The cost of the average consumer’s utility bill will decline for the first time since 2002. This is a piece of good news for families across the country. Year to date, the cost of electricity has gone down almost 1% over the course of 2016.
While this may not seem like such a huge decline, the fact is that a 1% decline could save a household as much as $15 to $20 per year per the Department of Energy Information Administration. This 1% decline is also a sharp reversal from the normal annual increase in utility bill that most families face as historically the cost of electricity goes up anywhere from 1.5% to 4% per year. So a one percent decline is as much as a 2.5% to 4% swing in prices in favor of residential customers.
The exact amount of the decrease is regional. Families that live in New England (such as Massachusetts or Connecticut) have had their bill decline as much as 6% over the course of 2016. Some states on the west coast, such as California, have had smaller declines that could be anywhere from .3% to .7%. Residents of Hawaii have had their prices decline by as much as 12%. So the exact savings experienced by each household do in fact vary widely.
While it is too early to now for sure, some of these savings that many families are now benefiting from may be reversed during the winter months. This is because of the fact that EIA is currently projected a colder winter this year, and combine that with a slightly higher cost of heating fuel. This means that any savings in electricity bills may be offset by higher heating costs in 2016. This possible reversal will be especially true for those household in cold weather states, such as the mid-west and northeast.
What is causing cheaper electricity in 2016?
The decline in the cost of electric bills is caused by a decrease in the price of natural gas. There has been an improved supply of gas across most of the nation. This surplus is now benefiting residential customers. This surplus has been created by an increased in both the number of as well as efficiency of natural-gas fired power plants.
Natural gas is after all a commodity. The market price is now down about 28% in 2016. So that is a huge decline that producers are benefiting from. Now companies such as Duke Energy and countless others are finely passing these savings on to their customers. What we find unfortunate is that while energy producers are paying as much as 30% less for the price of natural gas in 2016, the average family is only seeing a 1% decline in their monthly utility bill. So there is a huge disconnect in these numbers.
Now the bad news. These favorable trends of lower utility prices are not expected to continue in 2017. In fact, as of right now, the Energy Information Administration (EIA) is projected that prices should increase once again next year. As of right now, they are estimated that families should plan on paying as much as 3% more next year for their electricity.
But there are some things people can do. With the savings that most households are experiencing this year, it may be a good time to take that extra $20 or so and invest in cheap conservation measures. We recommend programmable thermostats for one, as those are very inexpensive. That means when prices go back up in 2017, maybe the hit to a families pocketbook will not be as great. While there has been good news year to date and when compared to 2002, we guess like most things in life, all good things must come to an end sooner or later.