Slow growth in electricity demand could mean higher rates for consumers

A recent federal government report indicates that demand for electricity is slowing, but prices could be rising. For the next 25 years, U.S. electricity use will grow by an average of less than 1 percent a year, according to the Energy Information Administration’s Annual Energy Outlook 2015.

Lower load growth could spell an increase in retail electricity prices, EIA said, since higher costs to produce and distribute electricity will be spread across fewer kilowatt-hour sales. “Rising costs for electric power generation, transmission, and distribution, coupled with relatively slow growth of electricity demand, produce an 18 percent increase in the average retail price of electricity over the period from 2013 to 2040,” the agency said.

Regulations such as the Mercury and Air Toxics Standards will add to costs by requiring new emissions control equipment and new generation to replace retired power plants. EIA said the mercury rule and low natural gas prices may lead to the retirement of 31 gigawatts of coal capacity between 2014 and 2016.

Energy-efficiency standards have played a big role in reducing demand, EIA said.

“Residential consumption has also declined as the population has shifted toward warmer climates, reducing the need for space heating,” it added.

The study does not incorporate the potential impact of the Obama administration’s Clean Power Plan, which has not been finalized.