The Elastic Price of Electricity and How to Avoid It

Updated: Apr 25, 2020

By: Connor Sanborn, Co-Founder of SunFlower LLC

One loaded question we get asked a lot at SunFlower is: Will solar energy save me money?

Most anyone asking this is frustrated by paying so much for their electricity, with good reason. It’s an unavoidable cost that no one wants to pay for, yet has no choice but to. The main drawback of doing nothing and continuing to pay your bill as usual is that electricity prices not only in NH, but nationally, have increased on average 2% per year for over a decade (Historical Electric Rate Information, 2020). This means that using the same amount of electricity in the future is projected to cost you more money than it does today.

For this reason, people search for alternatives that save them either money, electricity or both. The best ways to accomplish this are by producing your own energy (through solar photovoltaics [PV], for example) or increasing your energy efficiency. The focus here is generating your own renewable solar energy to save you money on electricity, as well as learning why some competing alternatives simply fall short, financially, in the long run.

Without zero-money down offerings from an installation company, some may think they’re better off paying normal electric bills than paying the money for something that makes electricity for them. After all, they’re probably still going to have a monthly bill from the utility company no matter what, right? This assumption is not wrong, yet misses a key point in the financial logic behind ‘going solar’.

What Do You Pay for Your Electricity Now?

When you glance at a bill from your electric company, it looks a lot like an itemized shopping receipt from your local grocer. In the state of NH, most utilities have 6 separate charges, each applied to the total measured unit(s) of energy, or kilowatt-hour(s) (kWh), that you consume throughout the month.

The Big 6 (Charges):

  1. Customer

  2. Supply

  3. Transmission

  4. Distribution

  5. Stranded Cost of Recovery

  6. System Benefits

In future posts we’ll discuss what these different charges mean and how they each relate to the net-metering of solar energy.

For now, suffice it to say that there’s room for improvement in how much you’re being charged for your electricity and that’s why people move to alternatives such as solar energy, to offset many of these costs.

Competitive Electric Energy Suppliers

Those who open their electric bills with a consistent desire to set them ablaze have discovered options outside of paying the utilities directly for the source of their power. One such route is going through a competitive energy supplier (CES) who can offer a lower ‘supply rate’ than the one available through your utility company. A simple internet search with the keywords “NH, Suppliers” leads us to a Public Utilities Commission (PUC)-run website revealing a number of alternative electricity suppliers for various NH utilities. Some CES energy is renewable (wind, solar, hydropower), typically coming at a price premium. A good portion of CES electricity is sourced from non-renewable resources, through the combustion of natural gas in combined-cycle power plants (think giant, gas-fired turbines), for instance.

Signing up with a competitive supplier can potentially reduce only the ‘supply charge’ on the electric bill - 1 of the 6 that are accounted for - but the difference yields marginal savings unless your electricity consumption is completely unrestrained (see cost breakdown below). The catch is, financial savings are typically achievable only when these suppliers are using energy sourced through non-renewables. That’s a big problem currently, stemming from the low price of natural gas. The good news is that renewables are coming down in cost by the day (another future post) and will soon surpass fossil fuels in their cost-effectiveness.

Generally, CES deals come in short-term contracts, anywhere from 1-24 months; it’s extremely important to read the fine print and opt-out if necessary prior to the onset of contract extension rate hikes typically embedded within. Major utility companies adjust their electricity rates 2-3 times per year - generally up during colder months and down in the spring and summertime. With the consistent changing of electric rates, it may be tough to figure out whether going with a CES company is really worth the effort and time. We resolve this dilemma in the cost breakdown below (spoiler: it’s not).