Mild weather led to new 12-month wholesale electricity price lows in New England, the Mid-Atlantic, Louisiana, and Texas.
Mild temperatures led to a new 12-month low electricity demand in Southern Company on January 1.
Net electricity generation in the U.S. decreased by 7.9% compared to January 2022. This significant decrease in electricity generation occurred because the country experienced significantly warmer temperatures this January compared to last year.
Average nominal monthly electricity expenditures for residential customers in the United States increased 13.4%, or approximately $16, from $121 in 2021 to $137 in 2022, based on preliminary data. In inflation-adjusted, or real, dollars, this increase was the largest year-over-year increase since at least 1984, when we began calculating average residential electricity expenditures. A combination of colder weather, which increased residential electricity consumption, and higher power plant fuel costs, which flowed through to drive up retail electricity prices, led to the increase in expenditures. With growth in U.S. inflation, as measured by the consumer price index (CPI), rising to 8% between 2021 and 2022, the inflation-adjusted monthly electricity expenditures for residential customers in the United States increased 5.0%.
Total electricity demand in the United States reached an all-time high of 3.9 terrawatthours (TWh) in 2022, with total residential demand increasing by 3.5% over 2021. Both a colder winter and a hotter summer helped to produce a 2.4% increase in average monthly electricity consumption per residential customer. Average U.S. monthly electricity consumption per residential customer increased from 886 kilowatthours (kWh) in 2021 to 907 kWh in 2022.
Monthly electricity expenditures reflect both the amount of electricity a customer consumes and electricity prices. Although we do not directly collect retail electricity price information, we do collect electricity revenues from which we can derive prices by dividing through by consumption. In 2022, the average U.S. residential electricity price was 15.12 cents/kWh, a 10.7% increase from the 2021 average price of 13.66 cents/kWh. After adjusting for inflation, we estimate that U.S. residential electricity prices went up by 2.5%.
In general, higher delivered fuel costs to power plants were a primary driver of increased end-use electricity prices in 2022. The cost of fossil fuels delivered to power plants in the electric power sector increased 34% from $3.82 per MMBtu in 2021 to $5.13 per MMBtu in 2022. The increases by fuel were:
• Natural gas: 39%
• Coal: 20%
• Petroleum liquids: 62%
Increased fuel costs were passed along to residential customers and contributed to higher electricity prices.
At the state level, however, regional fuel cost dynamics and differences in weather patterns throughout the country had varying impacts on average residential electricity expenditures. From 2021 to 2022 the average nominal monthly residential electricity expenditure increased in all states except Michigan and Alaska. Percentage changes in average expenditures ranged from a high of +31.8% in Maine to a low of -1.6% in Michigan.
The large increase in Maine’s average expenditures was driven by a 32.3% increase in nominal prices. A November 16, 2021 press release from the Maine Public Utilities Commission announced a 2022 increase for Standard Offer electricity supply rates (the rate that applies to customers who do not purchase electricity from a competitive supplier of their choosing and instead receive Standard Offer Supply by default). The release commented that “sharp increases in natural gas prices are resulting in higher electricity supply costs for the upcoming year . This increase is primarily driven by New England’s wholesale electricity market prices which have increased dramatically.” The average spot price of natural gas at the Algonquin Citygate, the primary proxy for the value of natural gas in New England, rose about 50% in 2022 compared with 2021. Natural gas generally sets the marginal price for wholesale electricity in New England.
The two states with the next highest percentage changes in expenditures were also driven by higher power plant fuel costs. In New Hampshire, high natural gas prices contributed to New Hampshire having the second-highest increase (26.9%) in average nominal residential electricity expenditures. The third-highest increase (24.6%) in nominal residential electricity expenditures was in Hawaii. Hawaii relies extensively on imported petroleum, so the high cost of petroleum during 2022 contributed to the electricity price increase.
|State||Average monthly consumption (kWh)||Average price (cents/kWh)||Average monthly expenditures ($)|
|Source: U.S. Energy Information Administration, Form EIA-861M, Monthly Electric Power Industry Report|
In absolute terms, the states with the highest average expenditures were Hawaii, Connecticut, Alabama, Texas, and New Hampshire. Because of its significant use of imported petroleum, Hawaii has the country’s highest average monthly residential electricity expenditure ($221.56) despite having the country’s lowest average residential consumption rate (515 kWh/month).
Two of the top five states with the highest average residential electricity expenditures were in New England: Connecticut and New Hampshire. Connecticut, with the second-highest average expenditures ($176.25 per month), had fairly low average residential consumption levels (715 kWh per month), but it had higher-than-average prices at 24.65 cents/kWh. The higher electricity rates in Connecticut are typical of New England, where prices tend to be higher because of constraints on natural gas pipeline capacity during peak demand periods. The four states with the lowest monthly expenditures in 2022 were Utah ($86.88), New Mexico ($95.37), Wyoming ($99.06), and Colorado ($102.50). The District of Columbia also had a low average monthly expenditure of $97.24. All five of these areas had lower-than-average consumption levels.