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EIA expects moderate increases in electric prices, but with wide regional variations

From the June 12, 2014 issue of Public Power Daily

Originally published June 12, 2014

By Robert Varela
Editorial Director
In its latest Short-Term Energy Outlook, the Energy Information Administration forecasts that the U.S. residential price of electricity will average 12.5 cents per kilowatt-hour during 2014, an increase of 3.4 percent from 2013. Some areas, especially the Northeast, have experienced rapid increases in retail electricity prices in recent months, EIA said. The average residential electricity customer is expected to spend 4.9 percent more this summer (June, July, and August) than during the same time last year. This increase in the average residential bill reflects a projected 1.2 percent increase in average electricity usage and a 3.7 percent increase in the average retail price of electricity, EIA said. Residential prices are projected to increase an additional 2.4 percent during 2015.

Commercial and industrial rates are expected to outpace the residential sector this year, increasing by 4.8 percent and 4.6 percent, respectively.

Natural gas spot prices averaged $4.58/MMBtu at the Henry Hub in May, down $0.08/MMBtu from April. EIA expects spot prices for natural gas will remain near current levels ($4.58/MMBtu at the Henry Hub) until the start of the next winter heating season. Henry Hub natural gas prices are forecast to average $4.74/MMBtu in 2014 and $4.49/MMBtu in 2015. 

Higher natural gas prices this year are contributing to a projected 0.5 percent decline in natural gas consumption in the power sector to 22.2 Bcf/d in 2014, the agency said. EIA expects natural gas consumption in the power sector to increase to 23.0 Bcf/d in 2015 with lower natural gas prices and the retirement of some coal plants.

During the second half of 2014, EIA projects overall electricity consumption will rise by 0.9 percent from the same period last year. This second-half growth estimate is driven by a 5.1 percent year-over-year increase in cooling degree days and a 2.3 percent increase in gross domestic product, the agency said.

There is wide variation in the average usage projections, with the average customer in New England consuming 3.7 percent less electricity than last summer while customers in the East South Central area consume 3.9 percent more electricity, according to the EIA report. Electricity prices in all areas of the United States, except for the West North Central, are expected to be higher than last summer. New England retail electricity prices are projected to rise by 9.6 percent, but the average bill is projected to go up by only 5.6 percent because of reduced electricity usage. Customers in the East South Central states are expected to experience the highest overall increase in average electricity bills this summer (8.7 percent), EIA said. 

EIA projects total electricity generation in 2014 will grow by 1.9 percent from last year to an average of 11,335 gigawatt-hours per day (GWh/d). Recently rising costs for natural gas have driven power generators to use relatively more coal for supplying electricity, the agency said. The use of coal for power generation is expected to rise 248 GWh/d (5.7 percent) this year while natural gas-fired generation falls 51 GWh/d (1.7 percent) and nuclear generation falls 53 GWh/d (2.5 percent) from last year's levels. The use of renewable energy sources will grow by an average of 59 GWh/d (4.1 percent), EIA projects.

In 2015, total renewables consumption for electric power and heat generation is expected to increase an additional 3.4 percent, as a result of a 2.2 percent increase in hydropower and a 4.0 percent increase in non-hydropower renewables, the report said. 

EIA estimates that wind power capacity will increase by 7.3 percent in 2014 and by 14 percent in 2015. Electricity generation from wind is projected to contribute 4.5 percent of total electricity generation in 2015. 

EIA expects continued robust growth in solar electricity generation, although the amount of utility-scale generation remains a small share of total U.S. generation at about 0.5 percent in 2015. While solar growth has historically been concentrated in customer-sited distributed generation installations, utility-scale solar capacity doubled in 2013. EIA expects that utility-scale solar capacity will increase by 57 percent between the end of 2013 and the end of 2015. About 70 percent of this new capacity is being built in California. However, customer-sited photovoltaic capacity growth, which the Short Term Energy Outlook does not forecast, is expected to exceed utility-scale solar growth between 2013 and 2015, according to EIA's Annual Energy Outlook 2014

EIA estimates that carbon dioxide emissions from fossil fuels increased by 2.2 percent in 2013 from the previous year. Emissions are forecast to rise again by 2.2 percent in 2014, followed by a 1.1 percent decline in 2015. The increase in emissions in 2013 and 2014 reflects growth in coal consumption for electric power generation, EIA said. "Coal emissions are projected to decline by 3.2 percent in 2015 with increasing coal plant retirements."

The June 10 Short-Term Energy Outlook is posted on EIA's website


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Vice President, Integrated Media and Communications
Meena Dayak

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro