Why Does the Price of Electricity Increase?

Electricity prices increase based on the fuel cost that power companies use to generate. That fuel is typically natural gas, which has been rising rapidly and will likely continue to increase.

Depending on your utility, you can expect to pay more for electricity during peak hours or times of day that are considered the most expensive. By avoiding these times, you can save money on your electricity bill.

Variable Rates

Variable rates are great for those who want to take advantage of market conditions but come with a risk. You can save money when electricity prices are low, but you could pay more during periods of high demand.

For example, variable rates soared during the recent Texas winter power crises as supply prices increased and demand grew. The good news is that these price hikes are often temporary, and the market eventually evens out.

However, it’s important to remember that your electric rates aren’t set in stone, and they can change based on market conditions and the discretion of your retail electricity provider (REP). So, if there’s a spike in demand or an increase in wholesale energy cost, your rate will rise.

This could result in higher monthly bills, but it’s possible to avoid it by staying within your budget and using less electricity during off-peak hours. This can help you save a lot of money over time.

You can also lock in your rate for a certain length of time. Some fixed rates offer this option, but it’s essential to read the fine print of your contract carefully.

Choosing the best electricity plan depends on your preferences and your family’s energy needs. It’s also influenced by where you live and how you structure your finances. If you’re located in Pennsylvania, the distribution of electricity is handled by Penelec. The electricity that Penelec sends to the residences and businesses that subscribe to their service is provided by suppliers, also known as Retail Electric Providers (REPs). You have a choice of suppliers in Pennsylvania’s deregulated energy market. Penelec will permanently maintain power lines and repair power outages regardless of your supplier. The supplier of your choice will determine the supply rate you pay for your electricity, which is in line with Penelec residential electric rates, based on the current market and supply vs. demand.

Peak and Off-Peak Hours

During specific times known as peak hours, electricity consumption is highest, and rates go high. This is because the utility company needs to spend more money to produce energy during this time.

Thankfully, you can help to ease the strain on the power grid by shifting your energy usage during these times of high demand. Using a time-of-use (TOU) rate plan, you can move some of your electricity use to the lower-cost off-peak hours, reducing your monthly electric bill.

TOU rates can be a great way to save on your bill, but there are some things you need to know before signing up for one. It would help first to comprehend the distinction between peak and off-peak hours.

Another factor to consider is your region and time of year. Energy prices are higher during the four summer months because people are more likely to use air conditioning during the day.

The exact peak and off-peak periods differ for each area, so check with your utility company to learn more about the best times.

It would be best to shift much of your electricity use to off-peak hours to maximize savings. For example, your bill will be less than standard rates if you use 650 kilowatt-hours monthly and go 84 percent of your electricity to off-peak hours.

Time-Based Rates

Unlike other forms of electricity pricing, time-based rates have a single price for every kilowatt hour (kWh) of energy used. These rates help you manage energy use and lower your electric bill when electricity is cheaper.

The basic idea is that demand for electricity rises when people watch TV, blow dry their hair or run the dishwasher. During these times, utility companies must supply enough electricity to meet the demand.

But that increase in demand can also mean higher costs. That’s because utilities must spend money to generate or purchase extra power to meet the increased demand.

This is why choosing an electricity rate plan that lets you control the price you pay for your electricity use is essential. For most residential customers, selecting a rate plan that makes energy cost more during peak periods and less during off-peak periods.


The price of energy in the wholesale power market is determined mainly by commodity supply prices, which go up and down based on demand and supply. Utilities must hold auctions to buy that energy for your region and then deliver it to you, where the supplier network comes in.

Your electric bill includes two charges: a delivery charge that reflects how much electricity your utility delivers and a supply charge that covers what it pays to get the energy it needs from the wholesale market. The latter is a complex calculation that depends on where the electricity comes from and how much it costs to transport that energy over long distances.

Another way that your electric rates can go high is because you’re using more energy than you need at any given time. This can be caused by extreme weather, which forces you to turn your air conditioning up higher than usual to stay comfortable.

You can avoid some of the costs of using more electricity by reducing the amount of electricity you use. For example, switch to a new dishwasher that uses less electricity or installs more energy-efficient lights. This relatively small step can save you a lot of money over time.

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