Electric slide: Power costs drop
Thanks to reduced demand, the cost for power at the wholesale level has gone down, according to this article from the Wall Street Journal.
A demand decrease of roughly 4.5% translated into nearly a 40% drop in wholesale electricity prices for the first half of 2009. Natural gas prices have fallen by about two thirds from their 2008 levels, according to the article.
This is in stark contrast to last year, when prices zoomed up so far so fast that it kicked off a (still ongoing) debate in the financial media about whether demand or rouge stock speculators were at the root of the problem.
The article goes on to say that average Americans might not notice a price decrease on their electric bill right away, since many power contracts lock in one price for months at a time regardless of what the market does. (In a time of rising prices, this can be a big benefit for people who don't want to see their bills skyrocket without warning.)
It's not just average Joes and Janes using less power; because of the recession. Manufacturers are cutting back on production and many stores are trimming their hours. This translates to fewer hours of the day that lights and machinery are switched on, which leads to less energy being consumed.Environmentally-conscious types might jump for joy at this news, but people who own shares of and invest money with the power companies aren't nearly as thrilled. Since both consumers and companies are using less juice, utility companies aren't making as much money. In some cases, programs the power companies launched in earlier years to try and get people to cut their energy use have worked a little too well, backfiring on them.
Still, though, some utilities are trying to raise rates in the midst of what should be a rare bit of relief for consumers trying to stretch every penny. Pacific Gas and Electric in California says it needs to update its power grid, while City Utilities in Missouri blames the addition of "smart" meters for the surcharges it's seeking to add to customers' bills.
One other possible down side to this slump: When the recession is over and both people and businesses are living and working full-steam ahead, we could be faced with higher prices if utilities don't ramp up quickly enough to accommodate the increase in demand that will accompany an economic recovery.