True market success goes beyond just the price per kWh because the price per kWh represents a bundled cost of one unit of electricity consumed. That cost incorporates fees, taxes, and distribution charges that are unique to each state and utility. It also doesn’t weigh a state’s access to different generation assets, which can easily alter the price. 

Context is needed when comparing raw data from state to state. Without it, the price rankings often reported on in news stories leave consumers with apples-to-oranges comparisons.

Price Isn’t the Same as Price Performance

Price per kWh is a snapshot of cost at a specific time and day, rather than an overall consumer value. It doesn’t account for the factors that drive long-term performance, resilience, or innovation the way that price performance does.

Price performance looks at how well a market delivers value relative to cost over time, which is missing when only considering price per kWh. 

States also cannot be equally compared just on price because no two states are the same. Consumers’ electric bills are comprised of a variety of different charges, many of which are directed by the state legislature.

Massachusetts is a state that demonstrates the difficulty in comparing prices to other states. The average residential electricity rate for Bay-Staters is just north of 30¢/kWh, ranking Massachusetts as the state with the third-highest average rate. According to WhatsInMyElectricBill.com, nearly 30% of a Massachusetts electric bill is public policy charges: residential assistance programs, energy efficiency, and renewable energy requirements. About 40% of the bill is the average distribution and transmission charge across the two main utilities. That leaves only about 30% of the bill for the actual cost of the electricity purchased and used.

By comparison, Idaho ranks number one for the best rate at less than half of Massachusetts’. Consumers in Idaho are required to pay for energy efficiency charges and even the closure of a coal plant; but the actual cost of the electric source is tiered into pricing levels for Idahoans based on energy usage and the time of year they are using it. 

Each state legislature and investor-owned utility has its own policy beliefs and priorities, which create differences among state electric bills.

The often untold story on price is when states are compared based on price performance. When factoring in all consumer classes, Idaho actually ranks third worst among all states for its change in electricity price from 2008-2024. During that time, Idaho’s average electric price increased by more than 67%. Massachusetts ranked about 15 states better with a price change over the same time of less than 50%.

When comparing state prices based on performance over time, a factor that should be considered is whether the state operates under a monopoly market run by investor-owned utilities or if the state has restructured the electric market in any way to welcome competition.

Downward Price Pressure from Competition

Pennsylvania leaders voted to restructure the state’s energy market in 1996. Competition in power generation and electric supply has provided consumers with more affordable electricity options, including products at a lower price than electricity sold in 1996. But more importantly for all consumers in Pennsylvania, competition has applied downward price pressure on the utilities –– which still sell electricity –– keeping all prices more affordable. In fact, Pennsylvania consumers who were still receiving their electricity from their utility in 2024 were saving about 20% on their electric supply compared to what the rate would have been when an inflation adjustment is applied to the 1996 rate. This is a demonstration of downward price pressure because competition is present, preventing monopoly utilities from charging uncontested rates. 

The effect of competition and downward price pressure can be found in all consumer class electricity prices. When comparing all monopoly utility states to competitive states, non-residential (industrial and commercial) electric prices increased by nearly 40% between 2008-2024 in monopoly states. In contrast, electric prices for that same consumer class slightly decreased by .3%.

In looking at the price performance over time, not only did monopoly states prices increase significantly over time, but the average price for monopoly states also surpassed the average price for competitive states –– which decreased over time. 

When attempting to compare electricity prices, it helps to understand what makes up the price that’s being compared, and just as important, how prices have performed over time in the states that are being compared. In the end, price per kWh only scratches the surface of what defines market success. Price performance gives a better picture by measuring long-term consumer value.

The post The Real Story Behind Electricity Price Comparisons first appeared on Retail Energy Advancement League.

In an effort to prepare for and tackle this transitory time, the Pennsylvania Public Utilities Commission (PUC) recently hosted a technical conference with industry professionals to assess the potential risks of our energy supply and what solutions might be applied to overcome challenges in Pennsylvania and beyond. Areas of focus included how to get the right mix of resources online, facilitating the completion of construction for generation resources, and what the PUC can do to facilitate resource adequacy.

Diane Holder, the vice president of entity engagement and corporate services for ReliabilityFirst, participated in the conference and reflected on the North American Electric Reliability Corporation’s (NERC) Long-Term Reliability Assessments in 2022 and 2023, which found numerous areas across North America at risk of resource adequacy shortfalls.

“The pace of growth and demand can be difficult to match,” Holder said when addressing increased load growth caused by data centers coming online. “Building that new transmission and generation can often take years to plan, approve, construct.”

Dr. Joseph Bowring, an Independent Market Monitor for PJM Interconnection, offered insight on resources in the interconnection queue but cautioned that most of those resources are intermittent.

“Ninety percent of what’s in the queue is not going to solve the reliability problem. Only 10 percent of that number is going to end up as a capacity resource,” Bowring said.

So, what are potential solutions?

It was a market-based approach that emerged as a superior solution to challenges raised throughout the session. 

“The answer is through markets,” said Adrien Ford, the Wholesale Market Development Director at Constellation Energy, in response to how to solve the problems facing Pennsylvania and many other states.

Travis Kavulla, Vice President of Regulatory Affairs at NRG Energy, went further, encouraging the formation of longer-term contracts and for regulators to drive retail customers toward considering the value of these contracts. He shared that among larger customer classes, there is an appetite for longer-term fixed-rate arrangements.

Kavulla pointed to contracts currently on PA Power Switch, Pennsylvania’s online shopping marketplace for retail energy, that are longer-range contracts available to customers that are lower in price than the default product even before the increased price of capacity is built in. 

“It would be much better to try to get those customers to shop for longer-term products,” Kavulla said.

As Pennsylvania and other states work to navigate energy resource adequacy, collaboration between regulators, market operators, energy suppliers, and industry stakeholders is necessary. The challenges are steep, but solutions are already being identified and can be obtained. One thing is clear: retail energy markets will be essential for adequacy success. 

The post Pennsylvania Investigates Resource Adequacy first appeared on Retail Energy Advancement League.