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  • Writer's pictureShane Richardson

Natural Gas Prices and how they affect Electricity Rates

Natural gas prices can have a significant impact on electricity rates in regions where

used to generate electricity in almost half of the US. When natural gas prices increase, it becomes more expensive for utilities to generate electricity from natural gas. This increase in costs is usually passed on to consumers through higher electricity rates. Additionally, natural gas prices can also impact the price of other fuels such as coal and oil, which are also used to generate electricity.

Natural gas is a widely used fuel source for generating electricity in Texas. Many power plants use natural gas to heat water to create steam, which is then used to turn turbines and generate electricity. When the cost of natural gas increases, the cost of the electricity produced by natural gas power plants also increases, which can impact the electricity rates charged to customers.

The relationship between natural gas prices and electricity rates is not linear, however. Natural gas prices are subject to fluctuations due to various factors such as changes in global demand and supply, weather conditions, transportation costs, and other market conditions. For example, if a severe winter storm causes a shortage in natural gas supply, prices may rise significantly, resulting in higher electricity rates. Similarly, if the government imposes regulations on natural gas production or transport, it can also affect prices and electricity rates.

Additionally, some natural gas power plants have long-term power supply contracts in place that mitigate the impact of fluctuations in natural gas prices on electricity rates. Nonetheless, a sustained increase in natural gas prices can have a significant impact on electricity rates in areas where natural gas is a primary fuel source for power generation.

According to the latest Natural Gas Chart prices have made their turn from the lower priced spring season of low demand and begun their climb back up as we get closer to the higher prices associated with summer demand. As the price for Natural Gas increases so will the electricity rates.

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