Rising Electricity Prices
Monday, July 7th, 2008
Worried about gas prices?
Aren’t we all! Not to add to your worries, but did you know that electricity prices increased by 10% between 2005 to 2006 nationally and are likely to rise at even higher rates in the coming months and years?
Strange as it may seem, energy utilities are also subject to fossil fuel price increases. Prices for natural gas and coal, which supply 60 percent of California’s utility electricity, have risen even more than oil prices. There are several causes for this and the majority of economists and market analysts believe that the energy market will continue to be pressured by rising energy costs. Check out this graph, created by the US Department of Energy, that shows projected and past cost increases for residential electricity in the US.
Why is this happening now and what does it mean for you?
For utilities, it’s getting more expensive to create power. Fuel and purchased power costs account for about 95 percent of the recent increase in utility operational costs. Demand for electricity, despite new advances in energy-efficient appliances, is on the rise. Infrastructure investment costs, or what it takes to maintain the grid, are forecast to be around 14 billion dollars a year in coming years. What’s more, in addition to rising costs for fuel sources, there are other costs associated with fossil fuels—40 percent of US carbon emissions come from electricity production.
Forgetting the environmental costs for a moment, take a closer look at each fossil fuel source and its role in spiking energy costs:
Oil, or petroleum, amounts for a small percentage of the United States’ fuel mix but it is now at record prices of $145.85 a barrel (as of July 3rd), the highest levels ever recorded. Accelerated demand and decreased supply due to the lowest production capacity in years contributes to these price jumps. Although oil does not contribute greatly to power generation, it significantly affects the cost of other fuels and is used in the mining and shipping needed to procure fossil fuels.
Natural gas accounts for nearly 20 percent of all power generation, and costs about 63 percent more than it did a year ago. Dramatically increasing natural gas prices have a particularly strong impact on electricity prices because natural gas-powered generators dictate prices in many short-term or spot power markets in the US. Natural gas has grown in popularity, edging coal out as a relatively “cleaner†burning fuel source; this popularity has helped raise prices even further.
Coal accounts for half of all power produced in the United States today and its cost has risen 20 percent in the last two years. In some areas, the increase has been much higher.
Uranium, the primary source of nuclear energy, which represents 19 percent of all power generation, has also increased in price by about 40 percent since 2001.
All of these things taken together means your utility is probably raising its prices.There is some good news. Utilities are using increasing amounts of renewable and distributed generation resources.
So, unfortunately, it’s not just your gas tank that you have to worry about. In California, only a small amount of electricity consumption is fixed by law. The price increase for additional electricity consumption is skyrocketing. The good news here is that there are solutions to controlling these runaway costs. Becoming your own power source by installing solar is a great step towards gaining your independence from gas and energy prices. There are many other ways that you can reduce your overall electricity consumption. We recommend this site for simple ways to cut down your energy consumption in daily life.
