Last modified: Wednesday, October 31, 2001
Indiana enjoys lower electrical rates, according to IU Kelley School economist
Hoosier businesses and households enjoy lower average electricity rates than do most firms and families across the nation, according to an article by an Indiana University economist in the current issue of INContext.
INContext is produced through a partnership of the Indiana Business Research Center in IU's Kelley School of Business and the Indiana Department of Commerce.
Comparative data from the U.S. Department of Energy indicate that in 1999, the average cost per kilowatt-hour (kwh) in Indiana was 5.2 cents, which is 21 percent lower than the national average of 6.6 cents. The article, written by Morton J. Marcus, IBRC executive director, indicates that Indiana ranks eighth in the nation for lowest electricity cost per kilowatt-hour. The leaders in that ranking, Idaho and Washington, benefit from hydroelectric power production.
The data indicate that industrial, commercial and residential users in Indiana all pay lower average amounts per kilowatt hour than their national counterparts.
"Regionally, Indiana ranks second among its neighbors in electricity prices," Marcus said. "Indiana and Kentucky, the leader in the region, both have substantially lower rates because they use coal almost exclusively for the generation of electricity."
Residential electricity sales per household in Indiana averaged 13,018 kilowatt-hours in 1999, which was the 20th highest usage level in the nation. Annual cost per household in Indiana was $900, which ranked 26th. At 16,790 kilowatt-hours, Tennessee led the nation in usage, while South Carolina, at $1,229 per household, had the highest annual cost of electricity.
"While the Hoosier state's residents have higher usage rates, their annual bills are lower than those in the nation as a whole because of lower prices," Marcus said. "Electricity is important to every sector of the Indiana economy, including industry. Electricity runs the machines that enable workers to do their jobs."
Wyoming had the highest usage per worker (122.8 kilowatt-hours) of any state in 1999. Kentucky, West Virginia and Louisiana followed, in that order. Each of these states mines significant quantities of coal or petroleum. Indiana ranked relatively low, 12th, in average usage per worker, but was still 46 percent above the national average in total usage per employee because of our heavy manufacturing employment.
Overall, the industrial sector -- including manufacturing, mining, construction, agricultural services, fishing and forestry -- accounted for 49 percent of electricity usage in Indiana in 1999 but only 33 percent nationwide.
"Clearly, the price and availability of electricity will remain an important component of our state's economic future," Marcus said.
INContext is published every two months and is circulated in print to Indiana business leaders and state and local governmental officials. It is available free of charge on the Web at http://www.ibrc.indiana.edu/incontext/. In addition, the IN Context Web site offers access to articles in previous issues on the Indiana economy, country profiles and links to useful resources .