How often have you looked at your electric bill and tried to figure out exactly what it means, only to revert to just dividing the total by the numb of kilowatt hours to get an "average price". While this is an interesting exercise, it doesn't really give an accurate picture of the underlying prices that are actually embedded in the rate. This applies to residential customers and most commercial customers.
In preparation for a talk on using solar energy to hedge electricity price risk for commercial and industrial users, we have done some analysis on one of our customers' AEP Ohio account.
This customer is a medium size business that uses about 12,000 KWH per month. They fall neatly into AEP Ohio's Medium General Service (GS-2 Secondary) tariff rate, which is the service that applies to a very large number of businesses and municipalities in central Ohio.
To do the calculation, we removed fixed charges and demand charges from the bill and then divided the remainder of this bill by the number of kilowatt hours.
As you can see from the chart, the price has been steadily rising since January 2009, which is how far back this customer's usage and billing information is available. In fact, this shows that even in the midst of the shale gas boom and despite lower natural gas prices, the retail cost of electricity is rising. The trend line in the chart shows a 4.7% annual inflation rate.
We will have more to come in the next couple weeks as we do more analysis of the current price trends, regionally and nationally. If you'd like help dissecting your bill, contact us.