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What Causes Changes In Electric Price Tariffs

Electricity is a necessity; that’s why even if the price hikes, most consumers still choose to be with the best, expensive suppliers to get the right supply of energy for their homes and businesses. But what are the factors that influence electric price tariffs?

Basically, the electric price reflects the expenses to create, fund, sustain and operate the power plants while some are for the owners and shareholders financial return.

Meanwhile, there are other key factors that affect the increase or decrease of electricity price:

Power Plants: Each electricity provider has its own power plant that needs to be constructed, maintained, and operated, thus, developing costs that need to be repaid.
Fuels: Depending on the cost of fuel per unit, the amount of the fuel may change; for example, the amount of coal per tonne or hundred cubic feet for the gas.
Weather Conditions: It may not sound obvious at first but the weather condition affects the electric price all the time. For example, a strong wind can provide electricity generation from wind farms for a lower cost while snow and rain can provide water from hydropower generation for a lower price. However, severe temperatures, such as cooling, can increase the prices.
Transmission And Distribution System: The system’s role is important to the production of electricity, however, since it is working, it creates costs for its maintenance and repair. For example, an accident occurred and the electricity transmission and distribution system was damaged; it needs repair, thus, generating a repair expense.
Other Expenses: Energy companies have other expenses to pay, such as the regulation fee. As the price of the fees or charges expenses, the price of the energy might be affected.

Why Are Electricity Prices Higher During Summer?

While electricity prices change from time to time, there’s one time when consumers pay the most. Basically, the customer’s pay rates depend on the energy’s season expenses. The differences in electricity rates reflect variations in fuel costs, generation sources’ availability, electricity demand, and the availability of power plant. As for summer, the electricity rates are higher because it requires more costly generation sources to meet the hiked demand.

The warmer weather during the summer causes more people to use electricity, such as air conditioners. As a result, the market for electricity rises.

The primary solution is to regulate the use of high energy consuming equipment such as the air conditioners while incorporating easy fixes to keep the house cool. Using heavy drapes on windows can effectively keep the house cool by blocking the sun and warming the place. Adjusting the ceiling and window fans also help in reducing the energy bill. Place fans strategically in the house to keep the air circulating. In addition, turning the lights off during the day can lower the electricity bill and conserve energy as well. If the weather is good, opening the window and using the natural light is a better option. This does not only reduce the use of electricity but also keep the place cool in case there is a need for the air conditioner later.

Electricity Prices Depend On The Type Of Customer

The prices of electricity are higher for the residential and commercial customer than with industrial consumers. This is because the cost is higher in distributing electricity to homes and business premises. Meanwhile, manufacturing facilities use more electricity which is received on higher voltages, therefore, the electricity supply is more efficient and cheaper. In fact, the prices for industrial customers are almost close to the wholesale price of energy.

Moreover, the place where the customer lives also affect the price of the electricity. It varies because of the local fuel costs, pricing regulations, and the availability of fuels and power plants.

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