Electricity rates are already on the rise as temperatures begin to tick higher

Electricity rates are already on the rise as temperatures begin to tick higher

Electricity rates are already on the rise as temperatures begin to tick higher. Rates have been relatively dormant over the last 2 years, but are now climbing out of their trough. Commercial electric rates are reacting to the move to a larger degree than residential rates, but that won't last for long.

Electric rates spiked during the summer of 2008. By the end of that same year, rates had crashed dropping by over 60%. They continued to slide through the summer of 2009, and have stayed low until just the last couple of weeks. Rates are still down over 50% from the highs of 2008, but they have surged this month, as has the price of oil, coal and natural gas.

This recent rise in the price of electricity rates can be attributed to several factors, including the trouble in the Middle East, the slow down of domestic offshore drilling, the drop of the US dollar in relation to other currencies, and the worries over the future of nuclear power generation.

Electricity in the US is produced in many ways, from the burning of coal and natural gas, the harnessing of the blowing wind and the flowing water, and the use of nuclear reactions. Coal accounts for the largest portion of our electricity production, and its price is closely linked to the price of oil. Oil is already trading north of $105 pre barrel, and is widely expected to rise above $120 within the next 3 months. Oil spiked above $150 in the summer of 2008 before collapsing. Oil has always been considered the "dog" while other forms of energy are the "tail". As goes the dog, so goes the tail. Keep an eye on the price of oil, as it is a precursor to the price you pay for electricity.

How high electric rates will go is anyone's guess, but most experts are expecting this rise to surpass the highs of 2008, and to stay high for quite some time. Locking in a low rate now can insulate you to the rise in the price of electricity. You should look at longer term plans, such as 24- and 36-month contacts. You can click here to compare residential electric rates and to request quotes for commercial electricity.

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