Texas Companies Becoming Power Marketers?

by Luke Johnson on May 4, 2012

Companies in Texas like Phillip 66 are looking to save on electricity by becoming power marketers. Cutting out the middle man and buying electricity at market prices adds high risks and high rewards due to the every changing market.

If the natural gas market turns for the worse, companies will lose millions. Natural gas prices are at a ten year low. Some market analysis says prices should go up in the near future. This makes it a prime time for power marketers to buy for the long run. As natural gas prices increase heat rates decreases which represents their inverse relationship.

Electricity Prices = (Natural Gas Prices) × (Market Heat Rate) + (TDSP Charges)

The ideal situation for Phillip 66 is to buy both natural gas and heat rates low. Because of their inverse relationship they will never be low at the same time. Companies will risk money on what the market does. If a company thinks natural gas prices are going to fail, it will buy long term heat rates hoping to save money on the difference. Same if natural gas prices are expected to increase; the company will buy natural gas and wait to buy heat rates.

Phillip 66 is the latest company in Texas to file with the PUCT to become a power marketer. At one point there was talk about Wal-Mart becoming its own retail electric provider.

Small businesses wanting to become power marketers will have a harder time than bigger businesses because of the extra cost. Large businesses have the staff to handle the legal side and energy managers to handle the market side. Many small businesses rely on energy consultants to manage their electricity.

Call 1-800-971-4020 to speak with an energy consultant.

 

Luke Johnson

Luke Johnson has been writing about deregulated energy markets since early 2010. His knowledge has helped consumers lower their electricity cost. Connect with Luke on Google+.

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