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Why is Electricity So Expensive?

Why is Electricity So Expensive?

We can complain all we want about the absurdly high price of electricity, but this situation is likely to persist for two reasons.

First, electric companies are government-sanctioned monopoly utilities. There is usually only one electricity supplier, just as there is one water and natural gas supplier. Telephone services — and phones themselves — used to be a monopoly; it took years of legal battles leveraging the Sherman Antitrust Act to break the telephone monopoly. Now there is a competitive market for phone services and handsets, just as there is the potential for a free and competitive market for electricity.

Second, the cost of electricity is primarily affected by the local cost of living; factors such as electric company wages, real estate costs, taxes, etc. So locations with a high cost of living — such as Hawaii, California and New York — have high electricity prices. And these high electric prices are likely to persist without some magical solution.

Speaking of magical solutions, it’s not practical to drill a well in your back yard for your own natural gas or water, but I can imagine a future in which you could generate your own electricity. How are the existing monopoly electricity providers reacting to this reality in which customers can produce their own less expensive electricity?

Please listen up to this week’s Energy Show as we delve into the reasons why electricity is so expensive — and how things are changing as solar, storage and better public policies are rolled out.


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