Energy Costs Are Down, but Electric is Rising

Over in the UK, seven major utility companies have recently announced a consumer energy price hike of as much as 10%. While the UK has been faced with a growing energy crisis for years, the United States has recently gone through an energy renaissance.

Innovations in harnessing natural gas and renewable energies, as well as OPEC’s crude oil glut have bottomed out price for nearly major energy source in America. Even while the price of oil has fallen year over year for the past 5 years along with gasoline and solar energy, electricity prices have risen by an average of 4% for the last decade.

While a 4% increase doesn’t sound scary, this trend has cost residential buildings thousands of dollars as a result. This doesn’t even take into account regional variants. For example, New England electricity prices spiked in the winter of 2014 due to precipitous weather conditions, while electricty prices in Texas have stayed relatively stable for the past decade.

What’s worrying about this trend is the fact that natural gas prices are expected to rise due to a low inventory from high exports and low imports. Deregulation of the coal industry may eventually lower prices, but natural gas just clinched the number one fuel source for America’s electric generation.

The EIA predicts that the average residential electric bill will be 3.7% higher than last summer due to rising natural gas prices. It’s important to note that natural gas prices are expected to rise as more western states are taking advantage of cheaper hydroelectric fuel sources.

It’s no secret that electricity prices rise to their highest during summer and very high during colder months. However, consumer demand, even during peak demand periods, has actually remained steady the past few years, according to the EIA.

Even when natural gas prices reached their floor, electricity was still rising region-by-region. This eliminates the idea that wholesale electricity prices have risen, as these are tied closely to the price of the fuel source itself.

According to Taylor Consulting and Contracting, electric supply costs are expected to remain at a steady price of $.11 per kwh over the next few years even as most energy sources have decreased in price. Even as electric supply costs have been rising the last few years, energy prices have continually declined.

This trend could be owed to the growing burden of capacity and RPS in your electric supply costs. More government mandates have raised subsidies into renewable energies and most of this also comes at the heels of the big utility companies.

According to Taylor C&C, who use an advanced energy aggregation module to calculate massive amounts of data, “in 2014, energy represented about $.085/kwh of your total supply costs while capacity and RPS were less than $.02/kwh combined. Compare this to what is forecasted to be supply costs in 2018 when energy may only represent about $.045/kwh of the total supply costs while capacity and RPS will balloon to a combined cost of more than $.05/kwh of the total cost.”

Combine this with rapid deregulation by some states, cap-and-trade policies in others, and a whole mess of federal environmental regulations and the supply costs of electricity are still rising.

Many of the big seven energy companies in the UK blamed their rising utility prices on the UK’s former green policies. Depleting sales of oil in the north sea and other factors have also resulted in a 69% increase in electricity prices from March of 2016 to March of 2017.

No matter your views on natural gas production or environmental policies, one thing remains obvious. The foot of any energy regulation or bill is always passed on to the consumer.