Electricity prices have fallen dramatically in several regions, especially adjusted for inflation, but is this leading to greater consumption?
The Consumer Price Index was published last Tuesday for the period through April. Electricity? The CPI for electricity has fallen 2.1 percent, April 2016 as compared with a year ago, April 2015.
During the same period, the overall CPI has risen 1.1 percent. This means electricity is significantly less expensive than it was last year.
Electricity prices have fallen dramatically in several regions, especially adjusted for inflation.
In the northeast U.S., the CPI-Electricity has fallen 4.1 percent while the overall CPI has risen 1 percent. So northeasterners are enjoying noticeably cheaper power.
In the south, the CPI-Electricity has fallen 3.8 percent while the overall CPI has risen 0.9 percent. So southerners are enjoying noticeably cheaper power as well.
In some areas electricity prices have fallen further. In the New York City area, the CPI-Electricity has fallen 4.7 percent while the overall CPI has risen 1 percent. In the Houston area, the CPI-Electricity has fallen 9.7 percent while the overall CPI has risen 1.4 percent.
With the prices of electricity discounted to this extent, in some places, have consumers responded with increased consumption? There seems to be little evidence of this. Consumption growth remains slow, in part driven by mild weather and more energy-efficient lighting and appliances.
Might this suggest that the prices of electricity are mainly in the range in which consumers are price-insensitive? That we generally use electrical machines, appliances and devices as much or as little as we want without much attention paid to its cost per kilowatt-hour.
For ten years, the price for Public Utilities Fortnightly hasn't budged from 24 bucks per month. Adjusted for inflation, this means PUF is 20 percent cheaper than in 2006. Contact Joe Paparello at paparello@fortnightly.com for one of the best bargains in utility regulation and policy.
Steve Mitnick, Editor-in-Chief, Public Utilities Fortnightly
E-mail me: mitnick@fortnightly.com
