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Why the electricity price increased for the commercial sector

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Electricity prices increase

In the power industry, investors should track the electricity prices to the end customer. It’s an important indicator. Over the last year, the average electricity prices in the US increased significantly across all of the sectors. For all of the sectors, the combined average electricity prices increased by 3.6%—compared to September last year.

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Price trends across sectors

In the commercial sector, electricity prices grew by 5.1% between September 2013 and September 2014.

This is the highest among all of the sectors. Residential electricity prices increased by 3.6% during the same period. The average residential prices across the US in September 2014 were $0.1294 per kilowatt hour—compared to $0.1249 in September last year.

The industrial prices grew by a modest 1.12% during this period. The transportation sector contributes a small portion of total electricity sales in the US. It grew by 2.45% between September 2013 and September 2014.

Higher electricity prices translate to higher revenues for power companies. In terms of revenue, the biggest US power companies are Exelon Corporation (EXC), Duke Energy (DUK), Southern Company (SO), and AES Corporation (AES). An increase in electricity prices benefits all of the companies that are part of the Utilities Select Sector SPDR (XLU).

Industrial electricity prices are lower than other sectors

The industrial sector’s electricity prices have always been cheaper—compared to the electricity use in other sectors. In all of the other sectors, electricity has to be delivered to end customers by a distribution network.

Also, industries are fed with high-voltage power. Other sectors consume power at much lower voltage levels. The lower voltage for consumption and managed distribution equals the cost of electricity. So, the electricity prices for other sectors are relatively expensive—compared to the industrial sector’s electricity prices.

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