The Average Price of Electricity in New York in 2015
Whether you're new to the state, or a long-time resident, sometimes you want to know more about electricity prices in New York. Here we explain the average price of electricity, and why prices are so high in New York State.
How Much Does Electricity Cost in New York?
According to the US Energy Information Administration, the average price of electricity in New York as of June 2015 was 18.81 cents per kWh.
This is expensive. In fact, New York electricity prices are among the highest in the country, at about 40 percent higher than the national average. While this may appear shocking to some, this difference in prices is actually lower than it has been in the past; New York electricity prices were about 50 percent higher than the national average in 2014.
The average monthly bill in New York in 2015 is $113.24
In spite of this large price gap, New York electric bills actually tend to be closer to the national average. This is because - unsurprisingly, given the high rates - New Yorkers tend to consume less power than most other parts of the United States. Average electricity consumption for households in New York at about 602 kWh per month (based on 2013 data), about 300 kWh per month less than the national average of 909 kWh per month. This means that the average bill for electricity is about $113.24 - not far off the national average of $117.53.
However, keep in mind that this is just an estimate. The true cost of electricity to run your home depends on several factors, including:
- How many people live in your home, and how much time they spend at home: for example, a retired couple may spend more time at home and therefore more money on electricity than a couple that works and is only at home on evenings and weekends
- The size of your home: more space means larger areas to heat and cool, more lights, etc.
- How old and/or well-insulated your home is: in general, older buildings tend to be less energy-efficient
- The number of electric appliances you use: your electricity bills are going to be higher if your stove is electric, and if you use electricity for heating
- The time of day: if you pay time-of-use pricing, your electricity bills will change based on how much power you consume during expensive peak periods as opposed to cheaper, off-peak times
Find out MoreLearn more about what goes into the price of electricity in the United States
Why is Power So Expensive in New York?
To understand why electricity prices are so high in New York, it first helps to understand what goes into the cost of electricity. There are three main types of charges that make up your electricity bill, and while the exact proportions will vary depending on your utility, on average the breakdown is as follows:
- Supply charges: this is the price of electricity itself (about 43%)
- Delivery charges: this covers the cost of delivering electricity to your home (about 46%)
- Taxes and surcharges: these charges cover various environmental and social programs relating to energy in New York (about 11%)
As you can see, the largest proportion of your bill actually goes towards delivering electricity to your home. Electricity distribution and transmission is expensive, no matter where you live in the United States. Aging infrastructure and a rapidly changing population has meant that utilities everywhere throughout the country are having to invest more into upgrading the electricity grid. This is after years of under-investment; for example, while electricity use increased by 58% between 1980 and 1999, investment in transmission infrastructure declined by nearly half during the same time period. International consulting firm the Brattle Group estimates that over $120 billion investment in transmission across the nation will be required over the next decade.
But the situation is particularly severe in New York, where "transmission congestion" (bottlenecks in the transmission lines where demand exceeds capacity to deliver electricity) has been declared a national concern. In addition to creating inefficiencies, congestion on electricity lines limits New Yorkers' access to cheaper electricity sources, because when they happen, power demand must be met by more expensive alternative sources, and existing bottlenecks discourage investment into new, cheaper generation sources. The state of New York is currently developing several projects to upgrade transmission lines across the state in order to improve this congestion problem, but as of September 2015 all projects are in the proposal phase.
Delivery prices have been on an upward trend in recent years, but especially in New York; between 2009 and 2013, most utilities in New York raised prices at a faster rate than the national average, according to federal data. Unfortunately, there's not much that the average consumer can do about delivery charges. Consumers don't have a choice of who delivers their electricity, and electric utility costs are regulated by the New York Public Services Commission. Nevertheless, most New York utilities, including ConEdison, Orange & Rockland, PSEG Long Island, and Central Hudson, all filed rate cases for 2015, so customers can anticipate further increases in the future.
Another factor in high New York power prices are taxes. While on average taxes account for around 11 percent of a New York state bill, taxes, fees and surcharges can represent as much as 26 percent of the average New York electricity bill, according to the consumer advocacy group the New York Affordable Reliable Electricity Alliance.
High delivery costs and taxes are both reasons for why electricity prices are expensive in New York, but what about supply? Depending on how much of your bill goes to your utility, the price of your electricity supply itself can represent anything from 35% to 57% of your bill. So is electricity supply more expensive in New York? There are a few factors at play. First is the generation source of electricity: unlike other states that rely heavily on relatively cheap electricity generation sources, such as hydropower, New York's energy mix relies primarily on natural gas and nuclear generation, which - while not the most expensive electricity generation source - are still relatively more expensive than hydropower.
That being said, falling natural gas prices should be pushing electricity prices down, and to some extent this is the case. Wholesale electricity prices for the period of April through June 2015 were 10 percent lower than they were at the same time last year, largely due to cheaper natural gas. But power generation source isn't the whole story. For this we need to take a closer look at how electricity is priced.
How the price for electricity is determined - namely, on the wholesale market, also impacts how much New York residents pay for their electricity. The options for electricity pricing depend on what type of market electricity is provided. In regulated markets, where one company provides most or all of the electricity service (from generation to delivery and sales), the price of electricity is based on the cost of generating it, and must be approved by a regulatory body. However, in markets that have been opened to competition, such as in New York, the price of electricity is determined at the intersection of demand and supply on a wholesale market.
Is the Electricity Market in New York a Scam?
Deregulation in New York has been controversial, with many claiming that electricity prices have risen since the introduction of competition. Some go so far as to say that the market is structured in a way that encourages high prices. While in theory competition should lower prices for consumers (as suppliers are encouraged to compete for the lowest prices), the complicated rules and secrecy that surrounds energy sales encourages higher prices, according to investigative journalist David Cay Johnston.
Different Classes, Different Rates
A final issue regarding electricity pricing is how it changes depending on who is using it. Electricity users are divided into three types of classes: residential, commercial, and industrial. Unfortunately, while residential and commercial New York power consumers pay rates about 40 percent higher than the national average, the price industrial customers can buy electricity is 3.8 percent below the national average. In fact, while New York residential customers use 34 percent of the power sold in the state, they provide 42 percent of utility company revenue. This difference in price is partly the result of policy, and partly a reflection of the lower cost of delivering electricity to larger customers. Lower power prices for industry can attract manufacturing activity and provide jobs, which is why they have been actively sought by New York policy makers. But industrial customers are also attractive to utilities - it costs less in terms of infrastructure to serve several large customers than to serve many small ones.
How to Pay Less on Electricity in New York
So what should you do if you live in New York and want to reduce your electricity prices? Here are a few easy ideas.
Cut Your Consumption
The single most effective thing you can do to reduce your power bills is simply to decrease the amount of power you use. Much of the charges that make up your power bill are charged on a per kWh basis, meaning that you pay fewer taxes and other charges .
Reduce Your Rate
Another option you can take is to take a look at the rate you're paying for your electricity supply, and see if it can be beat by an alternate energy supply company (ESCO). With electricity markets in New York open to competition, many alternative suppliers can offer competitive rates for electricity and natural gas.
Looking to Reduce Your Rate?Call us at 347-410-8789 to find the best rates in your area, or browse more of our pages on energy choice in New York.