Utility Companies

Not only do electricity rates vary by state but they can also fluctuate based on the utility company’s service area. The power grid needs to be continuously maintained and updated to prevent power outages and increase efficiency. The utility companies pass these costs onto the energy providers, who then pass these costs onto the customer. The result is higher energy prices. Here are a few other factors that can impact energy pricing.

• Natural Resources – Some states just happen to be more blessed than others. Texas with its wealth of energy resources leads the nation in energy production, producing more than twice the second leading producer, Florida. The abundance of energy resources has helped put downward pressure on pricing in the state. Texas enjoys some of the lowest electricity rates in the country.
• Time of Day – Just like any commodity, energy prices are impacted by supply and demand. On-Peak hours is the time of day when energy usage is at its highest. The increased demand can put upward pressure on energy prices. Off-Peak hours represent the time of day when energy usage is at its lowest. The drop in demand will result in lower energy prices.
• Regulations – Regulations can negatively impact prices. More states are implementing a Renewable Portfolio Standard (RPS) that requires energy providers to generate (directly or indirectly) a percentage of power from renewable energy sources. This forces companies to make investments that otherwise wouldn’t be made. The cost of these investments gets pushed onto the final price. This is one reason renewable energy plans tend to cost more than conventional plans that produce power from coal and natural gas.
• Seasons – Weather is another factor that can impact supply and demand. Boston and other areas of the northeast are notorious for harsh winters. The sharp increase in demand to keep the house warm factored with inefficient supply can cause energy prices to spike. The same result can happen during hot summer days.