Retail electricity prices rise, spurred by boost in delivery costs, EIA says
Retail electricity prices have risen over the past decade even as the cost of natural gas, one of the main fuels for producing electricity, has fallen, according to the U.S. Energy Information Administration.
The average retail price of electricity in the United States has risen about 1.5% per year between 2006 and 2016, roughly the same as the 1.6% rate of annual inflation, while the price of natural gas for generators have fallen at an average rate of 8.4% per year since 2006.
Much of the gap between the two price trends during that period has been filled by the cost of producing and delivering electricity, according to the EIA.
Hydraulic fracturing has had a huge effect on the economy as a whole, creating a boom in exploration and production, altering the United States’ strategic position as an energy producer and forcing coal and nuclear plants to close. But, according to the EIA, electricity consumers have not reaped those benefits commensurately.
Even though the portion of costs attributed to power production for most utilities has decreased from 69% to 54%, the cost of delivering electricity to customers has risen.
Delivery costs have increased in real 2016 dollar terms from 2.2 cents/kWh in 2006 to 3.2 cents/kWh in 2016, offsetting the decrease in the generation costs, according to the EIA data, which is compiled from utility financial reports filed with the Federal Energy Regulatory Commission. The EIA says those reports represent about 70% of all electric utility spending.
Delivery costs include costs associated with building and maintaining transmission and distribution networks, the costs of servicing customers, as well as administrative costs. The EIA attributes the rising costs in part to replacing aging infrastructure. Delivery costs have also taken up a rising share of overall electricity costs, rising from a 22% contribution in 2006 to 36% in 2016, according to the EIA.
Administrative and general expenses, meanwhile, have risen by 20% in real dollar terms since 2006, even though those costs account for a smaller portion of the overall costs of providing electricity, according to the EIA data.
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