10 Reasons Non Deregulated Electricity Companies Raise Prices

As most consumers know by now, electricity rates fluctuate all the time, usually in an upward direction.

We’re given all manner of explanations for the price hikes, but what’s really behind the higher rates? It turns out there are a number of reasons. Here’s a list of ten reasons that non-deregulated electricity companies raise their prices:

1. If the cost of the fuel source for the electricity goes up, the cost of the electricity itself will follow suit. For instance, electricity generated from coal will be priced according to the price and availability of coal supplies.
2. Consumption also dictates the cost of electricity. If there is a demand high enough to max out the electric grids, some utilities are forced to buy additional energy from surrounding sources. Alternately, low demand due to a mild winter such as this past season can force electricity companies to charge more per kW to offset the reduced revenues.
3. Operating costs can force any business to raise its rates, including the utilities. As their expenses rise, they pass the expense on to the consumer in the form of higher prices for the electricity they buy.
4. Gas prices affect everyone, and when the fleets of electricity companies are running on fuel that costs $4.00 per gallon, then the higher fuel costs are going to be reflected in your electricity bill.
5. EPA legislation requires utilities to augment or upgrade their equipment and facilities in order to comply with greener standards. So the affected companies once again pass along the additional expenditures to the consumer, unless they receive incentives from the government for implementing the necessary changes.
6. Transitioning from non-renewable to renewable energy sources also requires significant modernization to existing infrastructure. This cost has to be absorbed by the consumer ultimately, though the expense of the upgrade might eventually pay for itself in the form of cheaper energy down the road.
7. Inflation has the overall effect of increasing prices across the board. When inflation hits, the dollar weakens, and the cost of living goes up. That includes the cost of energy along with housing, food and other utilities.
8. Low rates of return on investment has been cited as another reason for rate hikes. When a company experiences a lower ROI per dollar spent, the price for their services is typically raised to offset that loss in revenue.
9. The market for surplus electricity fluctuates. Energy companies make a considerable percentage of their profits from selling power wholesale to other energy companies for use in their grids. When the demand goes down, it dries up that revenue stream for electricity companies.
10. Non-deregulated companies essentially operate as monopolies in their regions. Without competition, they have little to no incentive apart from federal regulations to refrain from implementing price hikes.

Taken From Electricity Providers