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The Impact of Winter Energy Prices on Waco TX Electricity Bills

Sep 19

The Impact of Winter Energy Prices on Waco TX Electricity Bills

WACO, TEXAS, September 19, 2022 - Texas Electricity Ratings

As we approach winter 2022-23 in the United States, energy retail prices are at or close to multi-year highs. High prices reflect changes in energy supply patterns and demand patterns as a result of the war in Ukraine and the COVID-19 epidemic. Because of this higher energy price and the assumption of a colder winter in many parts of the United States, we expect households to spend more energy this winter than they did the several previous winters.

Even though weather predictions can be unpredictable, the EIA expects an increase in energy prices this winter as the United States resumes economic growth. This will lead to higher residential energy costs.

The EIA predicts that nearly half of U.S. households that heat with natural gas will spend 30% more this winter than last year. This is if it is 10% colder than average and 22% if it is 10% warmer.

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The expectation of a cooler winter is based upon forecasts by the National Oceanic and Atmospheric Administration. The EIA expectation of a colder winter is based on NOAA's energy consumption forecast.

The winter heating season runs from October to March. This supplement's average household winter energy expenses is a broad measure of recent winters. It does not include heating, but all energy costs. Individual household fuel expenditures depend on the size of each home and its energy efficiency. Also, weather conditions and thermostat settings are important. Each fuel also has its market structure, physical infrastructure and regulations that can impact the connection between wholesale markets and retail markets.

The EIA estimates winter expenses for all primary heating fuels. This includes heating. The report will include household that heat primarily using electricity. It would also include electricity used in lighting and appliances. Electricity is one of the most versatile fuels. Its consumption tends not to be as sensitive to changes in temperature than other fuels.

We expect all fuel prices to rise in the United States on average than they were in recent winters. Retail prices are rising due to higher wholesale commodity prices for natural and crude oil. We attribute price rises over the last year to many things, but the main reason wholesale fuel prices for natural gas, oil, and petroleum products rose is that demand for fuel has increased faster then production. This has resulted in falling inventories (in the case crude oil and a number of petroleum products) and inventories rising by less than historical averages during summer, such as the case with natural gas and propane.

Oil products: Commodity price fluctuations are quickly passed to consumers. Brent crude oil spot price was $79 per barrel (b) on October 1. This is 51% higher than last winter's. Average retail prices for propane will be 49% higher this winter and heating oil 33% higher than last season's.

Because commodities price movements have an effect on residential prices for natural gases and, especially, electricity prices, it can take a while before these prices change. Regulated rates include these costs. Even though there is a delay, this winter's retail prices are rising due to an increase in spot commodity prices. On October 1, Henry Hub natural gaz spot prices were $5.61 for a million British thermal unit (MMBtu), an 84% increase over last winter's. We predict that residential natural gas prices in winter 2018 will be 27% more than last winter, and residential electricity prices will rise 5%.

Based on the most recent NOAA winter forecast, we believe that temperatures in 2022-2023 would be slightly less cold than last year's winter and more similar to the typical winter of the past 10 years. Heater degree days (HDDs), a measure of cold temperatures, are used in comparison to a baseline temperature. More HDDs indicates colder temperatures. The average HDDs across the United States for 2022-23 will be 3% higher than those of last winter. This is 1% less than the 10-year-old average. There have been no significant changes in the region since last winter. We predict that HDDs will increase by 3% to 4 percent in the Northeast, Midwest and West this winter, as well as being about the same level as last winter.

Weather uncertainty is a significant factor in these forecasts. Therefore, the Winter Fuels Outlook also includes scenarios where HDDs measure all regions as being 10% or 10% colder than the baseline forecast. Last year's experience showed that even in a mild winter, severe disruptions to energy markets can happen. A cold snap that struck Texas in February caused severe disruptions to energy supply and affected many parts of the country. These weather events are not always expected, but the high prices and low inventories across a variety of fuels mean that even brief periods of severe weather can have an impact on energy markets.

The cold weather can cause household heating bills to rise in two ways. The first is that it increases the amount of energy needed to maintain a particular temperature in a home. It raises demand, which can lead to supply disruptions. Second, it can also cause energy prices and fuel prices to rise. This can be especially acute during low fuel inventories.

This effect can occur for all fuels. However, it is more severe for propane because wholesale-to-retail price pass-through happens quickly for this fuel. Cold weather can also significantly affect market dynamics. We expect that the Midwest, which has seen propane supply problems in the past winters, will see propane retail prices rise by 10%. In this scenario, propane households would consume 12% less propane and the price of propane would go up by 12%. This would lead to propane consumptions that are 26% more than the base case.

The Impact of Winter Energy Prices on Waco TX Electricity Bills

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