10 Reasons Deregulated Electricity Companies Raise Prices
There are numerous reasons for price increases in energy sources, as with other services. The difference that deregulation provides is in creating competition to make the costs more affordable overall and provide choices for consumers. That doesn’t make them immune from factors beyond their control which contribute to price hikes. Here are ten such reasons why deregulated electricity companies raise their prices:
- Aging infrastructures that need to be upgraded can run into the billions in cost. That money has to come from somewhere, and that typically means that John Q. Public winds up digging a little deeper each month.
- Electricity companies are required to improve their facilities in order to meet stricter EPA guidelines. Again, this additional expense requires electricity companies to raise their rates in order to defray those costs.
- Inflation affects deregulated as well as non-deregulated power companies. The cost of doing business goes up for everyone, and so the price of the services each company provides goes up accordingly.
- Fuel costs increase a company’s overhead dramatically, particularly when its operations rely on a large fleet of heavy equipment and trucks. The price of gas is being felt not just at the pumps, but in our monthly bills and expenses as well.
- As energy sources switch from non-renewable to renewable, the plants need to be upgraded to accommodate those changes. Companies which lack the technology to generate renewable power need to invest revenue into its installation.
- Surplus electricity, which an energy company might sell wholesale to other companies, is at a low demand currently. When this happens, the revenue that comes from its resale evaporates, causing the company to seek alternative revenue streams. This typically results in rate hikes.
- The energy source dictates the price of electricity; so as the price of the source goes up, so does the price of the electricity it generates. Whenever the price and availability of coal increases, we see the effects in our electric bills.
- Operational costs will have a significant bearing on the price that any company must charge for their product or service. Whenever these costs go up for a company, they pass that cost along in the form of higher prices.
- Very high or very low consumption can also affect energy prices. If there is too little demand for electricity, then the power company loses that revenue stream. Conversely, too great a demand on the grid can mean a power shortage, which will require the company to buy surplus electricity from elsewhere.
- The cost of wholesale power, which some utilities have to purchase, as mentioned above, is more expensive. Those companies who must buy their electricity wholesale from other utilities have to in turn charge higher rates to their consumers.