- 2023 had unstable power prices due to fuel costs, weather, and Texas regulations.
- Month-to-month plans risk seasonal price spikes; long-term plans are generally better.
- Shopping multiple retail providers is key for ongoing cost savings.
We collect a ton of data about the residential power market. In this article, we're going to dig into the data and hopefully demystify some of the craziness that drives our electric bills.
2023 Power Prices - A Volatile Year
Let's start with the forces driving prices changes this year. At the start of 2023, many of us felt the pinch of some of the highest fuel prices in the last decade, which of course drove up the cost of electricity. Fortunately, as summer approached, fuel prices returned to more manageable levels. However, this relief was short-lived due to an extremely hot summer and regulatory changes that pushed wholesale power prices sky-high. Meanwhile, the Texas state government has been proposing and debating sweeping reforms to the wholesale market that are likely to increase costs for everyone in the near future.
We wrote a bit about some themes behind residential energy prices in Texas here. In particular, we mention seasonality. We show here that a month-to-month will often times be cheaper than a 12 month plan. The problem is that when you get to summer and January/February, you're going to get hit with the highest prices of the year.
That might seem like a good trade off - you get more months of savings, right? But all months are not made the same. Using my own home as an example, 60% of my consumption came from June/July/August/September over the last twelve months.
Sometimes for some homes for some people, it can make sense to go with shorter plans and ride the seasonality. It is one of the things that we consider when we're making our recommendations, but for most cases locking in a longer rate and getting the price insurance is a better value in the long run. Just ask the people who bought a short term plan in January 2022!
Long Term Savings
In the last graph, we're focusing on the short term plans vs the 12 month plans because I think the 12 month plan serves as most people's default choice for a contract. Most of the time, our recommendation engine suggests plans longer than 2 years. This graph shows a big reason why that's the case. Not only do you get the lower prices, you also get the long term price insurance through the cancellation fee!