Should We Expect Electric Prices to Go Up?
Year over year comparison for 2020 to 2021 alone shows a price increase of 2.3% for the average cost of residential electricity. And electricity price forecasts indicate that price increases will continue well beyond 2022.
Knowing this, you may be wondering how yours compares to the average electricity bill and how you can manage costs. Here, we outline the factors that most affect electricity prices, when prices are the highest, why they might be increasing, and how PowerX’s Home Monitoring Solution can help save you money.
What factors affect electricity prices?
Three main factors affect electricity prices: generation, transmission, and distribution. Generation is largely depending on the fuels that supply energy to create electricity. So, generally, as natural gas prices increase across the global market, retail electricity prices will follow suit. Generation costs are also tied to the building, maintaining, and running of the power plants that create and supply electricity. As the cost of resources and labor goes up, so will energy prices.
Transmission and Distribution go hand in hand. Think of transmission systems as a highway for electricity and distribution as the city streets. Transmission moves the electricity from the power plant, while distribution serves electricity directly to your home. The quality and presence of your state’s transmission and distribution systems will greatly impact the cost of your electricity.
These are not the only things though that will affect your electricity costs. A lot of it is also influenced by factors that are specific to your location, including the weather, regulations, local costs, and power plant availability. It may come as no surprise then that Hawaii and Alaska experience higher electricity costs than the continental US. New England states, such as Connecticut, Massachusetts, and New York commonly top the list of most expensive electricity prices in the country due to their geography and regulatory policies. Fossil fuels are not evenly distributed across the United States leading to higher costs to produce energy.
When are electricity prices the highest?
Fun fact: The cost of electricity is not constant. The price to supply it varies on a minute-to-minute basis and is dictated by demand. So you will see a variation in your bill depending on when you use the most electricity. Seasonally, electric prices are highest in the summer. (Here’s looking at you, a/c.) And on a day-to-day basis, rates are usually highest in the afternoon and early evening. However, since most customers are billed at the seasonal averaged km cost of electricity, you will not likely see daily fluctuation in price. Although, if you find yourself working from home during the day and spending evening hours out on the town, you may want to inquire if your utility company offers “time-of-day” pricing. This could save you big bucks if your highest usages are during off-peak hours.
So why is the cost of electricity increasing?
If you live in a state or city with antiquated or damaged transmission systems, you may find that your wallet is taking a hit. The same logic applies to locales that experience extreme weather events that affect the distribution of electricity. As climate change becomes a more present threat, many regions are experiencing unprecedented weather patterns. Often, when disaster strikes, power grids can’t keep up with demand. Think Texas during a snowstorm or California amid wildfire season. Since electricity prices are not constant, increased demand always leads to an increase in price.
How can I save on my electricity bill?
The size of your electric bill is not beyond your control! Understanding what is using electricity and when can give you critical insight to help lower your electric costs. And PowerX is your ideal partner in this quest. PowerX is the only solution that gives you a comprehensive understanding of your home’s electricity, water, and water heater usage. PowerX app gives you full connectivity to whole-home usage, tracks your trends, alerts you to inefficiencies and identifies areas where you can save money.
To learn more about our smart home sensors click here.