Nov. 22, 2016: It feels like electric utility service is less costly than it was. This feeling, a reality, is backed up by Consumer Price Index trends.
The Labor Department has been tracking the prices of the goods and services that consumers typically buy, including electric service, since 1913. It’s interesting, though not too relevant to today, that electric service costs 4.6 times what it did in 1913, while consumer goods and services overall cost 23.9 times what they did back then. Comparing 2015 to 1913 annualized.
Electricity is far cheaper now.
Let’s go back to 1984, after the impact of higher world oil prices had been mostly absorbed by our industry. For this shorter thirty-two-year period, we’ll switch to the compounded annual growth rate, CAGR, to make comparisons.
What consumers pay for electric service has increased since 1984 at a CAGR of 2.04 percent. October 2016 to October 1984. In contrast, what consumers pay for goods and services overall has increased at a CAGR of 2.63 percent.
Electricity is significantly cheaper now.
To see more recent price trends, let’s go back to 2008. The CAGR for electric service during the last eight years is 0.94 percent. October 2016 to October 2008. The CAGR for goods and services overall is 1.38 percent.
Again, electricity is significantly cheaper now.
The last two years have been a boon for electric customers. The CAGR for electric service since October 2014 is minus 0.07 percent. The CAGR for goods and services overall is 0.90 percent.
We may recall the brief period before Hurricane Katrina, before August 2005, when electric service was historically cheap, inflation-adjusted. Low natural gas prices then kept electricity prices low. So, if one measures price trends since the first George W. Bush administration, they can find electricity somewhat outpacing the overall cost of living.
Though, with the moderate electricity price trends of the present, even these comparisons are turning positive for the consumer.
Happy Thanksgiving from the staff of Public Utilities Fortnightly!
