Why electricity prices vary across different regions in the US



Electricity prices vary across regions

Electricity prices vary across the sectors. However, electricity prices also vary across regions and states. The U.S. is a large country. There’s a large difference in electricity prices in many states. For example, the average residential electricity price in Washington in July, 2014 was $ 0.09 per Kilowatt-hour (or kWh)—compared to $0.39 per kWh in Hawaii.

As a result, changes in regional electricity prices are also an important factor for the power utilities industry.


Divisions in focus

Based on a census, the U.S. is divided into nine divisions. These divisions can be seen in the above chart. The average electricity prices in U.S increased by 2.90%. With the exception of the Mid-Atlantic, electricity prices in all the divisions increased significantly.

The Pacific and New England divisions had the highest growth in electricity prices year-over-year (or YoY). PG&E Corporation (PCG) and Northeast Utilities Systems (NU) are major players in the Pacific and New England divisions, respectively.

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In terms of price increases, the next divisions are East South Central, South Atlantic, and West South Central. Duke Energy (DUK) and American Electric Power Company (AEP) have a presence in these regions. They should benefit from price increases in these areas. Electricity prices increased across all of the regions in the U.S.

This is positive for all the companies that are part of the Utilities Select Sector SPDR (XLU).


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