Gasoline prices are plummeting and natural gas prices are relatively low, but electricity prices are still climbing. Not only that, residential electricity prices are expected to hit record levels in 2015 and 2016, according to federal government projections.
U.S. average electricity rates will hit a record high, this year, at 38 percent higher than they were in 2001, according to the Energy Information Administration. That record is expected to be beaten in 2016, as prices hit 12.86 cents per kilowatthour (kWh)– the highest annual average price in the 21st century.
Electricity prices have been creeping up since 2001, according EIA data, and prices are set to rise even further as coal-fired power plants are shut down due to Environmental Protection Agency clean air regulations. So far, 381 coal-fired generators are slated to shutdown over the coming years due to EPA rules.
The Energy Information Administration (EIA) expects retail electricity prices to “increase by 1.1 percent in 2015 and by 1.8 percent in 2016.” Pretty much the whole country will see their electricity rates rise in 2015, says EIA, with the highest rises — nearly 4 percent — hitting New England residents.
U.S. residential electricity rates are projected to average 12.50 cents per kWh for 2014, according to EIA. But that electricity rates are set to rise to 12.63 cents per kWh in 2015 and 12.86 cents in 2016.
“The U.S. residential retail price averaged 12.54 cents per kilowatthour (kWh) between January and October 2014, which was 3.1 percent higher than the same period in 2013,” according to EIA. “Electricity rates rose the fastest in the New England states (10.9 percent) over this period, while residential prices in the West North Central region rose by 1.6 percent… Retail electricity prices to the commercial and industrial sectors also increased over 2013 levels: by 4.4 percent and 3.4 percent, respectively.”
There are lots of reasons for electricity price increases, but adding to existing price hikes are federal regulations. The EPA’s proposed carbon dioxide limits for power plants is projected to increase electricity rates between six and seven percent through 2020, according to the agency.
It’s also slated to nearly double the amount of coal-fired power that is set to be retired. The EPA says “that approximately 46 to 49 GW of additional coal-fired generation… may be removed from operation by 2020.”
Natural gas-fired power plants will replace most of the shuttering coal plants, which means that natural gas prices will likely increase as demand is ramped up.
Before the EPA even announced its carbon rule, EIA said that coal plant closures could drive gas prices up 150 percent over 2012 levels by 2040. This could cause electricity rates to climb 7 percent by 2025 and 22 percent by 2040.
“[N]atural gas prices are a key determinant of wholesale electricity prices, which in turn are a significant component of retail electricity prices,” says EIA. “Accordingly, the cases with the highest delivered natural gas prices also show the highest retail electricity prices.”
The EPA says its carbon dioxide rule for power plants will cost more than $7 billion in 2020 and nearly $9 billion in 2030, but will deliver $93 billion in “climate and public health benefits.”
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