Electricity price changes

Electricity prices always tend to increase over time. What can you do about it?


Ever increasing electricity prices

Every year, the prices of electricity increase for the customer. Apart from the years 1997 to 1999, at the early stages of the energy deregulation, electricity prices have only increased since the beginning of the 1990's.

 

How to avoid these increases?

To avoid this increase in electricity prices, customers may:

switch to an alternate supplier and choose a fixed rate contract for their electricity supply.

Unlike supply rates with your utility company which can only be variable rates (the price is defined by the value of the electricity market), fixed rates offer a single constant price per kWh for the whole length of the contract.

Nevertheless, you must watch out. switching to an alternate supplier will only affect the supply portion of your bill. The rest, which is made up of the delivery charges and the state surcharges, will not be affected by a supplier change. However, these will remain relatively constant over time. The state surcharges are only modified every year or so, and by very little. The delivery charges might be changed monthly, but they will not change much. It is only the supply part of your bill that traditionally changes when on a variable rate.

How is the price of electricity structured?

The price of electricity that you pay in your monthly bill is divided between:

 

      Supply

Depending on your state, on your utility company, and on your supplier, the supply of electricity can represent anything from 1/3 to 2/3 of your electricity bill. The supply directly reflects the cost of electricity. If you are still supplied by your default supplier, the utility company, this will be the price of electricity on the market, plus a purchasing charge (sometimes called the merchant function charge), an additionnal cost for the utility company for purchasing the electricity on the wholesale market. If you have switched to an alternate supplier, this is the only part of the bill that will change. If you are signed up with an alternate retail supplier on a fixed rate contract, then this part of the bill will remain constant per electricity consumed.

      Delivery

This covers the cost of transporting the electricity from the power plant to your home, through the transmission lines (high voltage), the distribution lines (low voltage), through your electricity meter, and into your appliances. The delivery costs include the maintenance of these infrastructures, the reliability of the grid (in order to avoid outages), and the reading of your meter at the end of each month, in order to know how much electricity you have consumed.

      State surcharges

State surcharges are fees which are paid to the state to fund public incentives. This can include programs such as increasing the amount of renewable energy in your area, offering funding to people who wish to improve their house's energy efficiency (to improve energy savings), or helping people with low income pay for electricity. It also includes the state's sales tax.

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