Xcel Energy: Natural gas costs to impact Texas electricity bills

State & Regional

(Photo provided by Xcel Energy)

AMARILLO, Texas (NEWS RELEASE) — The following is a news release from Xcel Energy:

After months of historic lows, costs for natural gas that fuels almost half the region’s electricity production have gone up and will increase bills for Xcel Energy’s Texas customers, but only for a short time before savings from a new wind farm are expected to bring those costs back down in early 2021.

“Abnormally low natural gas prices and new supplies of low-cost wind energy have combined to lower electric bills over the last two years, but now natural gas prices are on the upswing,” said David Hudson, president, Xcel Energy – Texas. “The good news is our Sagamore Wind Project in New Mexico is nearing completion and the savings it will deliver after the first of the year should bring fuel costs down once again.”

Xcel Energy has filed with the Public Utility Commission of Texas to revise the monthly fuel cost factor that collects for the cost of natural gas and coal that fuel area power plants, as well as the costs of electricity purchased from other suppliers. If approved, a typical residential bill of 1,000 kilowatt-hours would increase by approximately 6% or $6.29 more per month beginning Nov. 1.

The two most recent fuel factor changes in Texas resulted in a combined reduction of more than 9% in residential bills. Additionally, since January 2019 Xcel Energy has passed along multiple one-time fuel cost refunds totaling close to $70 million, most recently in the May and June billing cycles.

“In spite of this increase, fuel costs over time have trended much lower than in the past,” Hudson said. “We have made some permanent changes in how we generate electricity to reduce our exposure to natural gas prices, and these efforts will continue to pay off over time.”

Xcel Energy has added 750 megawatts of wind energy capacity to the regional grid since 2019, including the 478-megawatt Hale Wind Project near Plainview, Texas. Wind farms not only produce electricity using the free and abundant wind energy, but also generate federal production tax credits, 100% of which are passed along to customers in the form of fuel-cost savings.

The Hale Wind Project has generated close to $80 million in annual fuel-cost savings. The Sagamore facility, now under construction in Roosevelt County, New Mexico, is also expected to generate a large amount of savings that should offset the recent increases in natural gas prices.

“We anticipate Sagamore will be operational by the end of December, and we will file in early 2021 to revise the fuel costs factors to reflect this low-cost resource in our fuel cost calculations,” Hudson said.

Additional Detail:

  • Fuel costs currently make up between 10 and 15% of a typical residential bill and are passed through dollar-for-dollar to customers with no profit to Xcel Energy.
  • Xcel Energy’s business and industrial customers in Texas also will see higher bills related to the change in fuel cost factors.
  • The fuel cost factor in Texas can be adjusted up to three times per year to reflect changing market conditions.
  • Fuel costs for New Mexico customers and wholesale customers such as electric cooperatives and municipal utilities are adjusted monthly, and already reflect the higher natural gas prices that will impact Texas bills.
  • Xcel Energy’s Texas-New Mexico generating mix in 2019 was 47% natural gas, 25% coal, 26% wind and 2% solar.

About Xcel Energy
Xcel Energy (NASDAQ: XEL) provides the energy that powers millions of homes and businesses across eight Western and Midwestern states. Headquartered in Minneapolis, the company is an industry leader in responsibly reducing carbon emissions and producing and delivering clean energy solutions from a variety of renewable sources at competitive prices. For more information, visit xcelenergy.com or follow us on Twitter and Facebook.

(News release from Xcel Energy)

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