The cost of natural gas, a major fuel for generating electricity, has sharply declined at a rate of 8.4 percent per year for a decade, according to new data from the U.S. Energy Information Administration.
Still, electricity prices have climbed 1.5 percent per year between 2006 and 2016, the EIA said.
The reason for the disparity between fuel costs for generation and retail electricity rates is the cost of everything else, including transmission and distribution, generation plant maintenance and operation.
“Over the past decade, the portion of total electricity costs attributed to power production for most utilities has decreased from 69% to 54%, while the portion associated with delivering that electricity to customers has risen,” the EIA said.
Power production costs account for 70 percent of utility spending.
All this comes at a time when the grid is being transformed, becoming less reliant on large baseload generation units while moving towards increased reliance on renewables, distributed generation, microgrids and a broad move towards increased efficiency.
As this evolution proceeds, utilities increasingly recognize that they need to recast their relationship with their customers and embrace new business models. That is the focus of the Energy Times" Empowering Customers & Cities executive energy conference in Chicago, November 7-8.