For many people electricity is just a service that they take for granted – they plug in their appliance, flick the power button on, and away they go. Most people only think about electricity when they have a power cut or a particularly high utility bill because of increasing electricity prices.
Understanding how electricity prices are determined requires a little bit of knowledge about how electricity works. Electricity is delivered to millions of homes through a network of power lines called the National Grid. Power plants generate electricity through various sources of energy and feed the grid in order to transmit electricity through the power lines to your home.
Some utility companies generate all their own electricity but – more often than not – the utility company will purchase their power supply from the wholesale electricity markets, which can come from domestic suppliers or abroad. Your electricity prices can fluctuate depending on how much your supplier has to pay for the electricity from foreign markets.
A poor exchange rate or shortage in world power supply will push electricity prices up as suppliers pass on increased costs to consumers. Often a ‘power pool’ is created to conglomerate neighbouring resources which increases reliability of power supply and prevents power outages.
Electricity prices are based mainly on the current availability of fuels available used to generate electricity for the grid. Most of our electricity comes from coal and oil, but natural gas is a growing commodity as it is the cleanest burning of the three fossil fuels. The more fuel there is, the cheaper electricity prices get. Electricity prices can also be affected by construction costs incurred by utility companies to build new power plants, as well as outside factors such as major international events and the weather.
Electricity prices are most expensive during the day during peak times, usually in the afternoon and early evening. Where possible, if you are on a variable rate, use your electrical appliances early in the morning and late at night to get cheaper
electricity prices .
