Wholesale electricity prices in Texas are expected to jump this summer following the recent shutdowns of three of the state's largest coal-fired generating plants, which have driven the state's power reserves to their lowest level in more than a decade.

Retail customers in Texas would eventually feel the impact of rising wholesale prices in the form of higher electricity bills, but it is too soon to know when those bills might climb or by how much, analysts said. But anyone without a fixed-rate electricity contract could ride a roller-coaster of spiking power prices should there be a long stretch of extremely hot weather that sends demand soaring and stretches power supplies.

"We are going into a summer where people are going to be paying a lot, potentially paying a lot more," said Commissioner Brandy Marty Marquez at the state Public Utility Commission last week. "We are not really sure what we are going to see."

The Electric Reliability Council of Texas, which operates about 90 percent of the state's power grid, has braced for potential shortages and price spikes since late last year, when it determined that Texas would enter the summer with 7,200 fewer megawatts of power than expected because of plant closings, temporary shutdowns and delays in the completion of natural-gas and wind generating projects. (One megawatt is enough to power 200 homes on a hot Texas day.)

The bulk of the shortfall, around 4,300 megawatts, comes from the shutdown of three coal-fired plants by the state's largest power company, Vistra Energy of Dallas. Vistra said the plants were no longer profitable after years of low electricity prices and competition from lower-cost natural gas plants and wind energy projects.

If the summer is mild, of course, that would ease prices spikes and the stress on power supplies. But even if the state is spared unusually high temperatures, increased demand, driven largely by population growth, could tighten supplies and push prices higher. ERCOT's most recent projection estimates that peak demand this summer will reach almost 73,000 megawatts, well above the record off 71,110 megawatts set in August 2016.

Recall summer 2011?

The worst case scenario would be a repeat of the summer of 2011, when ERCOT frequently urged customers to raise thermostats and cut power consumption. If such steps don't succeed, ERCOT's next step would typically be to cut off power to large consumers - such as industrial plants.

Industrial customers, who buy directly from wholesale markets, would get hit hardest by price spikes. Most households would likely be shielded from rate increases over the short term by electricity contracts, but extended, elevated wholesale costs would eventually trickle down to retail prices, analysts said.

The best thing Texans can do to prepare for the summer is check their electricity contracts and make sure their rates are fixed and don't change with fluctuations in wholesale power prices, said Andrew Barth, a partner at CSD Energy Advisors, a Houston energy consulting firm. Shorter retail electricity contracts that span the summer months will already have high prices baked into rates, so customers should be wary of changing electricity plans this summer.

"Make sure that you are prepared, even if you choose to do nothing, at least make sure you had a conversation about the risk," Barth said. "I don't think that there is a huge reason to panic here, but it's going to be a little bit of a wait-and-see."

ERCOT is charged with ensuring that Texas has enough power to meet demand on even the hottest summer days. In 2010, ERCOT adopted guidelines calling for the grid's generating capacity to exceed demand by at least 13.75 percent. The excess generating capacity is called the reserve margin.

ERCOT's forecasts for the summer of 2018 show that the reserve margin will fall to 9.3 percent, the lowest since 2007. ERCOT said that fluctuations in reserve margins are not uncommon, and more generating capacity expected to come online by 2019.

ERCOT plans to update its summer power demand forecast on March 1, when it said it will address concerns about reserves and prices.

For years, Texas has enjoyed some of the nation's lowest electricity prices, largely due to the state's access to cheap natural gas and abundant wind power. But the lower prices have pummeled the state's merchant power companies, which have struggled to stay profitable, leading them to delay investments in new and existing plants.

No incentives offered

Unlike most other states with deregulated power markets, Texas does not provide incentives for power companies to keep spare generating capacity at the ready to meet peak demand. As a result, the Houston power companies NRG Energy and Calpine Corp. have asked the PUC to adjust the power market pricing to allow them to earn more money during high-demand periods, making it easier for them to keep plants operating and even build new ones.

But the PUC said it is unlikely to act on the proposal given the prospect of soaring wholesale prices this summer.

JD Schmidt, a managing partner at CSD consultancy, said power supplies could become even tighter and prices higher if plants have malfunctions. The combination of deferred maintenance and the stress of running full-tilt during summer months makes that likely, he said.

"Something is going to break. The challenge is going to be - is there anything left to come online?" said Schmidt. "The answer to that, with reserve margins being so low, is no."