fbpx
Connect with us
Others

A Beginner’s Guide To Energy Pricing

Published

on

fuel

People tend to notice their electric bill can fluctuate throughout the year. When the bill starts to get too high, they may look to change their power consumption habits or invest in more energy-efficient appliances. But what actually drives the cost of energy throughout the year, and how do the prices really get set?

Fuel Costs

Of course, different power plants run on different fuels from petroleum, oil, natural gas and liquefied natural gas, though of course some still run on coal and others include hydroelectricity and nuclear power. How the fuels are purchased, the way they’re transported and ultimately the way they’re distributed all affect the cost. Plus market speculators all have their own forecasts on where there prices are headed. One such forecast has been showing crude oil currently trending at about $40 a barrel, and the current outlook is that it’s likely to trend downward as the summer months come to a close. Natural gas is also been selling quite cheap lately, and its prices aren’t likely to go up anymore this year.

Geographic Location Costs

Part of the power grid infrastructure and power supply costs are affected by geographic location. That’s because of several factors that include not only the topography of the land and how its roads and infrastructure are designed but also local governments and regulations they may have on power consumption. As an example of how different prices can be across the US, the cost per kilowatt-hour in Louisiana was only 7.65 cents, while the rate skyrocketed to 28.33 cents per kilowatt-hour in Hawaii. Hawaii does have by far the highest power costs of any state, but you certainly will see a marked difference in power supply costs in Maine, and those in California.

Seasonal Costs

Your power bill will usually rise in the spring and summer months and lower in the fall and winter. That’s because it usually takes more power to run appliances like refrigerators, and consumers tend to run their air conditioners more during those months. But when cold winter temperatures become extreme, that too could raise the rate.

Consumer Type

Residential consumers and different types of business consumers all pay different rates on power. Certain industrial consumers will have a more steady rate of consumption, while residential consumers may be more unpredictable in their usage, and it costs more to get it to them. Plus, residential consumers may have limited options in terms of who they can purchase power from.So, in conclusion, energy companies have to take all of those factors into account when laying out a pricing strategy for their power supply. But they can also benefit from energy pricing software which uses real data and advanced algorithms to calculate prices for different consumers. This kind of software can help them reach a good pricing point that will reflect current market conditions and make sure their bottom lines aren’t being hurt; yet at the same time ensure they aren’t unfairly price gouging consumers when it’s unnecessary.

Continue Reading

Popular