What Factors Affect the Average Cost of Electricity Per Kilowatt Hour?

What Factors Affect the Average Cost of Electricity Per Kilowatt Hour?

The regular price of electricity per kilowatt-hour is affected by fuel costs, weather conditions, state regulations, the locality and the type of customer. It is also affected by the power plants and the transmission or distribution systems.

The cost of fuel varies depending on the fuel per unit cost. Therefore, when the prices of natural gas and coal decrease or increase, it will affect the cost of electricity. When electricity is in high demand, generators that have high fuel costs are used most.

Weather conditions can also add up to your power bills. Snow and rain offer water for generating relatively cheap hydropower. However, extreme temperatures tend to elevate electricity demand, particularly for cooling. Severe climatic conditions can destroy power lines and increase the maintenance costs of the electricity grid. According to consumersenergy.com, different states have varying regulations that govern power generation.

Every power plant has a unique cost of construction, operation and maintenance. Therefore, the electricity costs will differ depending on how expensive it is for a specific power plant to produce electricity. The maintenance and use of transmission systems for delivering electricity also add to the expenditures of power generating plant.

The locality also affects the price of electricity. This is because of the variations in the availability of fuels, power plants and the pricing regulations. Electricity prices fluctuate depending on the type of customers.

Electricity prices are higher for commercial and residential consumers due to high distribution costs. Industrial customers get cheaper electricity because they use more energy and get power in higher voltages.