Electricity: What A Bargain!

American homes use more electricity today than ever. Yet the portion of our household budgets that we devote to our electricity bills has actually declined.

That’s because electricity prices—unlike the prices for most other goods—did not keep pace with the rate of inflation for many years.

From 1987 to 2007, electricity prices rose, on average, by 1.8 percent per year, while inflation rose at a rate of 3.1 percent per year. Overall, the price of one kilowatt-hour of electricity (in nominal dollars) has increased by 43 percent since 1987, while the prices of other consumer goods like gasoline, health care, housing, food and beverages, and transportation have increased at much higher levels.¹

Today electric companies are facing steadily increasing costs to generate and deliver electricity. While electric companies make continuous efficiency improvements and are working with state regulators to contain costs and to keep electricity prices as low as possible, the fact is that rising electricity costs are becoming inevitable throughout the United States. And yet, electricity remains one of the true bargains among crucial U.S. commodities.

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¹Sources: U.S. Department of Labor, Bureau of Labor Statistics (BLS), and U.S. Department of Energy, Energy Information Administration (EIA).