Shift in delivery vs. supply costs as components of total cost

We were analyzing forecasts of usage and cost data over the weekend and found a surprising shift in the electricity landscape.  Due in large part to low natural gas prices and, also, as a result of increases in transmission and delivery rates, the ratio of supply/commodity costs to transmission and delivery costs has shifted.  If my memory serves me, this is the first time since deregulation began in the late 1990s that such a significant shift has occurred.

We have been accustomed to seeing supply costs comprise as much as 60-75% of a customer’s total costs.  Now, as a recent forecast of 2012 costs shows, supply costs comprise about 45% of total costs, while transmission and delivery comprise 55%.

What does this mean for you?

1. You need to spend a little more time thinking about transmission and delivery costs than you have before.  Energy efficiency and demand reductions will help here.  We will soon be able to provide customers with transmission and delivery cost projections.
2. Keep an eye on costs and prices— I wouldn’t expect these trends to continue indefinitely.
3. Take a look at supply prices out in the future for a few years.  Plan ahead.  Don’t expect electricity prices to stay this low forever.  If you see an increase in supply costs– even a small uptick– it may make sense to make a decision about fixing some component of your supply costs for future years.