Course: GFM 102 Technical Aspects of Energy, Resources & Conservation

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Understanding Energy Consumption Versus Energy Demand

Electricity prices generally reflect the costs to build, finance, maintain, manage, and operate power plants and the electricity grid (the complex system of power transmission and distribution lines), and to operate and administer the utilities that supply electricity to consumers. Some utilities are for-profit, and their prices include a return for the owners and shareholders.

Some key factors that affect the price of electricity include:

- Fuels— Coal is relatively inexpensive while natural gas tends to be more costly.
- Power plants — Construction and maintenance costs are greater for some kinds of power plants than others.
- Transmission and distribution lines — Maintaining and using the transmission system to deliver electricity contributes to the cost of electricity.
- Weather conditions — Rain and snow can provide water for hydropower generation. Extreme heat can increase the demand for electricity for cooling.
- Regulations — In some states, prices are fully regulated by Public Service Commissions, while in others there is a combination of unregulated prices (for generators) and regulated prices (for transmission and distribution).

Click here to access the webpage on Electricity Explained: Measuring Electricity from the U.S. Energy Information Administration.
Click here to access the webpage on Electricity Explained: Factors Affecting Electricity Prices from the U.S. Energy Information Administration.
Click here to access the webpage on Deregulated Markets from Independent Energy Services.