducing their electricity usage during that period. The new pilot program runs from June to September and is weather and load related so it goes into effect when it’s most needed.
To explain the program, she used the following example:
It’s a hot summer morning with high temperatures expected to reach 105 to 115 degrees in the ERCOT service area.
Generators are working at full capacity but ERCOT keeps an eye on the margin between generation and load.
If the gap reaches 2,300 megawatts, an Energy Emergency Alert goes out, asking consumers to voluntarily cut back usage from 3 p.m. to 7 p.m.
Consumers who are participating in the pilot program will be asked to cut back usage mostly by raising the thermostat and not using big appliances.
ERCOT will distribute money to the company that aggregated the consumers in the pilot program, in some cases a retail electric provider.
The company will return those savings to consumers based on how much power they saved.
ERCOT expects to pay out between $34,000 to $86,000.
The staff report for the pilot program shows the potential the program has for the state this summer and in the future.
“If the pilot demonstrates that participating loads can provide meaningful demand response during peak summer conditions at a reasonable price, the potential long-term reliability benefits could be substantial, given the best demand response potential associated with residential loads at summer peak.”

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March 1, 2012, AUSTIN – Generation capacity for the state’s wholesale power system is expected to be tight this summer, according to a preliminary summer assessment released today by the Electric Reliability Council of Texas (ERCOT), the state grid operator and manager of the wholesale electric market.

“Based on the National Weather Service’s three-month outlook, we are expecting above-normal temperatures this summer – though not as extreme as last summer’s,” Vice President of Grid Operations and System Planning Kent Saathoff said. “If that’s the case, we expect to be able to meet the peak demand on the grid, unless we have above-normal generation outages,” he said.

Saathoff noted that initiatives are underway to increase voluntary demand reduction during peak summer hours.

“We are working with the Public Utility Commission to increase our load management options – or voluntary interruptible load that is paid to be curtailed in an emergency situation,” Saathoff said. “These are typically a mix of large industrial companies, but we’re now including smaller industrial and commercial companies and trying to facilitate the ability for these smaller customers to aggregate their load for this emergency interruptible load service,” he said.

The projected summer peak demand has been increased to 67,492 megawatts (MW) – 1,297 MW higher than would be expected with “normal” summer temperatures, based on the Climate Prediction Center’s 40 percent chance of hotter-than-normal weather for summer. The new forecast is 887 MW less than ERCOT’s all-time record-peak demand of 68,379 MW which occurred Aug. 3, 2011, during extreme weather conditions. (One megawatt is roughly enough electricity to power 200 average homes during hot weather when air conditioners are running for longer periods of time.)

“If we have a higher-than-normal amount of generation outages or if we experience record-breaking electricity demand because of extreme temperatures – like we had last summer – we may have to ask the utilities to initiate rotating outages to protect the grid from a state-wide blackout,” Saathoff said.

“Overall, we expect our reserves may get low enough to put us into the initial stages of our emergency procedures on some days, but not necessarily rotating outages,” he said.

Consumer conservation can play an important role, Saathoff noted.

“Although we implemented emergency procedures on six days last August due to low reserves, the consumers and businesses helped us reduce the demand by responding to our requests for conservation,” Saathoff said.

Recent rains have improved the drought conditions for the near term, Saathoff said.

“We don’t anticipate the drought to be a major factor this summer, but we will continue to monitor how it’s affecting capacity due to its impact on cooling water resources available for generation units,” Saathoff said. The recent rains have improved the current situation, and given our latest information, we don’t expect to have significant generation loss due to the drought this summer.”

Initiatives underway to address capacity concerns

In addition to the load management options, a number of other initiatives are underway to address capacity shortages for the short term.

The ERCOT board recently approved a process governing ERCOT’s use of emergency authority to recall idled units for capacity. Approximately 2,600 MW is currently mothballed; including about 1,500 MW which could be returned to service with one to four months notice. Although this preliminary assessment has not caused ERCOT to implement this option at this time, it is available if conditions change.

ERCOT and the Public Utility Commission have also made administrative changes to ensure that market rules align with ERCOT’s need to bring on maximum generation during peak periods.

ERCOT management also announced at the Feb. 21 board meeting that they were close to selecting a consultant on another resource adequacy initiative – a project to identify factors that influence investment decisions related to generation development. The project will consider both supply-side and demand-side resources from a wholesale and retail perspective, as well as, include suggestions for ways to enhance investments for long-term resource adequacy in ERCOT. The report is expected to be completed by June 1.

“We’re also participating in Public Utility Commission Chair Donna Nelson’s meetings with market participants concerning how to ‘get the message out’ for conservation,” Saathoff said. The preliminary summer assessment anticipates approximately 750 MW of demand reduction due to the effects of price-responsive demand, conservation appeals and other demand response programs managed by market participants, based on estimates of the results of those appeals last summer.

BACKGROUND

The preliminary summer assessment, which will be updated May 1, is a new ERCOT report – the Seasonal Assessment of Resource Adequacy – designed to improve the assessment of near-term conditions. The seasonal assessments are based on the most-current available data on seasonal weather, the status of power plants, and the impact of factors like economic activity and the ongoing drought.

The ERCOT region includes 23 million people and represents about 85 percent of the state’s electric load. ERCOT does not include the El Paso area, the Texas Panhandle, Northeast Texas and Southeast Texas.

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Most Americans aren’t doing enough to stop their homes from being energy hogs.
People have to do more — at least four energy efficiency improvements — to make a real impact on their utility bills. Unfortunately, Americans aren’t reaching that magic number, even though the government and utilities have spent hundreds of millions of dollars to get them to act.”
Most energy conserving behaviors and home improvement activities dropped significantly from last year” and now are more in line with percentages from 2008 and 2009.
Researchers looked at more than a dozen improvements and behavior changes from simply turning off lights and using less energy during peak periods to having a home energy audit. Activity fell in each category this year with respondents doing a mere 2.6 things on average to reduce energy consumption — which was not enough to lower electricity bills.
Oddly, the drop in energy-saving improvements and activity occurred even though Americans seem to be somewhat more aware that their homes need work and that their energy costs are increasing. This year, 23 percent said their homes were inefficient compared to 14 percent in 2010.
There is a reason there is a gap between perception and behavior:
• Denial. “Most Americans continue to live in denial about their energy consumption,” the report said. Despite doing less to save energy, 71 percent of respondents said they believe they are using the same amount or less energy than they did five years ago. Twenty-six percent said they were using more, and 3 percent said they didn’t know.
• A high-tolerance for bill increases. Fifty-eight percent said their utility bill would have to increase by more than $75 a month before they’d consider spending money on energy improvements. On average, respondents said it would take an increase of $112 to spur them to action and those is not a certainty give variables that can affect a bill.
• Costs. The people who most need to make energy efficient improvements are the least able to make them. Those who can better afford to spend money on home improvements were more sensitive to bill increases” and were more likely to make changes that would reduce costs. That is usually the ones that are acting.
• Misplaced priorities. “Consumers continue to prioritize the wrong things as you can see from the lack of home energy audits. Home energy audits continue to be the colonoscopy of energy efficiency. Everyone should get one, but too few actually go through with it. This year, 15 percent said they had an energy audit done on their home, compared to 20 percent last year. Only a third said they think an audit is necessary and of those people close to half said they might get one done.
The federal government should take the hundreds of millions of dollars that’s currently fragmented into best-practices tests, block grants and pilot programs all over the country and pool the money into one big pot. Then design a big national education effort to encourage Americans to take the most important four or five steps necessary to see a real reduction in their utility bills. There needs to be incentive that both creates people to act as well as results that they can look forward to.

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This is a great article about the current State of the market and everyone needs to read.

Texas Electricity Prices Likely to Rise
By Elizabeth Souder
Dallas Morning News
October 26, 2011

Texans, prepare to pay more for electricity.

And don’t expect to get any more reliability for your money. In fact, next year, the lights seem more likely to go out.

The problem is, power companies aren’t building many more generating plants. Some companies are shutting down plants that are old or don’t comply with new pollution rules. At the same time, Texans are using more electricity than ever. In the Texas deregulated market, when supply declines and demand rises, prices go higher. That could put Texas electricity consumers on a free-market roller coaster. “I think there may be some pressure for prices to rise,” said Phil Tonge, president of electricity retailer Spark Energy. “I’m knocking on wood right now. I’m hoping we don’t see another summer like we did this past summer.”

During the past few years, natural gas prices have been low and steady. Since natural gas prices tend to set the price of power in Texas, wholesale power prices have also declined. That’s good for consumers, right? Maybe not for long. Low prices have deterred some power companies from building new plants. Tight electricity supply could soon turn power prices higher.

The Electric Reliability Council of Texas, which operates the state grid, predicts demand for power will increase steadily for the next decade as population increases. The council’s predictions can be conservative. This year, we used much more electricity than expected, thanks largely to February’s freeze and August’s record inferno.

Power plants
At the same time, the supply of new power generation isn’t keeping pace with demand growth. Between 2000 and 2002, when natural gas was cheap, power companies built more than 100 natural gas-fired generators within the Texas grid. Then, as natural gas prices rose to record levels, driving wholesale electricity prices higher, power generators built dozens of wind and coal-fired plants. Wind and coal plants are cheaper to run than natural gas plants, and therefore earn a fatter profit margin when natural gas prices push wholesale power prices higher.

But when natural gas prices collapsed a few years ago, power-plant building hit the skids.

Consider how things shaped up for the plants that were scheduled to go online next year. Back in 2007, plant operators had the permits and grid-connection agreements to add 4,221 megawatts of capacity in 2012. The following year, the planned capacity for 2012 rose to 5,987 megawatts. Now, generation companies plan to add 1,940 megawatts of capacity next year, less than half of what they originally intended. Also, the state’s largest power generator, Energy Future Holdings, announced it will stop operating two coal-fired plants in order to comply with stiffer pollution regulations. That would wipe out 1,200 megawatts of capacity on Jan. 1.

Without those power plants during the August electricity emergencies, the lights would have gone out, ERCOT executives have said. ERCOT chief executive Tripp Doggett predicts the loss of power generation due to new Environmental Protection Agency rules could boost customer electric bills by around 10 percent.

Price signals
In theory, when generating company leaders see higher prices, they build more plants. But some experts say prices aren’t going high enough in Texas to persuade power-generation companies to break ground. So long as natural gas prices are low, investors worry any rise in wholesale power prices is temporary. “Fundamentally, we’re trying to establish the right price signals to get the investment we need when we need it, to keep the lights on,” said Dan Jones, ERCOT’s independent market monitor. He thinks prices should be allowed to go higher.

In the land of electricity deregulation, ratepayers no longer pay a monopoly company to build power plants. Instead, competing power generators build plants on their own dimes and make money by selling the electricity into the market. Each day, power generators bid their electricity into the market. ERCOT tells power plants to fire up to meet demand, calling on the cheapest bids first.

Some old, inefficient natural gas plants cost a lot to operate and may get called on to do so only when demand is tight and market prices jump very high. For those plants to make enough money to stay in business, they need to get called on to operate a few times a year at extremely high prices.

Currently, wholesale prices are capped at $3,000 per megawatt-hour. (The average Texas family uses about one megawatt-hour of power each month.) That cap is far, far higher than the usual market price of around $20 to $50 per megawatt-hour. Jones, the ERCOT market monitor, proposed boosting the cap to $6,000 per megawatt-hour, but only when ERCOT declares a grid emergency.

Trickling down
Higher wholesale prices have a way of trickling down to consumers. Anyone who signed up for a variable-rate plan, in which rates can change each month, probably saw much higher rates after this year’s grid emergencies. Even people on fixed-rate contracts could see higher prices when their contracts come due. That’s because if wholesale prices are higher, it costs retail electric providers more to buy the power. And if wholesale prices are more volatile, retailers have to pay more to protect themselves from price swings.

Retailers often buy electricity ahead of time to keep costs predictable, or they invest in market securities that hedge against price swings. “Almost anyone who’s a retailer in Texas, if they don’t have any generation, is going to have to take significant steps to protect themselves against the high peaks,” said NRG Energy chief executive David Crane. NRG executives have said they expect to spend more money next year to protect their retail companies against price swings, and such costs will surely fall to customers across the industry.

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Did any of you open your July and August energy bill to discover some pretty high charges, shock, and then an anger that set the tone on how your bill shot up. Guess what you are not alone. The main thing to make sure of whether you are a business or home owner is that you understand what plan you are in and you are aware of the risks involved. Whether you are in a fixed, index, heat index, blend, or some other type of plan, know what contract you are in. The heat wave has made things ugly for pretty much everyone in Texas, not just the people suffering from the heat or their high electricity bills. It’s also been hell on the Texas Electricity Grid and the individual Retail Electricity Providers. Recently Indexed Plans have been thrust into the limelight, and not for good reasons. Recently, ABC News ran a story about a Champion Energy customer who opened his bill to a shock. Champion Energy deals almost exclusively in Fixed Rate electricity plans and when customers fail to renew their contracts at the end of term but fail to cancel service, they are rolled over onto an Indexed Plan, which is tied to the rates of the natural gas market. Which is all well and good, except that due to this heat wave and the struggles of the electricity grid to meet the needs of Texans, the cost of natural gas has shot to SIXTY TIMES the normal price. It’s not price gouging, it’s not profiteering, it’s just an unfortunate fact that the cost of natural gas has risen exponentially during this heat wave when the grid faces shutdown. And for customers with Indexed Plans, where the costs are automatically tied into the natural gas market through simple math, the fact of the matter is that those colossal cost increases are passed on directly to the customer. Which is why Robin Jansen was shocked to find an electricity bill covering 4 days of service that was almost as much as their entire last month’s bill. Which is a perfect illustration of one of the rarely discussed dangers of an Indexed Plan. Don’t let the REP dictate your contract and your bill. You can take ownership of this by knowing your plan your on and making sure you are locked into a contract. I will help you if you need someone to talk to that understands the market and can advise you. Don’t get caught with the high bill that might drive you to drinking. There is help and lessons to be learned that can help you plan on your energy for the future

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A new “nodal” electricity grid system could put your retail electricity provider out of business.

The Electric Reliability Council of Texas, which operates the state electricity grid, is switching to a fundamentally different operating system. The new system assigns the cost of congestion to the companies creating that congestion. This is supposed to prompt companies to find ways to relieve power line congestion and cut electricity costs.

The switch happens Dec. 1. Several experts at the Gulf Coast Power Association conference this week predicted that the transition to the complex nodal system won’t be entirely smooth. Some retailers might go out of business. Others might charge customers fees to cover new costs.

“I would expect some retailers to default in 2011,” said Chris Brewster, an attorney with law firm Lloyd Gosselink who represents cities.

Mike Cleary, ERCOT’s chief operating officer, said: “People are going to struggle. It’s the nature of the beast.”

But they won’t struggle because of any technical issue at ERCOT, he said. ERCOT is ready for the switch. The problem is that some electric providers may not be ready.

“We’re going to have issues with the market,” Cleary said.

Remember summer 2008, when several retailers went bust because they hadn’t protected themselves against the risk that wholesale power prices could spike?

At first, one retailer, National Power, tried to simply break fixed-price contracts with customers. When regulators put the kibosh on that idea, National closed shop, dumping customers on expensive providers. Several other companies shut down for the same reason.

A similar situation could happen early next year if retailers haven’t educated themselves about the new market or if the change brings surprises to everyone.

ERCOT’s new chief executive, Trip Doggett, said the council has offered training sessions for electric companies.

“We’re doing our best to educate the retail electric providers,” he said.

Brad Jones , vice president of government relations for Luminant, the power generation unit of Energy Future Holdings, said he worries that ERCOT’s collateral requirements may clash with some nodal rules. Some companies could face billions of dollars in credit calls, making it difficult for them to trade effectively, he said.

ERCOT was supposed to switch to a nodal system in early 2009, but technical and management problems delayed the move and doubled the cost to about $660 million.

At the time, the Public Utility Commission ordered an outside study of the cost benefit of the system. The study found that Texas consumers would save $5.6 billion during the first 10 years of nodal operation.

Brewster said at the conference this week that he doubts consumers will save that much. He said some retailers are adding language to their contracts that could allow them to charge customers for nodal-related costs.

“In my mind, that is very telling,” he said.

What can an electricity customer do? Watch your bills and read any bill inserts, he said.

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Dallas-based power line operator Oncor has set up a hotline to answer customer questions at 1-888-875-6279 or online at http://www.askoncor.com.

“We expect to get questions on everything from ‘How do I switch retailers?’ to ‘What is a kilowatt?’ and everything in between,” Oncor chief customer officer Brenda Jackson said.

“As we’ve heard multiple times since the smart meter questions began and the February snowstorm, customers need and want someone to turn to. Before we began stepping up, there wasn’t really anyone serving them.”

Oncor spokeswoman Megan Wright said operating the hotline probably won’t cost much, because Oncor already employs the customer service agents and experts who will answer the questions. She said if the program becomes costly, Oncor would probably ask regulators to include the cost in the rates electricity customers pay each month.

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