Customer Spending on Electricity Expected to Increase This Summer
EIA’s Short-Term Energy Outlook forecasts the typical U.S. household will spend an average of $426 for electricity this summer (June–August), an increase of about 3% from the average summer expenditures in 2017. The expected increase in electricity bills is a result of forecast higher retail electricity prices and slightly higher projected electricity use to meet increased cooling demand.
The amount of money that customers spend on their electric bills is based on the quantity of electricity they used during the period, measured in kilowatthours (kWh), and the price charged for that electricity (dollars per kWh). Fluctuations in electricity bills are usually the result of differences in outside temperatures, so electric bills are usually lowest during the milder spring and fall months.
In most parts of the country, residential electricity usage peaks during the summer months of June, July, and August, when households are using air conditioning to cool their homes. Based on projections from the National Oceanic and Atmospheric Administration (NOAA), EIA expects cooling degree days—an indicator of cooling demand—during the months of June through August 2018 to total about 2% more than during the relatively mild summer of 2017. NOAA expects cooling degree days in summer 2018 to be about 1% fewer than the average of the previous 10 summers.
The projected increase in summer temperatures compared with last year contributes to EIA’s forecast that the average U.S. residential electricity customer will use about 1% more electricity this summer. NOAA forecasts summer temperatures to be warmer throughout the eastern area of the country, while the western states are expected to experience milder summer weather than last year. Summer-over-summer changes in average household electricity usage range from 6% less electricity use in the Pacific states to 5% more electricity use in the New England states.
EIA expects U.S. residential retail electricity prices to average 13.5 cents per kWh between June and August 2018, about 2% higher than last summer. Electricity prices are rising primarily in response to higher generation fuel costs, especially for natural gas. Retail electricity rates are also rising as utilities increase their investments in transmission infrastructure. Electricity prices are expected to be higher this summer in all regions of the country.
EIA expects natural gas to be the primary fuel for summer electricity generation, providing 37% of total U.S. electricity generation compared with 35% during the summer of 2017. The share of forecasted generation fueled by coal averages 29%, down from 31% last summer. This change in the projected relative generation mix of coal and natural gas is primarily a result of recent natural gas capacity additions and coal plant retirements.
Principal contributor: Tyler Hodge