9. ELECTRICITY

For the wholesale power market, merchant generators have emerged, primarily in RTO/ISO markets that are dominated by states that chose competition for both the wholesale and retail markets. Merchant generators are privately owned, non-utility generators that sell power as part of an RTO/ISO’s economic dispatch or contract directly with utilities and other end users.

Merchant transmission owners that own portions of the electricity system have emerged in several regions. Nevertheless, regulated distribution utilities continue to be the dominant transmission owners.

In states with retail choice, vertically integrated investor-owned utilities have “unbundled” by selling their generation and becoming distributionand transmission-only utilities.

Many companies, including investor-owned utilities, engage in power trading to hedge costs.

Retail prices and taxation

US retail electricity prices have been quite stable in terms of annual average rates, both for industries and for households (Figure 9.8). In 2018, US industries paid on average USD 69/MWh and households paid USD 129/MWh. In real prices, the household price decreased by 1.8% over the decade from 2008 while industry prices fell by 9.3%.

In an IEA comparison, US average retail prices for electricity are relatively low. In 2018, industries in the United States paid the second-lowest price, above only Norway. Household prices were a bit higher but still the fifth-lowest in the comparison (Figure 9.9).

The United States does not apply any federal electricity-specific taxes, aside from income taxes charged to companies operating at various stages of the power supply system. Many US states have sales taxes, which often include electricity, though several offer partial or full exemptions for electricity sales.

Figure 9.8 Electricity price trends in the US, 1990-2018

USD/MWh (2015 prices)

IEA (2019). All rights reserved.

Electricity prices have been quite stable for both industries and households in recent years.