Pub. 58 2017-2018 Issue 4

12 A t the TADA Spring Conference in San Antonio in late April 2018, Mike Payne, Executive Vice President &Corporate Counsel of APPI Energy, shared facts and insights about the Texas electricity market. He advised that there has been a dramatic increase in the cost of power in Texas over the last few months, and that dealers need to review their electricity supply positions. Mr. Payne warned that if a dealer was being supplied on a variable price and/or has a contract that allows for the pass-through of some supply costs, they could experi- ence significant cost increases in May through at least September 2018. He shared price analytics that illustrated the steep incline in power prices since late 2017, and an even more recent sharp up-tick in supply prices starting in May 2018. This price change is attributable in large measure to the steady increase in Texas’ electricity demand, coupled with anticipated extremely high temperatures and a drier-than-normal summer across most of Texas. In short, when it is very hot and dry, the demand for Texas power jumps to high levels, often setting record consumption days. At the same time, electricity plants fueled by coal are being retired, nuclear is at a stand-still, and wind farms create less power during the hottest days when demand peaks. Texas Electricity Prices Spike Up Why, and What Can Dealers Do?