If the summer of 2005 is any indication, the cost to power air conditioning in the next few years will be down right shocking. When Michigan set a new peak demand record in July, wholesale prices for 1 kWh shot up to 18.9 cents, more than twice what consumers had budgeted to pay.
The main culprit was inadequate power distribution throughout the Midwest. Demand for electricity is outpacing new distribution. No one who votes wants to see new high-voltage lines strung up in the backyard. As the economy grows and infrastructure glitches worsen, expect home cooling costs to climb with each new problem encountered.
Conventional wisdom says, "As California goes, so goes the nation." If this is true, we're deep in something other than cotton. In mid-July Southern California announced a stage two emergency when power reserves fell below 5 percent; in a scramble to buy needed power, the spot market price for electricity jumped to nearly 25 cents a kWh - three times the national average.
New peak electric demand records were set throughout the nation, surpassing the record by 4 percent. It wasn't just high temperatures causing the problem, it was the new load added in the last three years. New peaks were recorded from Atlanta to Albany and Phoenix to Philadelphia. When demand increases as temperatures rise, most power companies fire up costly natural gas "peaking" plants.
Rising natural gas prices are the main reason electric bills will climb over the 20-year expected life of a comfort system. Since 2000, the wellhead price of gas has more than doubled from 28 cents to over 64 cents a therm.
A key factor in this frightening increase is the fact that North America is running out of gas. Natural gas production peaked in 2001. No matter how many new holes were poked into the earth, gas production wouldn't budge. As the remaining supply is depleted, the law of supply and demand will ensure the cost of staying comfortable will continue to climb.
Within the next 10 years, demand for electricity is expected to increase by 25 percent. Due to construction costs, speed and environmental concerns, 90 percent of all new power plants under construction or currently planned, use natural gas to fuel generation. As old natural gas price hedges come off, the cost to generate electricity with gas will skyrocket. Through the use of "fuel adjustment charges" most consumers will be immediately billed for all fuel price increases. The most important thing consumers can do to protect against future energy prices is to buy the highest-efficiency comfort system they can afford.
Max-Efficiency BuyersSmart buyers don't get mad for saving too much on their power bill. With your help most buyers:
Max-Efficiency Means Max-ComfortTo achieve max-efficiency, most comfort systems require the use of special features like variable airflow and two-stage compressors. These top-of-the-line features are essential in producing maximum comfort. For many consumers it's not about the lowest power bill, it's about the most comfortable home. With max efficiency they can have both.
Steve Howard is the founder of The ACT Group. He can be reached at either 800-515-0034 or firstname.lastname@example.org.
Publication date: 08/22/2005