July 9, 2008—Higher fuel prices, increased capital costs and continued uncertainty about climate policy are helping fuel the rising costs of electricity faced by consumers across the country, the Federal Energy Regulatory Commission (FERC) said recently.
The rising cost trends are likely to continue for years, according to a report presented to the Commission by analysts from FERC’s Office of Enforcement. The report pegs current futures prices for natural gas at $2.50 to $5 above the average 2007 spot price for natural gas, and costs for everything from iron and steel to cement and copper wire rising significantly over the past several years. Those have contributed to increases in the cost of new generation for every type of power plant, from nuclear power to combustion turbine and wind generators.
The report says that consumers and the market likely will respond with demand response measures that help reduce energy consumption during times of peak prices, energy efficiency and conservation measures, and technological innovations that could usher in changes that help reduce costs and improve value, as they did in other competitive industries such as telecommunications.
The FERC staff report, “Increasing Costs in Electric Markets,” is available on the FERC Web site.
