Residential and small business customers experienced very high electricity during the summer. You're likely to do the same thing this winter when you see your natural gas bills. How come? Because natural gas is used to produce a lot of electricity.

If you're sick and tired of 20 second sound bites, you've come to the right place. We're going to explain as best we can a very complex topic in simple English. We'll do this in four parts. Our goal is to tell you:

• What's really driving electricity and natural gas prices higher, and
• What you can do reduce your bills and even earn some money doing it.

Finally, you'll get to use an Electricity Calculator to determine how a
country is going to meet its electricity needs in the year 2020. If anything, you'll gain an understanding of how tough it is to achieve lower electricity prices, protect the environment and to remain energy independent. However, lets first tell you about factors that affect the price of electricity and natural gas.

The Role of Fuels in Electricity and Natural Gas Prices

1) Although the US has large coal reserves, the fuel of choice is natural gas when it comes to generating electricity and heating our homes. Natural gas is very clean when burned and emits low levels of carbon dioxide. In contrast, coal is relatively dirty and produces higher carbon dioxide levels.

Since natural gas has great environmental qualities and contributes less
toward global warming, the demand for it is relatively high. This in turn
raises both natural gas and electricity prices.

2) The Federal government does not regulate the wholesale price of natural gas coming out of the ground. The Feds deregulated it years ago. Today, the law of supply and demand determines wholesale price, which fluctuates with the seasons and each day. Hurricanes and other natural disasters can create shortages and higher prices. The Feds also monitor the markets to make sure people don't manipulate the price.
The cost of transporting natural gas via interstate pipelines to large cities is regulated by the federal government. State Public Utility Commissions handle the retail end. They regulate natural gas retail prices and ensure that adequate supplies get to your home or business.

3) Electricity and Natural Gas Markets
1) There are two markets operating when it comes to natural gas and electricity. There is an unregulated wholesale market where energy companies actually buy and sell electricity and natural gas. They actually plan to use the natural gas or electricity.

There are also financial markets where those same energy companies, energy traders and speculators all over the world buy and sell financial assets associated with natural gas and electricity. Here no one really takes delivery of either commodity. Instead they hedge their risks or just speculate on the future direction prices. The federal government monitors trading to ensure that these markets are not being manipulated.



2) Lately it seems like financial markets are affecting the physical prices of both electricity and natural gas. In some cases, the financial markets are now beginning to be used to set the price for natural gas and electricity.

The Electricity Calculator
Now that you have some idea of how natural gas and electricity prices are affected, try using the Electricity Calculator.* The calculator will be used to decide future electricity prices and environmental consequences in the United Kingdom.**

OK, time to get serious and use the calculator. Click the image below and then click Start. Good luck.

* Unfortunately, we could not find an electricity calculator for the United States. Nevertheless, we think using the Electricity Calculator that we found on BBC Online to meet the United Kingdom's electricity needs in the year 2020 is excellent. Have fun and please send us your comments on this.

** About the Electricity Calculator. If you didn't do so well, then you'll want to look at the other energy articles below.