Yahoo Finance Electricity prices expected to decline in some regions next year, government data says
Here's something you don't hear often: Your utility bill could actually go down next year.
Economists at the Energy Information Administration predict on average, US residential electricity prices in the US will decline by 1%.
The main driver for the dip is the pullback in fuel prices used to generate electricity. Natural gas futures (NG=F) are down about 34% year to date, hovering just below $3 per million British thermal units (MMBtu).
"There's usually a lag between when costs are incurred and when they ultimately get passed on to retail customers," said Tyler Hodge, senior economist at the EIA.
The delay can be 12 months or longer. Understandably, a 1% drop in electricity costs for households may not feel like a lot, especially given the more than 60% decline in natural gas prices from their 2022 peak of $9.29 MMBtu.
"Electric utilities have to cover their cost of providing electricity to retail customers. So there's a lot of different costs built into those retail rates," said Hodge, adding that they include expenditures in delivering through transmission lines and investments in renewable technologies.
"That's one of the reasons we're not seeing larger declines in residential prices, because of those infrastructure factors," added Hodge.
Not everyone agrees with the EIA forecast. Ed Hirs, economist and energy fellow at the University of Houston, doubts residents will get to see a fall in prices.
“I am not optimistic about that. I expect utility bills to increase primarily because of the aging infrastructure of coal and natural gas fired power plants,” Hirs told Yahoo Finance.
He highlights that investors are reluctant to invest in new plants in order to backstop rising electricity prices.
"There's no return on capital," said Hirs."Nobody wants to invest without getting paid."
Residential electricity prices generally tend to rise from year to year.
In fact the last time households saw an average decline in their utility costs was in 2016. The time before that was in 2002. Even during the Great Recession, the average price of electricity in the US didn't fall.
This year, residents in the US are expected to see an average increase of 4% in their utility bills, with some regions experiencing more of an impact than others.
Likewise, not all areas of the US are expected to feel cost relief next year, according to EIA data.
Residential utility prices are expected to increase 4% in Oregon, Washington, and California.
Meanwhile, New England could see a 2% decline in the average price for electricity. Keep in mind that comes after a 16% increase this year.
The eastern north central part of the US such as Indiana, Illinois, and Michigan, along with south Atlantic states such as Maryland, North Carolina, and South Carolina, are also expected to see prices fall by 2.5% and 3.7% respectively.
The spread among all areas is between a decline of 3% and an increase of 4%, for an average of -1%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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