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Falling natural gas prices, new wind farms make electricity production cheaper
AMARILLO, Texas (Feb. 14, 2020) – Xcel Energy customers in Texas will receive a one-time, $39.4 million refund in their June billing cycle related to a continued drop in prices for power plant fuel and the increased use of low-cost wind energy resources.
If approved by the Public Utility Commission of Texas, Texas residential customers using 1,000 kilowatt-hours a month would see a bill credit of $35.60 based on the amount of electricity a customer uses in May. The refund could be spread over two months depending upon when a customer’s meter is read.
“Natural gas fuels close to half the electricity production in this region, and the prices we pay for this fuel have continued to fall,” said David Hudson, president, Xcel Energy – Texas. “This reduction in prices is coinciding with a significant addition to our wind energy resources from the Hale Wind Project near Plainview, which is dramatically lowering fuel costs that are passed through to our customers.”
The June refund will mark the third time Xcel Energy has refunded fuel costs since January 2019. If the proposed June refund is approved, Texas customers will have received approximately $70 million in the form of bill credits in just over a year.
Electricity generated at natural gas-fueled power plants and from area wind farms is now cheaper than electricity from coal-fueled power plants. New wind energy plants in the area have no associated fuel costs because they capture the region’s free and abundant wind in the production of electricity. In June 2019, Xcel Energy began producing electricity at the Hale Wind Project near Plainview, adding 478 megawatts of wind energy capacity to the region’s generating mix and contributing to a 5 percent overall drop in residential bills last summer.
Adding to the savings from wind energy is the fact that Xcel Energy is passing along 100 percent of the wind energy federal production tax credits to customers through the fuel cost factor.
Construction has started on a second regional wind energy plant that is being built and will be owned by Xcel Energy – the Sagamore Wind Project near Portales, New Mexico, in Roosevelt County. Sagamore is expected to reduce fuel costs further in 2021. Hale and Sagamore also will play large roles in helping Xcel Energy reduce carbon emissions by 80 percent by 2030.
New transmission infrastructure is also helping to lower fuel costs by building efficiencies into the regional grid and creating additional pathways for the import of less expensive energy from the wider power market outside the area. The costs for these outside purchases are passed through in the monthly fuel costs customers are charged.
- From 2017 through 2019, the Texas average residential rate per kilowatt-hour has declined 7.6% because of lower fuel costs.
- Xcel Energy’s business and industrial customers also will receive refunds related to the low natural gas prices and new wind energy resources. New Mexico customers and customers of electric cooperatives and municipal utilities that purchase electricity on the wholesale market from Xcel Energy won’t receive refunds because the additional savings have already been accounted for in their pricing, which is adjusted month to month.
- Fuel costs for residential customers make up 20% to 30% of a monthly bill. They are passed through dollar-for-dollar to customers with no profit to Xcel Energy.
- The fuel cost factor in Texas can be adjusted up to three times per year to reflect changing market conditions. It recovers the cost of purchasing coal and natural gas to fuel area power plants, as well as the cost of power purchases.
- Preliminary analysis shows that Xcel Energy’s Texas-New Mexico generating mix in 2019 was 47% natural gas, 25% coal, 26% wind and 2% solar.