Fuel prices a little part in identifying electricity charges

Published: Sat 23 Nov 2013
A blog entry by Nicole Anderson

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Nicole Anderson

Nicole Anderson's Blog

Oil and gas prices have been decreasing, as have natural gas prices, but a number of people have realized that electricity prices have not gone down with them. They also aren't likely to, as the factors in setting electricity rates are a bit more complex. Source for this article: Electricity Rates

Low gas costs not fueling a dip in electricity prices

Many people have noticed dropping costs on things such as oil and gas. There has also been a 43 percent decrease in natural gas prices from last year, according to the Huffington Post. Natural gas prices have been declining for a while now.

There has been a rise in electricity charges though, many individuals have noticed in their monthly power bills. From June to August, it is anticipated that the average cost for power will be 12.4 cents per kilowatt-hour. The cost was 2.3 percent cheaper in that same period last year. In the rest of the year, the cost is anticipated to increase another 2 percent, and people will most likely end up paying an extra $3 a month for power with the change.

Commodity costs easier than power

Electricity is not like other commodities. Most of them can be priced based on scarcity, so the worst a harvest is for an item, the more it will cost.

In order to make sure power businesses still have enough power to support a whole city or region, they purchase their electricity from power generator companies in years at a time and years in cash advance, according to the Huffington Post. This is the best way to ensure power for the area, according to the Chicago Tribune.

One other thing to consider is how expensive it is to get power to a customer. In some areas, this has gotten so expensive that all drops in natural gas, oil and coal have been counteracted. It is already very expensive to maintain the power grid, but the costs have been going up recently. About 40 percent of the bill is from this, according to the Huffington Post.

You will see boosts still

The area largely determines the amount paid in power bills though. In fact, according to the Scranton Times Tribune, areas such as Pennsylvania actually saw decreases in electricity rates. This is because some of those places use natural gas plants for power. According to the Chicago Tribune, the little increases in charges right now are nothing compared to what you will see in 2015.

In 2012, the power was sold at $16 per megawatt, which is enough electricity to power 800 homes, at a PJM Interconnection auction. Fox News explained that the company controls power for 13 states. That price dramatically increased for auctions for 2015 and 2016. In fact, power was $136 on average per megawatt for that year, and it was as high as $357 per megawatt in Northern Ohio, which is an enormous amount of money. A ton of the issue has to do with coal businesses that need to pay to put in emissions controls but need to pass the money on to customers. Many of those areas are powered by coal.


Huffington Post

Chicago Tribune

Fox News