You might not be aware of it, but the price of natural gas can affect the price of your electricity, even when you're not burning gas. You see, the cost of fuel makes up about a third of the costs of electricity, and in Texas, that's based mostly on the price of making power via natural gas fired generation methods. When the price of natural gas changes, so does your power bill. This can cause some pretty confusing results if you don't know what's happening. Sudden price increases may seem completely unexplained

According to the 1999 Texas Electric Choice Act, providers of retail electricity are permitted to chance their prices twice a year, based on the cost of natural gas. This allows customers and the market to benefit, by making sure that the price of your power reflects market conditions. So what do you do if you're unhappy with your electric costs? You can always choose a new supplier with better prices and service that makes you happier. That's why the Act was passed - to give Texans the ability to decide where and who their electricity is coming from. You can also choose a supplier with methods of production you prefer, such as wind power. This is excellent for people who are concerned about the environmental impact of their energy usage.

So, how is that price arrived at? First, a composite natural gas price will be calculated, using what's called the NYMEX Henry-Hub natural gas index. The closing forward twelve month prices are averaged for every business day over a ten day period. Then, the price that's been arrived at will be examined. If it's over four percent higher than the price that was used to set the current fuel factor, the provider might file for an increase in their prices. It's unlikely that the prices will be reduced from the current levels, but they may increase.

The percentage increase in the price of natural gas will be applied to the current fuel factor, creating a new fuel factor. A new factor becomes effective in either twenty or forty-five days, depending on whether or not a hearing has been requested by the electricity provider. If a hearing is requested, the longer period is when the factor becomes effective, and if the hearing is successful, then the prices go up, affecting your utility bill.

Increases might seem like they're really complicated, but the truth is that they're not. When natural gas gets more expensive, all electricity in Texas does, even if it's not produced by burning natural gas. So, next time your utility bill confuses you, make sure you consider this fact.