For many Americans, paying the electricity bill is never the highlight of a monthly routine, as prices continue to rise with each passing year. Nationwide, annual percentage increases in American electricity bills can be attributed to a large number of reasons, with varying rates and consequences throughout the country.
Today, efforts to combat global carbon emissions and growing electricity prices are being explored more than ever. In this article, we will analyze the increased costs of electricity use across the United States. After showcasing trends in national electric utility prices, we consider the impact of renewable resource adoption, before looking at ways to decrease monthly utility power consumption.
If you’ve received a notice that your electricity provider will be adjusting their rates soon, then you are certainly not alone. In the United States, electricity rates have been steadily rising since first becoming wildly available in the early 1900’s.
As one of the largest countries in the world, it is challenging to showcase hundreds of American utility prices from various regions of the country. As the east coast is one of the most congested areas in the country, large increases in electricity prices have not gone unnoticed.
As you can see in the chart, the price of electricity from each of these utilities has steadily gone up over the past several decades. Most notably, Consolidated Edison CO-NY Inc has seen multiple instances in which the average price per kWh reached over 30 cents.
Although the publicly available data set from PPL Electric Utilities Corp* is incomplete, the utility has managed to keep electricity prices and rates of inflation lower than other regional providers.
In the summer of 2020, New England, Hawaii and Alaska have the highest average rates of electricity. The graph below is a snapshot of the country’s regional electricity prices as produced from the U.S. Energy Information Administration's Electric Power Monthly Report.
What becomes very clear in this data is that electricity costs more on the coasts and outside of the contiguous United States. Whereas many rural areas in New England and the Pacific Northwest may see lower electricity rates, the highly congested cities in these regions drive up the average price paid per kilowatt.
As you can see in the chart above, the average price of electricity charged for commercial, industrial, and transportation purposes is lower than average residential rates in every part of the country. The only region that does not have a specially designated rate of electricity for transportation is the Pacific Non-contiguous, which includes Alaska and Hawaii, and the East South Central which includes Alabama, Kentucky, Mississippi, and Tennessee.
In 2020, there is no denying that more people are spending less time in commercial offices and more time at home. This has led to an increase of over 10% in monthly utility bill totals throughout large cities nationwide. Beyond electricity, COVID-19 has also increased demand for residential water and gas.
Of course, energy companies and skeptics often declare that electricity price increases are largely due to inflation. After all, most industries in the United States are forced to slowly raise their prices to combat the slow inflation of the US dollar.
Whereas as inflation is a factor of electric utility price growth, it is far from the only reason that utility prices are growing. In fact, this chart shows the average price of electricity vs. approximate inflation over the last 100 years. This data was sourced from the U.S. Bureau of Labor Statistics, which shows the Consumer Price Index of Electricity paired against national inflation averages.
As you can see in the chart above, electricity prices have increased nearly every year since 1948, with a record high of 18% in 1974. Well beyond the average inflation rates of the US dollar, some sources have even calculated that electricity prices have increased at a rate of 46% over the last 20 years.
Utility prices are increasing in the United States for many different reasons throughout the country. Although the national trend results in a steady upward curve, the exact reason behind each separate utility raising their price per kWh rates could be one of the following factors:
Simple economics will tell you that increased demand will drive up prices of any consumer product. While energy companies are operating continuously to deliver as much reasonably priced electricity as possible, they are up against the steady rise of the American population. In addition to the electricity a person uses at home, they are also very likely to use electricity when working, attending schools, moving about town, eating in restaurants, and more.
In addition to an increasing population, the world is also becoming a more electricity-oriented place, every day. With consumer electronics, air conditioning, and the electrification of transportation, electricity has increased by over 300 Billion kWh per year since 1950.
In order for an electric utility to provide homes and businesses with electricity, they need to independently source the energy in the first place. Fuels like natural gas, coal, and petroleum have fluctuating price levels that may increase for a number of reasons. This includes:
Essentially, seasonally frosty places like Alaska and North Dakota can only be utilized when the ground can be drilled and the resources can be safely transported from one area to another. Beyond seasonality, new regulations, policies, and taxes are the primary reasons that the average cost of fuel increases for electricity providers.
More than anything, tiered billing rates and time of use billing structures have caused many American electricity bills to increase since their inception. Although many utilities structure their new policies as a “way to save you money” on using power during off-peak periods, these new policies often end up resulting in increased electric bills for residential users.
Although the exact time frames vary between utilities, in general, most increased time of use billing rates are applied somewhere between 2 PM and 8 PM on most weekdays. There is also often inflated base rates during some weekends or holidays.
Of course, the American utility grid is a large and complicated electricity distribution system with a lot of moving parts. As more and more homes, apartments, and buildings are constructed and added to the system, the power grid often requires both the installation of new parts and the upkeep of existing components.
Unfortunately, nothing comes free. In order to stay in business, utilities are required to transfer the cost of general power line maintenance and upkeep to customer’s electricity bills. As capacity is increased in many American cities, plausible maintenance costs rise along with each foot of electrical wire that is laid.
In the worst cases, large scale catastrophes such as hurricanes, tornadoes, and raging forest fires may increase electricity costs if large components are damaged or broken. Today, many measures are also being taken to increase the security of existing and new electric systems.
As you can see in this chart from an analysis done by the National Renewable Energy Laboratory, the southern and coastal regions of the country saw the most rapid increase in residential electricity expenditures over the course of 27 years. By looking at this chart, you can infer that the farther a state is from the geographical center of the US, the faster the price of electricity is growing.
This trend is largely compounded by the transportation and maintenance costs for bringing the resources from American soil into residential homes. While most of the contiguous United States petroleum and natural gas is taken from states like Texas, Oklahoma, Colorado, North Dakota, it continues to become more costly to deliver these resources to various corners of the country.
In other cases, this trend is also partially due to some states turning to new, renewable sources of energy. With costly installation causing utility grids to be updated and modified, new regional power plants are being built to prevent future costs of electricity from rising even further.
Over the next several decades, the International Energy Association (IEA) predicts that electricity demand will continue to increase by at least 2.1% each year globally. As displayed in their chart below, this is the result of a steady increase in electricity demands across nearly every sector.
As we mentioned earlier, increased electricity demand will lead to higher electricity prices as population growth and grid expansion and repair will drive up utility operating costs. However, in this scenario, no large developments have been made to adopt electricity from renewable energy resources.
As outlined in a recent article from Forbes, there is actually a paradox between rising electricity prices and lowering costs of adopting renewable energy resources. In the report, it is noted that plummeting renewable energy costs can make the future of electricity prices lower, or at least take the form of a more steady rate.
Unfortunately, in the short term, renewable energy mandates and rapid system adoptions are actually causing the rates of electricity to increase. Whereas the technologies and manufacturing efficiencies of today’s renewable energy equipment is better (and cheaper) than ever, it will still take some time for these future cost decreases to set in.
Much like death and taxes, increased electricity rates almost seem impossible to avoid. Although utilities may charge whatever they please, there are a few things that can be done in order to avoid large electrical bills each month.
To start, forming good electricity use habits is always going to be the best way to actively limit your energy usage. In ordinary day-to-day life, ignored and neglected electricity use can skyrocket utility bills for no practically useful reason whatsoever.
Here are some of the best practices for lowering electricity use at home:
Today, solar power and other independent sources of energy are being used more than every to drive down the necessity and cost of using utility provided electricity. PV solar panels affixed to a roof create a micro power plant for homeowners to generate their own electricity, right at home, which is usually seen as a credit to any power supplied by the existing power grid.
Unfortunately, not everyone owns a home, let alone one that is ideal for harnessing solar energy. Beyond this, buying your own solar panels and equipment can be expensive. In these instances like these, many people have the opportunity to join local community solar gardens. Here, electricity is generated off site with participants paying a different rate than typical utility provided power.
Beyond the efforts of individuals, large companies, governments and other organizations have also begun to rapidly adopt solar power to decrease electricity costs. With more capacity being installed everyday, every kWh of solar energy fed into the grid drives down the demand and cost for traditionally sourced power.
Ultimately, the price of electricity has been increasing in the United States since utility power first became available over a hundred years ago. For the past several decades, dramatic price increases have caused many individual users and organizations to explore new ways to generate less expensive residential, commercial, and industrial electricity.
Although electricity demand continues to increase, the adoption of renewable energy production, energy efficient technologies, and waste decreasing habits have the potential to slow the rise of electricity prices to correspond with more normal inflation rates.
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