Declining Utility Prices: Do pigs fly?

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Occasionally, maybe…

APS has decreased its electrical power prices twice in 35 years. Yep, 1996 and very slightly for the upcoming 2022. In fact, across the US, residential electricity prices did flatten from 1995 through 2000. But from 1970 to 1995 and 2000 through 2021 prices increased each year. The last 50 years have shown 3.7% annual increases on average.

Will the future be any different? I think not.

With only electric vehicles being offered by manufacturers after 2035, demand will continue to increase for electricity. Utility companies will need to spend significant money on new and existing infrastructure to keep up with this demand. This will be paid for by customers in the form of higher rate increases for electricity.

Aging existing infrastructure will require investment to keep the current amount of electricity flowing, all paid for by consumers. Fuel prices for oil, natural gas, coal and nuclear generation can be very volatile, making those impacts on consumer bills very unpredictable. In the long term, the price for each of these commodities has continued to increase, having the same impact on the utility’s price for electricity.

With global warming and the measurable increase in violent storms, significant damage is experienced by portions of the electrical grid each year. This could be caused by fires, ice storms, or hurricanes and the cost to repair is passed along to utility customers. As these events increase in frequency and intensity each year, so will the cost of repairs.

We have recently seen increasing inflation begin to take hold in nearly every area of our economy. The price of utility electricity is made up of generation, transmission, distribution, metering, billing, administration, management, regulation and taxation. It only takes increases in a few of these areas to raise the price of electricity significantly.

An average APS residential customer pays about 12 cents per kWh for their electricity today and if history repeats itself this electricity could cost over 30 cents per kWh in 25 years. Investing in solar power production will fix electricity prices at 4 to 5 cents per kWh over the expected 25+ year system life.

Which will you choose?

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