Electricity Rates in the US

Environmental Impacts of Electricity

Electricity in itself is a clean and relatively safe form of energy. Its cultivation for human use makes most modern conveniences possible. The generation, transmission, and distribution of electricity, however, tends to affect the environment.

Nearly all types of electricity generation have an effect on our air, water and land. The extent to which these impact the environment, however, varies and largely depends on how the electricity is generated.

Electricity generated from renewable energy sources is generally less harmful to the environment than electricity generated from fossil-fuel sources. For example, coal is a much more environmentally harmful energy source than solar power, which carries significantly less environmental dangers since no fuels are combusted. This is why there is a concerted global effort to move away from fossil fuels to renewable sources of energy.

Electricity companies use different sources, processes, and technologies to generate electricity. Outside of meeting electricity demands, US electric companies are tasked to use fuel more efficiently in order to minimize the emission of greenhouse gasses and other air pollutants.

The United States, predominantly through the US Environmental Protection Agency (EPA), enforces laws that regulate the effects of electricity generation and transmission on the environment. The EPA administers the Clean Air Act in order to regulate and reduce major air pollutant emissions from power plants.

Basic Physics of Electricity

Despite its unquestionable significance in our day-to-day lives, we don’t often think about what electricity is exactly and how it manages to power our homes and establishments.

Electricity consists of atoms, much like everything else. This means that a basic understanding of electricity demands a basic understanding of atoms.

As you know, the human eye is far from capable of seeing atoms; if it is, however, an atom would resemble a cluster of balls surrounded by bubbles, which are technically referred to as shells. On the surface of these bubbles, you can find constantly spinning electrons. Electrons tend to move as far away from each other as possible. At the heart of an atom is the nucleus; the nucleus itself consists of particles called protons and neutrons.

Electrons carry negative charge, protons carry a positive charge, and neutrons carry no charge whatsoever. Being that they carry opposite charges, electrons and protons naturally tend to attract each other.

The electrons that spin closest to the nucleus tend to have a stronger attraction to the protons than the electrons that are further away from the nucleus. The electrons that have the least attraction to the protons tend to be knocked out of their orbits; when this happens, the electrons shift from one atom to another. These shifting electrons are electricity.

History of Electricity

Electricity is an inseparable part of modern life. Electricity has become so vital that it’s very difficult to imagine everyday life without it. Amazingly though, electricity has only been a part of the world for a little over a century.

Before the advent of electricity, about 100 years ago—it was candles and kerosene lamps that provided light, it was ice boxes that kept food cold, and it was wood-burning and coal-burning stoves that cooked food.

A long list of scientists and inventors worked tirelessly to unravel the principles of electricity since the 1600s. It was, however, Benjamin Franklin, Thomas Edison, and Nikola Tesla who made the most significant contributions to bringing electricity into homes to power indoor lighting and into factories to power industrial machines.

In 1752, Benjamin Franklin, through his now legendary kite experiment, demonstrated that lightning was electricity. In the late 1800s, Thomas Edison invented what would ultimately become the predecessor to the modern light bulb. Also in the late 1800s, Nikola Tesla first laid out the foundations of alternative current generation and transmission.

In the infancy of the US electric system roughly 120 years ago, electricity was generated through isolated plants that served individual customers. In the course of the next 50 years, utilities began linking these isolated generating plants, forming electric systems.

By the mid-1930's, it became apparent that interconnected electric systems made for a more reliable method of generating and transmitting electricity. Interconnected electric systems made back-up generation possible in the event of equipment failure, routine maintenance, or high energy demand. Additionally, interconnected electric systems also made practical economic sense as it made the sharing of energy resources and energy reserves a possibility.

In the 1960's, the transformation of the modern-day electric system from isolated generators to an interregional grid was completed. More about the electric grid later.

War of the Currents: AC vs DC

During the late 1880s, three legendary inventors, Thomas Edison, Nikola Tesla and George Westinghouse were embroiled in a battle that would shape the future of electricity as we know it today. Dubbed as the “War of the Currents”, the three were caught in a bitter dispute on whether electricity should be transmitted direct current (DC) or as alternating current (AC).

Thomas Edison developed direct current. DC is an electrical current that runs steadily in a single direction, like in a battery or a fuel cell. DC was the standard in the early years of electricity in the US. However, DC was a little problematic in that it cannot reliably be converted to higher or lower voltages.

Nikola Tesla and George Westinghouse championed the alternating-current system, claiming that it was the solution to the DC’s conversion problem. AC is an electrical current that reverses direction 60 times per second, making it possible to be converted to higher or lower voltages through the use of a transformer. Consequently, AC made it possible for electricity to be transmitted over long distances at lower losses.

Today electricity in the United States is still predominantly powered by AC. However, since DC is far more stable, consumer appliances, household electronics, computers, mobile devices, solar cells and electric vehicles all run on DC power.

Electricity Regulation

The United States sets and enacts policies on electricity generation, transmission, distribution, and consumption through various executive and legislative bodies of the federal government and state governments. Electricity regulation is generally based on two main categories:

• Wholesale sales and transmission of electricity in interstate commerce
• Local distribution and sales of electricity at retail

On a federal level, the Department of Energy oversees national energy policies, the Federal Energy Regulatory Commission regulates interstate power sales and service, the Environmental Protection Agency sets environmental protection policies, and the Federal Trade Commission enacts consumer protection and the prevention of anti-competitive practices.

On a state level, state governments—through their Public Utilities Commissions, Public Services Commissions, or equivalent offices—regulate the rates for electricity distribution and retail electric service and oversee policies on the planning and siting of electric facilities.

In many instances, there exist multiple overlaps of responsibilities and jurisdictions between these federal and regulatory offices. These overlaps often result in a complex web of legal, regulatory, and technical considerations for manufacturers, sellers, consumers of electricity.

Electricity Deregulation

The retail electricity market is mainly determined at the state level. It generally falls under two main categories—traditionally regulated markets and deregulated energy markets.

In a traditionally regulated market, consumers of electricity don’t have a choice on where to purchase their energy from other than their local utility companies, typically at prices set by the government.

In comparison, residential, commercial, and industrial consumers in a deregulated electricity market can shop around for the energy plan that best meets their energy requirements and they can purchase this plan from the energy provider of their own choosing.

The deregulated market empowers consumers to shop for rates, services and contract terms that best fit their needs. Additionally, one of the biggest selling points of a deregulated energy market is that it gives the consumers the option to switch to a better energy provider, especially if they’re not satisfied with their current one.

In many instances, energy deregulation is the state's way to restructure the existing energy market in a way that will increase competition among energy providers and ultimately prevent energy monopolies.The government does this by reforming old laws and creating new laws altogether that allow multiple suppliers to compete on the market.

Competition is vital to a healthy electricity market as it naturally encourages electricity providers to offer better plans and terms, lower rates and prices, and more compelling end-user experience in order to attract and retain consumers.

It’s worth noting that although energy users can choose where to purchase their energy from, utility companies still own and control the delivery infrastructure.