6 Factors That Affect Electricity Costs

6 Factors That Affect Electricity Costs

Your electricity bill may seem unpredictable at times. However, there are many factors that influence the price of electricity. Check out these factors below.

  1. Cost of Fuel– Electricity operates on fuel. It needs to be generated and delivered. Fuel prices change which in turn changes electricity prices.
  2. Supply and Demand– Supply of energy sources like coal, nuclear, gas and oil can change on an hourly basis and contribute to price fluctuations. The demand for heating, cooling and light is directly influenced by the technological and economic measures. Warmer places tend to use less natural gas oil for heating and more electricity for air conditioning.
  3. Weather– While this seems obvious, the weather impacts short-term prices. During extreme weather, your system works harder than usual. However, it won’t affect long-term prices as heavily. Electricity prices tend to be higher during the summer months as more people use their air conditioning.
  4. Regulations– Government regulations vary from state to state. Some implement controlled prices while others are uncontrolled. Federal and state regulations also impact supply and demand.
  5. Type of Consumer– Industrial consumers tend to pay less than commercial and residential consumers because they are supplied a larger amount of electricity at one time. It takes more effort to get power to consumers that use less energy, therefore more money.
  6. Location– Where you live in reference to an energy source naturally influences the price of your energy. Power plant availability and local fuel costs vary in different locations. In addition, climates within different locations vary which can drive up or lower your electricity bill.