Electricity prices

Rates
The rates charged for electricity vary between countries, regions and states. The reason for the variation is primarily regulation and the way it is generated. Some states in the USA have large hydroelectric generation facilities that are largely subsidized and relatively efficient, and rates are low. There is often a time lag between wholesale and retail markets. Energy suppliers buy much of their gas and electricity for domestic customers in advance. Yet there is some suspicion that electricity firms use the lag to justify delaying a price cut.

Electricity retailing is a final process in the delivery of electricity from generation to the consumer. The other main processes are transmission and distribution.

Electricity retailing began at the end of the 19th century when the bodies who generated electricity for their own use made supply available to third parties. In the beginning, electricity was primarily used for street lighting and trams. The general public were allowed to purchase electricity only after large scale electric companies started.

The provision of these services was generally a responsibility of electric companies or municipal authorities who set up their own departments or contracted the services from private entrepreneurs. Residential, commercial and industrial use of electricity was confined, initially, to lighting but changed dramatically with a development of electric motors, heaters and communication devices.

The basic principle of supply has not changed over time. The amount of energy used by the domestic consumer, and the amount charged for, is measured through an electricity meter that is usually placed near the input of a home to provide easy access to the metre reader.

Customers are usually charged a monthly service fee and additional charges based on the electrical energy (kWh) consumed by household or business during the month. Commercial and industrial consumers normally have more complex pricing schemes. These require metres to measure energy usage in time intervals to impose charges based on both the amount of energy consumed and the maximum rate of consumption.

The rapid growth in electric appliances in the early part of the 20th century contributed to an explosive growth in electrification around the planet. The supply of electricity to homes, offices, shops, farms, factories, and mines became the responsibility of public utilities, which were either private organization subject to monopoly regulation or public authorities owned by local, state or national bodies. In some nations a statutory or government granted monopoly was created, which was controlled by legislation.

Electricity retailing in the period from approximately 1890 to 1990 consisted of managing connection, disconnection and billing of electricity consumers by local monopoly supplier. In many utilities there was a marketing function which encouraged electricity usage with excess capacity to supply encouraging conservation when supply was tight.

Electricity distribution is the penultimate stage in the delivery (before retail) of electricity to end users. It is generally considered to include medium voltage (less than 50 kV) power lines, electrical substations and pole-mounted transformers, low voltage (less than 1000 V) distribution wiring and often electricity metres.

An electric utility is a company (often a public utility) that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. Electricity is an integral part of life in the Developed world. It is indispensable to factories, commercial establishments, homes, and even most recreational facilities. Lack of electricity causes not only inconvenience, but, also economic loss due to reduced industrial production.

Creation of a market
In 1990 there were development in the way electricity was bought and sold. The theory was that as the customer can shop around, the customer will cause competition to increase the price and quality. In many nations, the electricity market was deregulated to open up the supply of electricity to competition. The UK Tories decided with that the UK Electricity Supply Industry was to be radically reformed to establish competition. The trend continued in other nations (New Zealand Electricity Market) and the role of electricity retailing changed from administrative function to an integrated utility to a become a risk management function within a competitive electricity market.

Electricity retailers now provide fixed prices for electricity to their customers and manage the risk involved in purchasing electricity from spot markets or electricity pools. This development has had casualties. The most notable example of poor risk management occurred in California in the summer of 2001, when Pacific Gas and Electric and Southern California Edison were driven into a bankrupt situation. By having to purchase electricity at high spot prices and sell at low fixed rates.

Customers can choose from a number of competing suppliers. They may also opt to pay more for greenpower, i.e. electricity sourced from renewable energy generation such as wind power or solar power.

The U.S. coal and electric power industries are linked, more than 87 percent (1) of domestic coal consumption is used for generation by utilities. Coal accounts for more than 56 percent (1) of utility power generation.

Average fuel price for electricity production in 2015 is projected to be about the same as in 1996 in all but the high fossil case (1).

Restructuring the EU electricity system to an electricity market has many an obstacle. Harmonised approaches are missing for the short-term market arrangements like organised markets and balancing markets (2).

An electricity provider is often known as the electric company or the power company.

(1) http://www.eia.doe.gov/cneaf/electricity/chg_str_fuel/execsumm.html

(2) The liberalisation of the European Electricity Market(s):

http://www.ofgem.gov.uk/ Ofgem - Regulates the electricity and gas markets in Great Britain

The job of promoting effective competition, wherever appropriate, and regulating effectively the monopoly companies which run the gas pipes and the electricity wires.

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Some energy utility companies

E.ON AG (ADR)
Suez SA (ADR)
Enel Societa per.Azioni (ADR)
Endesa S.A. (ADR)
Exelon Corporation
National Grid plc (ADR)
Dominion Resources, Inc.
TXU Corporation
The Southern Company
Korea Electric Power Corporation
Duke Energy Corporation
FPL Group, Inc.
Scottish Power plc (ADR)
FirstEnergy Corp.
Entergy Corporation
Public Service Enterprise Group Inc.
EDP-Energias de Portugal,
American Electric Power Company, Inc.
PG&E Corporation
Edison International

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