U.S. has fifth highest electricity prices in world
By Staff -- Purchasing, 9/2/1999
Among 17 major Western economies, the U.S. has the fifth highest electricity prices, according to an annual benchmark study by independent utility cost consultants, National Utility Service, in Park Ridge, N.J.The NUS International Electricity Cost Survey finds that electricity prices in the U.S. are almost double those in Canada (where electricity deregulation is yet to get under way). Meantime, other countries that have been deregulating their electricity industries, such as the United Kingdom, Australia, and New Zealand, all report prices lower than those found in the U.S.
"This comparison indicates that countries that have deregulated their electricity markets have received the benefits of lower prices," says Richard Soultanian, co-president of NUS. "Electricity prices may tend to rise again after a few years of deregulation, but they still remain lower than those of most countries that have not begun the process."
The NUS annual benchmark survey finds that electricity prices in the U.S. dropped less than 1% to 6.6 ¢/kWh for the year ending April 1999. (Prices are for supply of 1,000kW with a monthly usage of 450,000kWh per month.) Soultanian does note, however, that while U.S. prices dropped only marginally, "there were some wild movements by some suppliers. For example, there was a 5.3% increase from the Baltimore Gas & Electric Company and an 8.25% reduction from Peco Energy."
Soultanian predicts that "Marginal drops in prices should continue over the coming 12 months as deregulation begins to increase regional competition and stranded costs are phased out." As of April 1999, he notes, legislation has been enacted in 16 states, enabling consumers to buy electricity from third- party suppliers.
Soultanian warns, however, that electric power users can not rely on deregulation to provide them with lower prices. "Our experience in electricity deregulation around the world clearly indicates that market forces will not automatically send electricity costs lower. It's up to consumers to aggressively hunt out the best prices." What's more, he says, "Simply because your incumbent electricity supplier offers you a lower price does not mean you're getting the best price. There are dozens of suppliers offering prices all structured in different ways." The challenge, he notes, is recognizing best prices and understanding whether correct transmission and distribution tariffs are being applied to transactions. "Our analysis of the U.S. market has uncovered many different pricing options that are now available to business users."
National Utility Service claims to have saved more than $2 billion in electricity, gas, water, fuels, and telecommunications costs for more than 750,000 locations around the globe, including more than half the Fortune 500 companies.
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