Electricity Delivery Costs Rise

According to the Federal Energy Regulatory Commission, the average costs associated with delivering electricity to customers has risen over the past decade, even though electricity generation costs have decreased.

As eia.gov reports, electricity delivery costs have increased in real 2016 dollar terms from 2.2 cents per kilowatthour (kWh) in 2006 to 3.2 cents per kWh in 2016, roughly offsetting the decrease in the generation cost.

Delivery costs include:

  • Transmission expenses such as towers, poles, wires, substations, and communications equipment necessary to ensure reliable transmission of electricity from generators to neighborhoods
  • Expenses for distribution equipment to deliver electricity at lower voltages to households and businesses
  • Distribution expenses to install, operate, and maintain meters and sensors
  • Customer billing, education, relations, and other services that allow customers to participate in utility programs such as energy efficiency, rebate, and time-of-use pricing programs

Transmission and distribution costs have risen for several reasons. In many areas, aging electric infrastructure has been replaced with new equipment that allows utilities to repair faults on transmission lines remotely, to read meters remotely, and to more quickly find, repair and communicate with customers about neighborhood reliability problems and outages.

Other infrastructure has been built to improve reliability and resiliency, to connect to new sources of electricity generation (including wind and solar), and to reduce transmission-line congestion in quickly growing areas.

Other costs associated with electricity, such as administrative and general expenses, have also risen by 20% in real dollar terms since 2006, but these costs account for a smaller portion of the overall costs of providing electricity.

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