Info about Electricity
Variations in Electricity Prices by State
Electricity prices in different states vary depending upon the type of energy regulation enforced in that particular market. There are several factors that are essential in determining the average cost of energy for a residence or business establishment. These factors include the sources used to create electricity, municipal regulatory laws, and the amount of taxes a consumer pays each month on their bill.
There are large differences in electricity prices by state based on the source used to create the power. For example, Hawaii has the highest electricity prices, primarily because it depends on imported oil to produce its electricity, and shipping costs greatly increase the cost of that oil. On the other hand, states that primarily depend on hydropower and coal power plants for their electricity tend to have the least expensive electricity.
Municipal and state laws both play a vital role in the variations in electrical prices throughout the country. Some states regulate energy companies with an iron fist, making it difficult for businesses to compete with each other. Other states allow the free market to dictate how energy companies conduct their business which causes some businesses to offer cheap deals to their clients. Paradoxically, electricity prices tend to be higher in states with deregulated electricity markets, when compared with states with strongly regulated electricity markets, showing that competition is not necessarily better for consumers when it comes to electricity.
Finally, the cost of taxes differs quite a bit from state to state, which creates a discrepancy on how much consumers pay for electricity. Taxes in states such as California, New York, Massachusetts, and others will always remain high since the local governments have chosen to tax electrical consumption quite heavily. Other states with minimal taxes allow consumers to pay less for electricity.
These are the factors that affect the price of electricity in each state. Each must be considered in order to understand how electricity prices vary across the United States.