Pertinent to rate design debate, variable falling further behind fixed cost
The public naturally believes that most electric utility costs are variable, if only because utility bills are mainly based on per kilowatt-hour rates. Utilities' fixed costs, for generation, transmission and distribution infrastructure, are largely invisible to the average person.
Electric bills average four to four-and-a-half percent of expenditures of low income households
One of the primary concerns in utility regulation, rightfully so, is the affordability of electricity to low income households. So how are we doing in this critical area?
The answer can be found in the latest semi-annual Consumer Expenditure Survey by the US Bureau of Labor Statistics. This survey has been providing extraordinary insights about what Americans buy, and what they spend, since the 1980's. It samples many thousands of households quarterly and repeatedly.
March 6th Democratic debate featured fracking food fight.
Most of you know the abundance of natural gas, hence its low price, is due to the fracking revolution. And that the public's electric and gas utility bills are relatively low as a result.
So you might find of interest this transcript of the March 6th Democratic debate, where the presidential candidates had a food fight over fracking:
Friday’s data release from Labor Dept.: average electric bill fell 1.2%.
As we wrote yesterday, it's like Christmas in April. On Friday, the Labor Department came down the chimney with how much American households spent on pork, postage, pets, personal care products, pensions, and everything else during the year ending June 2015, including electricity.
Havlik’s timeless analysis: Justification for fixed charges in rates, their just level relative to variable charges.
I found this book at the Library of Congress and had to have it. Fortunately AbeBooks, that has just about anything old and obscure, did have for sale this 1938 classic on rate design. And that's how I came to own a copy of "Service Charges in Gas and Electric Rates" by Dr. Hubert Havlik.
2016 could place in fifth or sixth or seventh place. Behind 2010, 2011, 2014, 2015 for sure, possibly 2013, 2007 as well.
In the first quarter of 2016, electricity sales to residential customers were 346.8 million megawatt-hours. This was well below sales in the first quarter of 2015. And well below sales in first quarter of 2014.
Q1 2016 sales were 8.3 percent below sales in Q1 2015. And they were 10.9 percent below sales in Q1 2014.
Sales in March, the last month of the quarter, were particularly low. They were 14.4 percent below March 2015. And 12.4 percent below March 2014.
The falling percentage of electric bills has freed nearly 1% of consumption expenditures since the 1980s.
Last week, the Commerce Department's data for the Gross Domestic Product again highlighted electricity's affordability. Residential electric bills in May were 1.40 percent of personal consumption expenditures nationally.
This compares to 1.46 percent in May 2015, 1.43 percent in May 2014, and 1.43 percent in May 2013.
And compares to 1.40 percent in April 2016, 1.36 percent in March 2016, 1.39 percent in February 2016, and 1.41 percent in January 2016.
Bottom line? Residential electric bills have been consistently moderate for a while.
On August 12, the Labor Department published the Producer Price Index data through July 2016. Price trends are still good for electric and natural gas consumers. And price levels are historically favorable for consumers.
But the four monthly data series we track, from three federal departments, Labor, Commerce and Energy, are beginning to tell us something new.
But first, what did the Producer Price Index have to say?
Electric bills are around four percent of expenditures for low-income households versus around two percent for high-income households
Today we continue to mine the mother lode, the Labor Department’s Consumer Expenditure Survey. In extraordinary detail, it reports what households spent last year for everything.
Let’s look at electric bills by income. There are fascinating implications for utility regulation and policy.
As we wrote last week, a household’s electric service averaged $4.00 daily. Or 2.6 percent of all consumer expenditures.
Nov. 22, 2016: It feels like electric utility service is less costly than it was. This feeling, a reality, is backed up by Consumer Price Index trends.
The Labor Department has been tracking the prices of the goods and services that consumers typically buy, including electric service, since 1913. It’s interesting, though not too relevant to today, that electric service costs 4.6 times what it did in 1913, while consumer goods and services overall cost 23.9 times what they did back then. Comparing 2015 to 1913 annualized.
Electricity is far cheaper now.