This past cold winter caused electricity rates to skyrocket and they remained high well into 2014. Typically, these rates moderate during the spring and remain low until early fall. However, this year, prices were high through the spring and are now starting to moderate in July. Almost every day in July has seen lower prices.
The two main factors that cause prices to rise and fall are: 1. the price of natural gas and 2. geopolitical instability.
Natural gas prices typically rise each winter, and geopolitical unrest can occur at any time. The typical scenario is that electricity prices rise in the winter when natural gas prices rise and fall in late spring and summer when natural gas prices fall. This year, due to the combination of high natural gas prices that lasted well into spring with unrest in Ukraine and the Gaza Strip, electricity prices remained high until early summer.
Now that prices are falling, it’s time to look at your electric bill and your term commitment. If your contract expires in the next 120 days, you should be able to shop around and sign a new contract with a provider that can lower your electricity cost each month.
You should look for electricity rates for the power itself of 0.060 cents per kilowatt hour (kWh) or less. This is the liberalized or competitive portion of your electric bill. The other part of your electricity bill is the delivery part, which includes reading your electric meter and delivering the electricity to your home or business. This portion is the regulated portion of your bill and is not subject to competitive pricing. There are also associated taxes and fees included here.
Still, you should strive to keep your total electricity costs below 10.0 cents per kWh. When you find that the prices are extremely low, you should select the longer term contracts, 24 or 36 months. If you are unsure of the current prices, then you should select the shorter term contracts, 6 or 12 months.
In either case, you should take a look at your electricity bill and determine how much you are currently paying per kWh and how long your contract term is. If you’re paying 12-16 cents per kWh, you’re paying too much. Once you’ve determined when your contract ends, you should actively shop for prices and lock in a low rate.
Going forward, keep an eye on electricity prices and the expiration date of your contract. This will set you up to be ready to keep your electric bills at the lowest rates possible.