Wind Energy FAQs: Electricity Unit Cost vs Bill Price

The Unit Price of Electricity vs. Electricity Bills: Analysis by State

There is a tendency to assume that if a household has to pay more for each unit of electricity, then it will also have a higher electricity bill at the end of each month. In fact this is not the case. Monthly electricity use varies enormously across the states from a low of 505 kilowatt hours (kWh) in Hawaii to a high of 1,240 in Louisiana. As a result there is also significant variation across states in total power bills.

If one prepares a scatter plot of average electricity price in cents per kWh (on the X-axis in the following chart) with the average monthly bill in dollars (on the y-axis), it is readily apparent that there is no correlation between these two variables.

The chart is quite ‘busy’ so a brief explanation may help.

We’ve labelled a few states to illustrate. The U.S. average residential electricity price is 12.55 cents per kilowatt hour (c/kWh) and the average monthly bill is $112.59. There is substantial variation about this average. The most expensive power price is in Hawaii (27.47 c/kWh) but the highest power bill is in South Carolina despite the fact that residents of the Palmetto state pay only 12.65 c/kWh – only marginally more than the U.S. average. Homes in California pay 17.39 c/kWh but pay some of the lowest power bills at $95.20. Massachusetts residents have to deal with the second highest electricity prices in the country (19.00 c/kWh) but pay monthly electricity bills of $113.77 – only marginally above the U.S. average.

In short: there is no correlation between the unit price of electricity and the typical monthly residential electricity bill across states.

Of course one might argue that a higher electricity price tends to depress economic activity. However, as the following scatter plot of average residential electricity price vs. per capita GDP (by state) shows, no such relationship exists. In fact, the opposite applies.

Although the relationship is only weak, the data indicates that states with a higher electricity price tend to have higher per capita GDP.