Do Puerto Ricans Pay the Highest Electricity Rates in the United States?

Comparatively speaking, do Puerto Rico’s residents pay the highest electricity rates in the United States (U.S.)? The U.S. Energy Information Administration (EIA) collects data on the price of electricity for residential, commercial and industrial customers for all the U.S. states and, since 2014, for Puerto Rico.  The 2016 and 2017 data is preliminary. Thus, for this analysis we will look at 2015 electricity rates for residential customers.

The average price of electricity for residential customers in 2015 was 12.7 cents per kilowatt-hour (kWh). The scatterplot below helps us visualize the country’s different rates. Hawaii had the highest prices at 29.3 cents kWh, followed by Alaska and Connecticut.  Puerto Rico, at 20.3 cents per kWh, had the fourth highest price in the nation.

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Even though this plot shows that Hawaii had the nation’s highest residential electricity rates in 2015, looking at this rate is not the best approach to see whether Puerto Ricans pay more for electricity than the residents of the other states. For that reason, we should look at how much of the median household’s income is devoted to electricity.

The U.S. Census estimates that the median household income for the U.S. was $56,516. At $40,593, Mississippi’s median household income was the lowest among the country’s 50 states. Maryland has the highest median household income at $75,847, while Puerto Rico’s median household earned around $18,626.

The median U.S. household devotes around 2.5% of its income to pay for electricity. The table below lists the 10 states which devote the least percentage of median household income towards electricity.

States Where the Median Household Devotes the Least Percentage of Income to Electricity (2015)
STATE % OF MEDIAN HOUSEHOLD INCOME DEVOTED TO ELECTRICITY
Utah 1.54%
Colorado 1.57%
Washington 1.64%
District of Columbia 1.73%
Minnesotta 1.75%
California 1.76%
Illinois 1.81%
Wyoming 1.82%
New Jersey 1.83%
Alaska 1.96%

The next table lists the 10 states where residents dedicate the highest percentage of their income to electricity.

States Where the Median Household Devotes the Highest Percentage of Income to Electricity (2015)
STATE % OF MEDIAN HOUSEHOLD INCOME DEVOTED TO ELECTRICITY
Louisiana 3.15%
Arkansas 3.15%
West Virginia 3.19%
Florida 3.21%
Tennessee 3.26%
North Carolina 3.43%
South Carolina 3.66%
Alabama 3.82%
Mississippi 4.06%
Puerto Rico 5.19%

What can we learn from this short analysis?

  • While Hawaii has the country’s highest electricity rates, its median household income is $73,486. Thus, the median Hawaiian household dedicates 3% of its income to pay for electricity.
  • The median Puerto Rican household, in contrast, dedicates more than 5% of its income towards electricity. This is more than double the national average, reminding us that:
    • Puerto Ricans are not only devoting the highest percentage of their income towards their electricity bills.
    • The median Puerto Rican household earns only $18,626, which is $37,890 less than the national average or $21,967 less than Mississippi, the U.S. state with the lowest median household income.
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What Can We Learn About Puerto Rico’s Electricity Consumption from 2009 to 2017?

Puerto Rico’s economic recession started in 2006. Since then, the Puerto Rican government’s economic activity index has plummeted, its public debt has dramatically increased, and many Puerto Ricans have moved to the U.S. mainland. What impact have these trends had on Puerto Rico’s production and consumption of electricity. Can these measures help us explain the island’s economic crisis?

For this post, I accessed data collected by the Government Development Bank for Puerto Rico on the total consumption of electricity by the island’s residential, commercial and industrial sectors. Rather than using monthly totals, I reorganized the dataset into quarters.

Let’s look at the total residential consumption of electricity. On the whole, the residents’ consumption of electricity from the first quarter of 2009 to the last quarter of 2017 has declined slightly. The graph below includes a trendline that allows us to measure the overall decrease in the consumption of electricity.

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Our second graph is similar to the first but it looks at the commercial sector’s consumption of electricity in the same time period. A trendline is also included for the same purposes and it demonstrates a modest reduction in the total amount of electricity consumed.

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The last graph follows the same format, but it is worth pointing out that the industrial sector’s consumption of electricity has decreased by a significant amount. And it is this graph that really explains Puerto Rico’s economic predicament.

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What conclusions can we draw from these graphs? These trends suggest that the economic recession has impacted the industrial sector at a higher rate than the residential or commercial sectors. The fact that industries in Puerto Rico are consuming less electricity suggests that many may have relocated to new jurisdictions, gone out of business, or lower their output. In addition, lower levels of electricity consumption in the industrial sector may explain lower levels of electricity consumption in the residential and commercial sectors too. Indeed, a weaker industrial sector may have led to higher unemployment rates, lower demand for commercial services, and to higher emigration rates among middle class Puerto Ricans to the U.S. mainland.