Can higher electricity prices be more affordable?
J.P. Pfeifenberger is a principal and practice area leader at The Brattle Group, and A.C. Schumacher is a senior consultant with the firm.
Four years ago we documented that retail rates in both restructured and non-restructured states increased by approximately 31 percent since restructuring started in 1997.1 While 2006 rates in restructured states were significantly higher than rates in non-restructured states, this was already the case in the mid-1990s prior to restructuring.
This article updates these rate comparisons through 2010, a four-year time span that includes significant initial increases in power prices, substantial economy-wide adjustments, and striking changes in electricity markets triggered by a sharp decline in natural gas prices and continued increases in the cost of coal. In addition to updating the analyses, we explore three questions: 1) how much have rates in restructured and non-restructured states adjusted to the change in economy-wide and energy market conditions?; 2) do higher electricity rates in restructured states also correspond to higher residential electricity bills?; and 3) what portion of household income is spent on these electricity bills?