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EIA: Electricity prices could be falling for 1st time in over a decade

Average annual prices for retail electricity in the U.S.residential sector could be dropping for the first time in 14 years, accordingto new data from the U.S. Energy Information Administration.

On average, residential customers paid 12.4 cents/kWh duringthe first half of 2016, which is 0.7% lower than in the same period theprevious year, the EIA said in its "Today in Energy" brief releasedOct. 6. The brief took into account retail electricity prices from 10 differentU.S. census regions for the first half of 2016 and compared average prices inthe U.S. from 1996 through 2016.

If the downward trend continues for the rest of 2016,average annual prices will have declined for the first time since 2002."Over the past five years, nominal residential prices have increased anaverage of 1.9% annually, about the same rate as overall inflation,"according to the brief.

In most parts of the country, retail electricity prices werelower in the first part of 2016, compared to the same time period in 2015, thebrief noted.

One of the main reasons retail electricity prices have beentrending downward is the decreasing cost of fuel, especially natural gas. At$2.58 per MMBtu, the weighted average cost of natural gas delivered toelectricity generators was 28% lower than in the first six months of 2015.

In the New England region, residential electricity pricesdropped by 6% for the first six months of 2016 and now average 19.2 cents/kWh."New England electricity prices rose substantially between 2013 and 2014as a result of a sharp rise in wholesale power prices," the brief said."Improved supplies of natural gas into the region, along with lowernatural gas prices, have contributed to the region's declining retailelectricity rates so far in 2016."

However, the EIA predicted in its recent Short-Term EnergyOutlook that the average delivered cost of natural gas for the second half of2016 would be 27% higher than in the first half of the year. The agency alsoforecast a further rise in natural gas prices in 2017, which would likelyincrease average residential electricity prices by 3%.

The EIA also pointed to the falling cost of crude oil asanother driver of lower retail electricity prices. For instance, in Hawaii,where a large number of power plants are fueled by petroleum, retailelectricity prices have dropped by 12% since the beginning of 2016, accordingto the agency. Additionally, Hawaii has begun to integrate morerenewable energy such as rooftop solar and is aiming to have 100% of itselectricity come from renewables by 2045, the EIA noted.

But residential electricity prices are rising in some statesand regions, despite the falling national average, the EIA said. So far in2016, average prices are 3% higher for residential customers in the contiguousPacific Coast states of California, Oregon and Washington, compared to the sameperiod in 2015.

"The regulated electric utilities in these statessought permission to increase rates to cover costs of maintaining and upgradingthe region's power transmission grid and its network of natural gaspipelines," the EIA noted in the brief. Rates have also risen some inportions of the Midwest, the agency said.