Electricity is one of the most widely used forms of energy in the U.S. It is used for lighting, cooking, heating, cooling, and of course, powering TVs, computers, and other electronic devices. But everything—even electricity—comes at a price. If you rely on electricity to keep your home running, it’s important to understand the basics of electricity rates.
What is the Average Cost Per kWh in the U.S.?
According to the U.S. Energy Information Administration (EIA), the average household spends about $117.65 per month on electricity. The EIA also reported that the average cost per kWh (kilowatt hour) is about $0.12.
But keep in mind that these are just averages, so your electric bill and cost per kWh may vary significantly from these numbers. In fact, electricity rates are not fixed, which means they can vary greatly depending on a number of different factors.
What Factors Affect Electricity Rates?
Many people are surprised to learn that electricity rates can fluctuate up and down for various reasons, but it’s true. Many factors affect the cost of electricity at any given moment, including:
- Weather Conditions
- Local Regulations
- Type of Customer
- Power Plant Costs
The weather conditions in your area can impact how much you will pay for electricity. For example, rainy or snowy conditions can provide a steady source of water that will reduce the cost of hydropower generation. For this reason, the average cost of electricity may go down during periods of rain or snow.
Windy conditions can also lower the average cost of electricity. High wind speeds can generate electricity at a low cost, so utility companies can pass these savings onto their consumers.
In some areas, local governmental agencies heavily regulate electricity rates. For example, the local government may put a cap on electricity rates, which limits the amount that utility companies can charge their customers per kWh.
The consumer demand for electricity can have a major impact on electricity rates. The term “peak demand” is used to describe the times of day and year that demand for electricity is highest. For example, demand for electricity typically spikes in the summer since consumers tend to use more electricity to stay cool.
During peak demand periods, utility companies may struggle to produce enough electricity to meet the demand. Because of this, utility companies implement strategies that will reduce consumer demand during these peak periods.
For example, utility companies often charge consumers higher rates for electricity that is consumed during peak hours of the day or peak times of year. Increasing rates during these periods reduces the demand since some consumers are not willing to pay a higher price for electricity.
As a result, the time of day and year that you consume electricity will impact how much you are charged for it.
Type of Customer
There are three types of consumers of electricity: residential, commercial, and industrial. It typically costs more to distribute electricity to residential and commercial consumers, which is why electricity rates are generally higher for these consumers.
Power Plant Costs
Every power plant has certain costs that must be taken into account when calculating how much to charge consumers for electricity. These costs include expenses related to operations, transportation, maintenance, and construction. The higher these costs, the more the power plant will need to charge their consumers for electricity.
What State Has the Highest and Lowest Electricity Rates?
The factors listed above can all affect how much you will pay for electricity. Because so many factors impact electricity rates, the average cost of electricity varies significantly from state-to-state.
The state with the lowest cost per kWh is Louisiana, where residents pay an average of $0.0951 per kWh. The state of Washington isn’t far behind with an average cost of $0.096 per kWh. The state with the highest cost per kWh is Hawaii, which has an average cost of nearly $0.30 per kWh.
However, this does not mean that residents in Louisiana have the lowest electricity bills whereas residents in Hawaii have the highest. It simply means that residents in Louisiana pay less per kWh than residents in other states. Louisiana residents may still have higher electricity bills if they use significantly more electricity than residents in other states.
How to Lower Your Electricity Bills
Now that you know the basics of electricity rates, it’s important to learn what steps you should take to lower your monthly electric bills. Follow these tips:
- Be mindful of how much electricity you use during peak demand periods. But first, contact your utility provider to find out what times of day and year are considered peak demand periods.
- Turn the lights off whenever you leave the room.
- Plug devices into a power strip instead of directly into the wall. Then, switch the power strip off when the devices are not in use.
- Air dry your laundry instead of throwing it in the dryer.
- Install a programmable thermostat so you can preset temperatures that will help you reduce the amount of electricity you use while at work, asleep, or on vacation.
These simple strategies can help you reduce your electricity usage, lower your monthly utility bills, and do your part to protect the planet!