Good To Know

5 Factors That Influence Electricity Rates and How to Take Advantage of Them


Many factors determine your electricity rates, including local fuel costs and power plant availability. Other factors include weather patterns and energy regulations.

For example, during summer, high electricity usage from air conditioning drives up demand and thus prices. But you can save by lowering your consumption during off-peak hours.

Time of Use

Depending on your utility’s time of use (TOU) pricing option, Texas electricity rates differ during peak and off-peak hours. Utilities design their TOU rates to encourage customers to reduce demand on the electric grid during peak consumption times by shifting energy-intensive activities like running a dishwasher, doing laundry, or charging an electric car to off-peak service times like nighttime.

During peak consumption hours, power companies must produce more electricity to meet demand. This is why the electricity rate is higher during these times. It’s also why many utilities offer TOU plans to their residential and commercial customers, which allow them to save money by shifting energy usage to off-peak hours.

Seasonal

Since the 1990s, deregulation has reshaped power markets around the world. In today’s competitive electricity market, seasonal factors often influence rates.

During the summer, energy demand surges as people rely on air conditioning systems. This puts a strain on generation capacity and drives up prices. In contrast, chilly winter weather leads to heating demands that burden supply similarly.

While consumers can’t control seasonal demand, they can reduce their energy usage during peak hours by using a programmable thermostat or participating in a demand response program. These efforts can help ease the stress on the electric grid and keep energy rates lower.

In addition to seasonal factors, there are many other influences on electricity rates, such as weather, cost of fuel, and transmission infrastructure. As a result, month-to-month rates vary significantly. Some plans offer flexibility by allowing you to choose the right power plan for your family’s energy needs and budget. With a variable rate plan, you can benefit from lower rates during off-peak seasons. 

Weather

The weather plays a big role in your energy consumption and the price of electricity. The right weather conditions support power production, lowering prices, while extreme weather increases consumption and raises energy rates. For example, a wet, snowy winter can create a favorable environment for hydroelectric generation at lower costs. Similarly, high wind speeds produce more efficient solar energy at cheaper rates.

Additionally, the fuel cost is a significant factor influencing the electricity rate. When natural gas prices rise, you can expect your energy rates to do the same. Many power plants are built with a mix of different fuels, and the type used can also impact electricity rates.

The polar vortex and other extreme weather events also skew electricity prices higher. High “ancillary” costs are incurred to ensure grid and transmission reliability during extreme cold temperatures. They can be passed on to suppliers who may absorb these costs or pass them on as a one-time line item on a future electricity bill. This makes it more important than ever to find a provider offering transparent and competitive electricity consumption pricing options.

Fuel

The cost of electricity rates can also depend on the price of fuel used to produce it. If the price of natural gas or coal increases, the electricity cost will also rise.

Another factor that impacts energy costs is the economic conditions in a country. If a country experiences a recession, the electricity demand may decrease. This can lead to lower electricity rates for consumers.

The availability of power plant capacity can also affect electricity rates. If there is a shortage of energy production, utilities may have to buy electricity from the open market, which can be more expensive.

Other factors influencing electricity rates include government regulations, infrastructure investments, public policy-related costs, generation mix, regional climate, fuel prices, and more. These variables make it so that your electricity rate can vary from one city to the next.

Demand

When electricity is in demand, prices rise because more electrical energy must be generated to meet it. You can see these times on your energy usage graphs with big upward spikes, and they are called peak demand periods.

Electricity systems balance supply and demand by predicting how much electricity people use at any given time. They rely on historical records and advanced computer models. But other factors also influence demand, like household income. For example, people with higher disposable income are more likely to have larger homes and more energy-intensive appliances, increasing their electricity demand.

Many utilities offer time-of-use pricing to encourage consumers to shift their energy usage to off-peak hours, which helps reduce demand and lower rates. Understanding the different factors influencing electricity rates can make you a smarter consumer and save you money on utility bills. For more information, talk with your local energy provider. They’ll be happy to explain how they set their energy rates. They may even offer you new pricing options that can save you even more.

 


Samantha hails from Virginia and is a proud wife to a retired Deputy Sheriff and mother to two amazing little boys named Jack & William. A veteran product reviewer; Samantha has been reviewing products for 12 years and offers high quality product reviews with original photography.

Samantha hails from Virginia and is a proud wife to a retired Deputy Sheriff and mother to two amazing little boys named Jack & William. A veteran product reviewer; Samantha has been reviewing products for 12 years and offers high quality product reviews with original photography.

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