Utility companies are monopolies in most cities throughout the US. This means that we don’t have a choice in who provides our electricity. To make matters worse, many of them are very profitable. In 2018, the parent company for the largest power provider in Arizona had quarterly profits over 100 million! Shortly before the year ended, they announced another rate increase.
As homeowners, the majority of us just pay the monthly utility bill and move on because we believe we don’t have a choice. But we really do have options that can be seen more like an investment. For example, let’s say you pay an average of $250 per month for electricity. This comes out to $3000 per year. After 5 years, this will be well over $18,000 with annual increases. For most homeowners, this will pay for more than half of a solar energy system. For those that receive the full tax credit, this amount could cover the entire cost of the system!
Utility companies in most states average about a 3-4% increase every year ***see below. This means your savings increases every year as you generate your own power! Once you add solar, your payments can be fixed.
We get asked from every homeowner “how much will I save each month”. Thus, the majority of us want to save money when we make the switch to solar. However, this is not always an easy question to answer as there are many factors that will determine how much will be saved, if any.
Although some utility companies claim they haven’t raised their rates in years, this is partially true. Some really haven’t raised their kwh charge in a while, but they have added a number of junk fee’s and charges to make up for rate increases. These charges can be confusing as they appear to have no direct benefit to us as homeowners. But the truth is, in Arizona, electricity rates have gone up 61.80% since 2001 according to the government website www.eia.gov. The chart below clearly shows an upward trend and a steady yearly increase in the cost of residential electricity.
With the increase of 61.80% in the past 16 years, we can likely expect the trend to continue for the future. This would equate to about a 4% annual increase. Although this may not seem like much, the chart below shows that it adds up.
Utility Cost Increase Chart – 20 years
3% annual increase
5% annual increase
|Years||Monthly Average Electrical Bill||Years||Monthly Average Electrical Bill|
As you can see, if there is even a 3% increase annually, you will be paying your utility company much more than what you would expect down the road. Over a 20 year period, based on government historical data, we will pay 2 and a half times our first year for electricity. With this in consideration, the benefit of the right solar package, if financed for example, your monthly payment will NOT increase for 20 years. So, if your savings are only $20 for the first year, it is likely to increase every year since you will generating your own electricity!
Analysis by Mike Orr, housing analyst with Arizona State University’s W.P. Carey School, found that homes with solar panels sold for a premium over those without in the last year, unless the solar is leased.
Average price per square foot
Owned solar: $144.31