When Are Electricity Rates Lowest?

When you take control of your energy consumption, you can make wiser decisions that help conserve power and could save you money. But before you can make informed choices regarding energy providers and plans, it’s important to understand energy and how electricity rates are set. This information will allow you to monitor your consumption and change your habits, avoiding peak hours and scheduling energy-demanding tasks for when energy rates are lowest.

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Consumption factors that affect electricity prices

The market rate for electricity is influenced by a number of factors. What affects electricity prices is largely the combination of demand and power consumption patterns. But there are many other factors that also play a part in what affects electricity prices, including fuel type and location, in addition to the cost of running power plants, distribution systems and regulations. Knowing the causes and effects of electricity prices can help you make better energy decisions, especially when choosing an energy plan.

How electricity rates are affected by the time of year

The price of electricity goes up when demand for electricity goes up. Ever wonder what time of year electricity rates are lowest? Because demand for electricity is lowest during the spring and fall, electricity may cost less in these seasons. Electricity market rates are higher in summer and winter because people use more electricity for air conditioning and heat. If you’re on a variable plan, planning power use for the time of year when electricity rates are lowest can make a difference in your energy bill.

Are electricity rates higher in summer or winter?

Summer is usually a time of higher demand than winter, so electricity rates will generally be higher in the warmest months. But figuring out exactly when peak and off-peak electricity usage take place really depends on where you live and specific weather conditions.

You can always help reduce your home’s energy use with energy-efficient ceiling fans, air conditioners and furnaces or boilers. Luckily, there are many tips for saving energy in summer.

The best time of year to lock in your electricity rates

Many energy providers are willing to contract with you to provide electricity at a fixed price. When you “lock in” your electricity rate, that’s the price you pay for the duration of your contract. It doesn’t matter what happens to market rates that change by season, by time of day and by other factors. The benefit of locking in a price is that you have a stable and predictable price for budgeting.

The trick is to buy when electricity is cheaper. The best time of year to lock in electricity rates is in the fall or spring, when electricity rates tend to go down. You might want to study long-term market price trends. Do analysts think prices will be heading down in your area? If so, you might want to wait before locking in a price.

How the time of day affects electricity prices

Seasons and weather aren’t the only causes that factor into when energy rates are lowest. It can depend on time of day as well. For this reason, some electricity providers offer time-of-use plans. With these plans, you pay different rates during different times of day. When demand is high, you pay a higher price. During the hours when demand is low, your rate is lower or even free.

How electricity costs change with the type of customer

Not every customer pays the same rate for electricity. In some situations, the type of customer can actually be what affects electricity prices the most. Industrial customers who use large amounts of electricity may pay lower rates than residential customers, though they may also have to pay additional demand charges that residential customers don’t. For residential customers, government estimates peg the price of electricity nationally at 13.28 cents per kilowatt-hour.

How fuel type impacts energy availability and rates

The cost of the fuel used for power generation can also affect what electricity prices are at a given time. The most common fuels in the United States are natural gas and coal. Demand for fuels goes up and down like any commodity. When demand for natural gas is high, its price is higher. That means the price of the electricity generated from natural gas also goes up. Transportation of fuel from its source to a power generation plant also drives its price.

Alternative power sources are desirable for environmental reasons, but they can be expensive. Power generation companies are responding to these challenges by diversifying the types of fuels and energy sources they use to average out costs and gain more flexibility.

How your geographic location affects energy rates

Just as important as when electricity rates are lowest is where they’re lowest. Prices vary by state and even where you live within a state. If you live close to a power plant, the cost to bring power to you is lower. Other power plants are located close to inexpensive fuel sources that can cut costs for surrounding communities. The average cost for electricity by state, as tracked by the U.S. government, varies from a low in Louisiana of 7.71 cents per kilowatt-hour to 29.18 cents per kilowatt-hour in Hawaii.

How current events affect the cost of energy

Current events, foreign activities and regulation changes all affect the price of electricity. For instance, a judge recently ordered a shutdown of the Keystone XL pipeline, which cuts off a major source of low-cost natural gas and will have an effect on that commodity’s price. On the other hand, government deregulation has made coal more viable for some and may also have an impact on electricity rates. Less predictable and controllable are natural disasters and political unrest that can damage infrastructure or impede its operation. Even events in other countries can affect fuel production for and shipping to the United States — and thus our electricity rates.

When is electricity cheapest?

With a better understanding of energy — when electricity rates go down and when energy rates are lowest — you’ll have more power to manage your usage and costs. Using energy when electricity is cheapest takes a little planning, but it could be worth the effort.

Pay attention to what time of year electricity rates are lowest in your area. When energy prices go down in either the fall or spring, that might be the best time of year to lock in your electricity rates. It’s all about finding the right electricity plan for you.