In 2015, the average price per KWH paid by ultimate, or all retail, customers in the U.S. fell slightly (0.3%) to 10.77¢; 2015 is the first year since 2002 in which the year-to-year change in the nominal price/KWH was negative. On an inflation-adjusted basis, the average price fell 1.3% in 2015, the first year since 2012 in which the rate of change in electric prices was less than inflation. Upward pressure on customer rates has been mitigated considerably by the decline in market-based power prices, largely attributable to lower gas prices that resulted from the rapid proliferation of shale-gas production.
Over the last decade, real electricity prices rose 11%. One of the driving forces behind this upward trend has been the robust level of rate case activity that has been spurred by rising capital expenditures to meet more stringent environmental standards, address reliability and congestion issues, and deploy innovative grid and metering technologies. However, over the years 2009 through 2012, many companies were focused on limiting the magnitude of rate increases given the weakened recessionary economy. In addition to declining fuel prices, lower electricity prices have also been attributable to declining interest rates and the resultant drop in authorized equity returns. It appears that these rate-mitigating factors will continue to be in play for the foreseeable future.
In a Special Report entitled Regulated Price of Electricity—Average Retail Price per KWH falls in 2015 Regulatory Research Associates, part of S&P Global Market Intelligence, provides details concerning the average price paid for electricity by retail customers of the major investor-owned electric utilities in the U.S. in 2015, 2014, and 2013, and a broad overview of historical trends in electric prices since the mid-1970s. The source of the pricing data is the U.S. Energy Information Administration, or EIA, an agency within the U.S. Department of Energy. The data in the report relates to power sold to retail electric customers of investor-owned utilities under rates that are subject to the oversight of state regulatory commissions; data associated with the direct sale of power through retail choice programs are not included. There are currently 22 jurisdictions that have frameworks in place that allow electric generation to be offered competitively to at least a portion of customers in the state.
Retail electric prices rose dramatically in the mid-1970's following the 1973 Arab Oil Embargo and, with the exception of 1979, continued to rise in real terms until 1984. From 1984-1994, with a few exceptions, nominal prices continued to increase each year, but in most cases at a slower rate than inflation.
From 1995 through 2000, prices declined in both nominal and real terms. We attribute this to: the cessation of large, capital-intensive construction programs; the emergence of low-cost, natural-gas-fired combustion turbines to meet peak demand; competition, in the form of energy conservation; rate freezes/caps mandated by electric restructuring activity; and, reluctance on the part of utilities to seek rate increases when commissions were considering switching to a competitive framework.
In 2001, for the first time in about 10 years, the average retail price of electricity rose in both nominal and real terms, largely due to sharp increases in wholesale market prices and power supply shortages. From 2003 through 2009, prices rose steadily in both nominal and real terms due to: the expiration of restructuring-related rate freezes and the associated implementation of competitive wholesale procurement in certain jurisdictions; rising natural gas prices (although this significantly moderated in the wake of the 2008 economic downturn and increasing shale-gas production); the costs associated with new transmission facilities and infrastructure investment; the beginning of a new construction cycle; increasing environmental compliance costs; and, rising employee benefit and health care costs.
In 2010, prices rose slightly in nominal terms, but fell moderately in real terms, a trend that continued through 2012. In 2013 and 2014, prices rose strongly in both nominal and real terms, driven by aggressive utility capital spending plans that addressed system reliability, aging infrastructure, demand-side management, energy conservation, renewables, and environmental issues. In 2015, however, the price of electricity fell, both in nominal and real terms, reflecting further reductions in fuel expenses and market prices for standard-offer power, as well as reduced rate case activity, and lower allowed rates of return.
During the 1975-2015 period, the nominal price of electricity to ultimate customers rose 266%, and in the five years since 2010, the nominal price increased 9.1%. In real terms, since 2010, residential customer prices rose 1.6%, commercial customer prices fell 0.1%, industrial customer prices rose 0.4%, and ultimate customer prices rose 0.6%. In real terms over the 1975-2015 period, residential customer prices fell 71%, commercial customer prices decreased 40%, industrial customer prices dropped 12%, and ultimate customer prices rose 17%.
Looking at 2015 prices, prices to ultimate customers ranged from 32.29¢/KWH for Hawaiian Electric Industries subsidiary Hawaii Electric Light to 6.17¢/KWH for Xcel Energy subsidiary Southwestern Public Service in Texas.
For residential customers, prices ranged from 34.65¢ per KWH for Hawaiian Electric Industries subsidiary Hawaii Electric Light, to 7.69¢ for Avangrid subsidiary Central Maine Power.
Commercial customer prices ranged from 32.80¢/KWH for Hawaiian Electric Industries subsidiary Hawaii Electric Light, to 6.88¢/KWH for Oklahoma Gas and Electric in Arkansas.
Industrial customer prices ranged from 27.76¢ per KWH for Hawaiian Electric Industries subsidiary Maui Electric, to 4.32¢/KWH for Southwestern Public Service in Texas. The average 2015 industrial price was 7.05¢ for the industry, and the median was 6.96¢/KWH.