In 2008, the average retail price for all customers rose 0.61 cents per kWh to 9.74 cents per kWh (Table 7.4). This amounted to a 6.7-percent increase over the 9.13 cents per kWh average retail price paid in 2007. Year-over-year, the average retail price for all customers increased in 47 of the 50 States as well as the District of Columbia, with the exceptions being California, Maine, and Nevada. From 2007 to 2008, the average price of electricity increased 10 percent or more in 15 States. Most of the increases were in the 10 to 13 percent range, with the largest increase, 22.0 percent, occurring in Rhode Island. The average retail electric price for all customers declined in only 3 States compared to 11 States in 2007, and only Maine and California had decreases of more than 1 percent. The average retail price of electricity to all customers increased by 4 percent or more in all Census Divisions of the country-except the Pacific Contiguous, which was led by a 2.0 percent, decrease in California. In New Jersey the average retail rate for all customers increased 11.0 percent. In the District of Columbia the average price increased 13.4 percent and in Texas it increased 8.7 percent. In Louisiana, the average electricity price for all customers increased 12.5 percent. Most Census Divisions experienced increases of 4 to 9 percent in the average retail price for all customers, with the exception of the East South Central Census Division, which experienced an increase of 12.3 percent. The highest regional price increase was in the Pacific Non-Contiguous Census Division (Alaska and Hawaii), where the average electricity price to all customers increased 29.7 percent over 2007. While both States rely heavily on oil and refined oil products, the regional price increase was primarily driven by increases in Hawaii. Hawaii's primary fuel for electricity is petroleum, and petroleum prices to that State increased 42.0 percent in 2008.
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In 2008, residential prices increased to 11.26 cents per kWh, or 5.7 percent over 2007. The average residential price increased by 10 percent or more in 8 States and the District of Columbia. Most of these jurisdictions have implemented retail competition and the investor-owned utilities operating within these States participate in organized, competitive wholesale markets operated by independent system operators. Residential prices in Rhode Island increased 24.1 percent, from 14.05 cents per kWh in 2007 to 17.43 cents per kWh in 2008. The average residential price in Maryland increased 16.4 percent, from 11.89 cents per kWh in 2007 to 13.84 cents per kWh in 2008. The largest increase in average residential prices was in Hawaii, at 34.7 percent. The increases in Rhode Island and Maryland are the result of the transition to market based rates for the wholesale electricity portion of retail electric service. In order to mitigate the impact of higher retail prices, the Maryland Public Service Commission approved a plan for the largest investor-owned utility in the State that gave customers two payment options. The first option provided for retail prices based on the full market price of wholesale electricity prices, effective June 1, 2008. This option resulted in approximately a 50-percent increase in the average electric bill. The second option provided that the cost of electricity would be phased in over time. Deferred costs would be recovered by December 31, 2009.
The District of Columbia had the fourth largest increase in residential prices, at 13.2 percent, followed by New Jersey (10.8 percent). On a regional basis, the highest average residential price increase was observed in the East South Central Division. New England, Mid-Atlantic, East North Central, South Atlantic, and West South Central all observed increases of between 6 percent and 7 percent. Average residential prices in the New England and Mid-Atlantic Census Divisions increased 6.0 percent and 6.8 percent respectively. Average residential prices fell 1.9 percent in Maine and 4.2 percent in California. These were the only two States to realize a decrease in the residential average retail price of electricity in 2008.
Nationally, average commercial prices increased from 9.65 to 10.36 cents per kWh, a 7.5 percent increase over 2007. The largest regional price increase was in the Pacific Noncontiguous Census Division, at 28.0 percent, followed by a 14.8 percent increase in the East North Central Census Division. By State, the largest increase in average commercial prices was in Illinois, where prices increased 37.6 percent as result of some Illinois utilities reclassifying higher-priced industrial transactions as commercial in 2008. Illinois was followed by increases in Hawaii (35.7 percent), Rhode Island (21.2 percent), Virginia (14.7 percent), Georgia (12.4 percent) and the District of Columbia (12.1 percent). The average commercial price in the East North Central Census Division was 9.75 cents per kWh in 2008, up from 8.49 in 2007. In 2007, the West South Central Census Division was unchanged at 9.26 cents per kWh but increased 9.2 percent in 2008 to 10.11 cents per kWh. The average commercial price declined less than 1 percent in Nevada and 2.2 percent in California. In the Pacific Contiguous Census Division, the average commercial price declined from 11.19 cents per kWh in 2007 to 11.03 cents per kWh in 2008. This was the only region where average commercial prices declined.
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Average industrial prices increased 6.9 percent from 6.39 cents per kWh in 2007 to 6.83 cents per kWh in 2008. The largest regional price increase in the industrial sector was in the Pacific Noncontiguous Census Division, at 36.1 percent, with Hawaii observing an increase of 41.7 percent from 18.38 cents per kWh to 26.05 cents per kWh in 2008. Average industrial prices in the District of Columbia increased 33.7 percent followed by increases in Louisiana and Tennessee (both at 21.2 percent), and Georgia (20.6 percent). The average industrial rate in the East North Central Census Division was 5.79 cents per kWh in 2008, a 1.9 percent decrease from 5.90 cents per kWh in 2007. This was driven by a 31.3-percent decrease in Illinois industrial prices, as a result of reclassifying data.
Total U.S. retail sales of electricity were 3,733 million MWh in 2008, a 0.8 percent decrease from 2007 to 2008. Comparatively, the annual growth in electricity sales in 2007 was 2.6 percent, and the average annual growth rate since 1997 was 1.6 percent. The 2008 decrease in annual sales from 2007 marks the first time since 2001 that annual sales decreased from the prior year. This decrease was driven by the residential and industrial sectors, with sales decreases of 0.9 percent and 1.8 percent, respectively. Commercial sales were essentially flat between 2007 and 2008. Since 1997, annual industrial sales have declined four times and overall, load continues to gradually shift away from the industrial sector. The industrial sector accounted for 33.0 percent of total retail sales in 1997, but by 2008 it had declined to 27.0 percent. Over that same time period, the commercial sector's share of retail sales increased from 29.5 percent to 35.8 percent, while retail sales to the residential sector grew from 34.2 percent to 37.0 percent.
American electricity demand is at an already high level, and although an economic slowdown or recession would cut the demand forecast, it is predicted that demand overall will continue to increase in the next 5 years and beyond. Generation of 350,000 megawatts (MW) of new electricity is necessary to satisfy electricity demand in the U.S.A. in 2030, according to forecasts and predictions of the government. Along the way, a generation increase of 80,000 MW to 90,000 MW will be necessary from 2006 to 2012.The industry is in agreement that new power stations are needed in the U.S.A. The country must increase investment in transmission systems, while securing new baseload electricity capacity, to meet demand. However, there is little build-out of new transmission systems, and the American power supply reserve is falling in those areas of the country where electricity regulation is relaxed. Several factors, including the high capital cost of constructing a new baseload power station, the cost of complying with CO2 regulation, and an opaque feeling about fuel prices, have become disincentives for building new capacity.
Producing electricity using hydroelectric power has some advantages over other power-producing methods.
Advantages to hydroelectric power:
- Fuel is not burned so there is minimal pollution
- Water to run the power plant is provided free by nature
- Hydropower plays a major role in reducing greenhouse gas emissions
- Relatively low operations and maintenance costs
- The technology is reliable and proven over time
- It's renewable - rainfall renews the water in the reservoir, so the fuel is almost always there
Disadvantages to power plants that use coal, oil, and gas fuel:
- They use up valuable and limited natural resources
- They can produce a lot of pollution
- Companies have to dig up the Earth or drill wells to get the coal, oil, and gas
- For nuclear power plants there are waste-disposal problems
Canada is a mid-size coal producer, ranked the 14th among global coal producing countries (2007). Canada's coal production has remained relatively steady over the past decade. In 2007, Canada produced 70 million tonnes of coal valued at C$2.7 billions. About 60% of the coal production was thermal coal and 40% was metallurgical (coking) coal. Thermal coal production is mainly for domestic consumption. Coking coal, almost all of the output, is for exports.
Coal is an abundant and widely distributed resource in Canada. Coal is affordable and readily available. The current proved coal reserves could support 100 years of production. IEA forecasts coal to have the highest annual growth rate among fossil fuels between 2006 and 2030. Forecast growth of coal will demand more coal supply from Canada and drive up investment and production. With the sustainable mining practice, clean coal technology development and deployment, coal will continue to play an important role in Canada's energy supply.
HYDRO ELECTRICITY PRODUCTION IN CANADA
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Electricity Canada is one of the leading producers of hydroelectricity in the world.
Canada had 126 gigawatts of installed electricity generating capacity in 2007. The country produced 595 billion kilowatt hours (Bkwh) of electric power in 2007 while consuming 530 Bkwh. Hydroelectricity represents the largest share of Canada's electricity generation, followed by conventional thermal and nuclear.
Canada's Electricity Generation, by Source
The electricity networks of Canada and the United States are highly integrated. It is true that in 2007, Canada exported 50.1 Bkwh of electricity to the United States while importing 19.6 Bkwh. Over the past ten years, Canadian imports of electricity from the U.S. have increased by over 150 percent, while exports have remained relatively constant. Due to the increasing interdependence of the networks in both countries, a dependency made clear during the 2003 Northeast blackout, there have been greater efforts to increase cooperation and coordination between Canada and the U.S. A bilateral commission is planning the formation of the North American Electric Reliability Organization, an intergovernmental organization that would monitor network reliability, settle trans-border disputes, and formulate common industry standards. Canada's Electricity Trade with the United States
Canada is one of the world's largest producers of hydroelectricity, generating 370 Bkwh from the source in 2008. Quebec has the largest share of Canada's hydroelectric production, followed by British Columbia.
Canada is one of the world's largest natural gas producers and exporters.
The country produced 6.6 Tcf of natural gas in 2007, while consuming 3.3 Tcf. Canada is the second largest producer of natural gas in the Western Hemisphere, after the United States. Canada is also an important source of the U.S. natural gas supply; in 2008, it exported 3.6 Tcf of natural gas to the United States, representing 16 percent of U.S. natural gas consumption and 90 percent of total U.S. natural gas imports that year. Most Canadian natural gas exports enter the United States through pipelines in Idaho, Montana, North Dakota, and Minnesota.
- Includes small amounts of wind and tidal.
- Includes petroleum coke.
- Includes manufactured gases, other petroleum products, other fuels and station service.
Data source: Statistics Canada, 2007, Report on Energy Supply-demand in Canada, catalogue number 57-003.
Table source: Statistics Canada, 2007, EnviroStats, volume 1, number 2, "Heavy fuel oil consumption in Canada", catalogue number 16-002-XWE.
POWER PRODUCTION COMPANIES
- Alberta Regional Transmission Organization
- ATCO Electric (formerly Alberta Power)
- Canadian Hydro Developers, Inc.
- Central Alberta Rural Electrification Association
- ENMAX (formerly City of Calgary Electric)
- EPCOR (formerly Edmonton Power)
- ESBI Alberta Ltd.(Transmission Administrator of Alberta)
- Lethbridge Power
- The Grid Company of Alberta Inc.
- The Power Pool Of Alberta
- Prairie Power Ltd.
- The Rocky Rural Electrification Association
- South Alta Rural Electrification Association Limited
- TransAlta Utilities Alberta Canada
- UtiliCorp Networks Canada
Relevance of Electricity Industry Reforms
Over the past two financial years Audit has made a number of observations on electricity industry reforms in South Australia. Those observations included commentary that Audit would continue to monitor the progress of the reforms. The inclusion of further comments in this Report to Parliament reflects not only the pace of change that has taken place in the electricity industry, but also issues that have arisen as the competitive electricity market develops. Most significantly, in December 1998 the National Electricity Market (NEM) commenced operations, bringing with it a new competitive and regulatory regime which underpins the way in which the electricity market functions in Australia and in this State. Some of the issues arising from the competitive electricity market have the potential to significantly impact on the finances of the State, namely: the Government has a large direct investment in the electricity industry through its current ownership of businesses whose assets have a book value of more than $3.5billion as at 30 June 1999. Collectively, these businesses make a significant annual contribution to the State's finances; the liabilities of the electricity businesses in government ownership are guaranteed by the Treasurer pursuant to the Public Corporations Act 1993;there is a public expectation that governments will ensure the supply of an essential service (for example electricity) irrespective of whether the Government has a direct investment in the industry. These expectations have received considerable attention in recent years through problems experienced in the supply of electricity in Queensland and New Zealand, in the quality of the water supply in New South Wales, and in the supply of gas in Victoria.
Major Factors Influencing each Segment of the Electricity Industry
The creation of competition in the generation segment of the electricity industry has generally been considered a key source of savings arising from reforms in the electricity industry. These savings emanate from the pool mechanism into which all generators with a capacity greater than 30 MW are required to bid their capacity into the pool. The prices bid by the generators to supply electricity, together with the demand for electricity, will determine the pool price that generators will receive for supplying electricity to the pool.
The pool arrangement and the nature of electricity (which can't be stored) results in changing pool prices. The following chart demonstrates the volatility of these changing pool prices.