Why Electric Service is This Low

Why electric service is at the all-time low, 1.30%, as a share of consumer expenditures
Today in Fortnightly

We've been writing this week about how electric service has never been cheaper for the American consumer than in November. 

Never, ever, over the last 695 months, since January 1959. 

The Commerce Department publishes each month an extraordinarily detailed table on Americans' personal consumer expenditures. Its latest release shows that the share of consumer expenditures spent on electric service was an all-time low, 1.30 percent. 

Energy Department data drills down on electricity. It isn't released as rapidly as Commerce data. But let's see what the latest Energy release tells us.

As of October, year-to-date residential expenditures for electric service totaled $150 billion. My analysis suggests this will end up at $175 billion by year-end.

If I'm right, American consumers will spend less for electric service in 2016 than in 2015, when they spent $178 billion. And less than in 2014, when they spent $176 billion. 

That's a monumental development. Residential expenditures, year-over-year, have significantly decreased just once in the last ten years (from 2011 to 2012).

Yet, the number of households with electric service is rising. Utilities served 129 million households in 2014, 130 million in 2015, and 131 million in 2016.

Take these trends together. Electricity expenditures are decreasing. Households are increasing. Then per-household electricity expenditures are decreasing. 

Next, consider that overall consumer expenditures are increasing. Therefore, the share of overall expenditures needed to pay electric bills is decreasing. In November, it was down to 1.30 percent.

What can we expect going forward? Overall consumer expenditures will likely increase further in 2017. Electricity expenditures will likely be somewhat stable. 

Lighting and other efficiencies puts downward pressure on electricity. While household growth, disproportionately in the South, puts upward pressure.

November 2016, with the all-time low of 1.30 percent, might not hold the record for long.


Number-crunching courtesy of Public Utilities Fortnightly.