Price of Electricity Hit Record for May

Terence P. Jeffrey | June 17, 2014 | 12:47pm EDT
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The coal-burning Hunter Power Plant near Castle Dale, Utah. (AP Photo/Al Hartmann)

( - The electricity price index and the average price for a kilowatthour (KWH) of electricity both hit records for May, according to data released today by the Bureau of Labor Statistics.

The average price for a KWH hit 13.6 cents during the month, up about 3.8 percent from 13.1 cents in May 2013.

The seasonally adjusted electricity price index rose from 201.431 in May 2013 to 208.655 in May 2014—an increase of about 3.6 percent.

If the prevailing trend holds, the price of electricity will hit an all-time record high this summer, when demand for electricity is at its peak.

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Rising electricity prices have not been inevitable in the United States. BLS’s earliest calculation of an annual price index for electricity dates to 1913, with a baseline of 100 set in February 1984. In 1913, the annual electricity price index was 45.5. By 1947, it had dropped to 26.6. Over the two decades following that, it only rose 12 percent, hitting 29.9 in 1967.

By 2013, however, the electricity had risen to 200.750. (The price index shows the relative change in price from a baseline of 100. Thus between February 1984 and the end of 2013, the price of electricity in the U.S. approximately doubled.)

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Per capita production of electricity in the United States peaked in 2007. Since then it has generally been on downward trend. In 2013, the U.S. produced less electricity per person than it did 1996.

The relative price of electricity tends to rise in spring, peak in summer, and decline in fall.

In four months of 2012 (March, April, May, December), the average price for a KWH of electricity was the same as it had been during that month in 2011. In another five months of 2012 (July, August, September, October, November), the price of KWH was less than it had been in 2011.

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However, that pattern did not hold in 2013, when each month set a record for the price of electricity in that month. This has also been the case in the first five months of 2014, when, in each month, the price of electricity has set a record for that month.

Thus far, the all-time peak for the seasonally adjusted electricity price index was March of this year, when the index hit 209.341. In April, it dipped to 203.874 (which was nonetheless a record for April). And, in May, it climbed back to 208.655, which was a record for May, but slightly below March’s all-time record of 209.341.

According to BLS, the one month drop in the electricity price index in April was due to a “climate credit” applied to electricity bills in California that month.

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“The electricity index rose 2.3 percent in May after declining 2.6 percent in April. This is largely due to semiannual climate credits applied to electricity bills in California,” said BLS. “The credits were applied to bills in April, causing the decline, while the May increase reflects those bills returning to levels that do not include the credit.”

What is the California climate credit? The California Public Utilities Commission explains it this way: “Under California's climate law, power plants and industries must pay for permits when they put carbon pollution into the air. Some of that money is used by the state to fight climate change, and some goes to households and small businesses to protect them from the carbon pollution cost in electricity that comes from non-renewable resources, like coal and natural gas. The credit on your electricity bill is your share of that money.”

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