These days, most of our monthly bills are predetermined flat rates we can budget for. Loans, mortgages, cable, internet, and more all are pretty predictable flat rates. However, one bill that can be hard to predict is your electricity bill each month. With fluctuating rates and usage each month you may be in for one ugly surprise when the bill arrives.
In fact, almost one-third of Americans struggle to pay their electricity bill each month. This is a staggering number and it begs the question: How affordable is your electricity bill?
What Makes Electricity Affordable?
Electricity bills can be very straightforward or complex depending on what you sign up for. For instance, If you elect to take part in programs like Time-of-Use pricing, you will be paying different rates for the same electricity throughout the day. But, at a very basic level, you get charged a flat rate for how much electricity you use each month.
Here is a map of the average rate per kWh for each state:
Rates are set using a number of market factors and can fluctuate quite often. Typically, you will see rates rise in the summer and winter when people are using more electricity to heat and cool their homes and fall in the spring and fall when the weather is milder.
Most people would assume that states with higher rates have higher electricity bills, right? Well, there are more factors than just rates that goes into making electricity affordable.
Energy Efficiency is the Kicker
Your electricity bill is a better metric for determining how affordable your electricity is. After all, your rate could be sky high but if you don’t use much electricity you will still have a small bill.
There are many states that have a higher than average electricity rate but lower than average electricity bill. For instance, Massachusetts has the 4th highest rates but the 36th lowest bills. How is this possible? Energy efficiency.
Massachusetts is ranked 1st in energy efficiency by ACEEE. The state has put forth a number of programs to help their residents become more energy efficient and use more renewable energy. They are also deregulated which means residents can shop and switch to lower electricity supply rates than what their utility offers. You can view a list of deregulated states here.
Meanwhile, states like Mississippi, Georgia, Alabama, and South Carolina all looked like they had affordable electricity. However, residential customers in those states have some of the highest bills in the country.
This is not to call residents of these states lazy or wasteful with their electricity. They may not have the same state provider energy efficiency programs or easy access to renewable energy.
Bills are a key factor in how affordable your electricity is. But, there is still one level deeper we want to go to truly understand how so many people are struggling to pay their electricity bill.
The Heavy Burden of Electricity
The fact is, not all Americans make the same amount of money. Income is another key factor in determining how affordable electricity is.
By determining how much of your annual income goes to paying your electricity bill, we can better determine how much of a burden your bill is on your overall budget. The national average is 2.3% of income is spent on electricity.
We can see that while states like Connecticut and Hawaii have a very high average monthly electricity bill, average household income in those states are also higher, making the electricity burden on par with the national average.
States in the southeastern US have a larger burden because they have higher electricity bills but also don’t have the higher average income to offset the costs.
So Remember, It’s More Than Just Rates
People tend to think that higher electricity rates automatically mean higher bills and a larger burden to their budget. While that may be true in some instances, we can see that even states with lower rates have a hard time paying their energy bill.
No matter what your rate is, you can always become more energy efficient to save some money and help our planet. Look for more energy efficient appliances, find ways to monitor your usage, looks into seeing if you might be viable for renewable energy options, or just be more conscious of turning off lights when leaving rooms.
The study originally posted in www.ucsusa.org