Average price of residential electricity declines - briefly

By Jodi Delapaz

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, Oct. 13, 2016 - Residential customers paid on average 12.4 cents per kilowatt-hour (kWh) for electricity during the first six months of 2016, according to new data from the Energy Information Administration (EIA). That's 0.7 percent lower than the same period last year, the data show.

If this trend continues for the rest of the year, EIA says annual average residential electricity prices will fall for the first time since 2002.

Over the past five years, nominal residential prices have increased an average of 1.9 percent annually, about the same rate as overall inflation.

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In New England, residential electricity prices rose by 6 percent during the first half of 2016 and now average 19.2 cents/kWh, EIA says.

New England electricity prices rose substantially between 2013 and 2014 as a result of a sharp rise in wholesale power prices, EIA notes. Improved supplies of natural gas into the region, along with lower natural gas prices, have contributed to the region's declining retail electricity rates so far in 2016.

The declining cost of fuel, particularly natural gas, has been a key driver of the recent reductions, EIA says. The data show that during the first six months of 2016, the weighted average cost of natural gas delivered to electricity generators was $2.58 per million British thermal units (Btu), 28 percent lower than in the first half of 2015.

However, EIA notes that natural gas prices have been increasing in recent months. EIA's latest Short-Term Energy Outlook projects the average delivered cost of natural gas in the last six months of 2016 will be 27 percent higher than the average cost in the first six months of the year.

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Because natural gas prices are expected to continue increasing in 2017, EIA also expects average U.S. residential electricity prices to rise 3 percent in 2017.

EIA notes that not all recent declines in electricity prices can be attributed to natural gas markets. The decline in cost of crude oil has contributed to a 12 percent drop in retail electricity prices so far in 2016, the data show.

Despite the decline in national average residential electricity prices in the first half of 2016, EIA notes that on average, residents of the contiguous Pacific Coast states (California, Oregon, and Washington) are paying 3 percent higher prices than in the first six months of 2015.

EIA says this is because the regulated electric utilities in these states sought permission to increase rates to cover costs of maintaining and upgrading the region's power transmission grid and its network of natural gas pipelines.

Midwest residential customers have also experienced increasing electricity prices, with year-to-date rates climbing by 2 percent and 3 percent in the east North-central and North-central regions, respectively.


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