Paradise Cost: Hawaii's not a better place to live than West Virginia or North Dakota . . . at least when it comes to electricity prices

Cutting down on how much electricity you use at home is a good move for your finances and the environment. Some steps to using less energy are simple, like choosing energy-efficient appliances and using and maintaining them properly—read about the U.S. Department of Energy's $300 million State Energy Efficient Appliance Rebate Program, otherwise known as cash for clunkers for appliances—and replacing incandescent lightbulbs with compact fluorescent lightbulbs, like those covered in our new ratings-based report on CFLs.

One area where you have limited options in terms of saving money is the kilowatt-hour price you pay for electricity. In our stories we always refer to the national average price for electricity—currently almost 12 cents per kilowatt hour—but the price you pay could be a lot more or a lot less. Here are the states with the highest and lowest average per-kilowatt-hour costs for electricity, according to the U.S. Department of Energy's Energy Information Administration:

Highest electricity rates
Hawaii: 22.99 cents
Connecticut: 20.24 cents
New York: 19.74 cents
New Jersey: 17.83 cents
Alaska: 17.82 cents
Massachusetts: 16.63 cents
New Hampshire: 16.41 cents
Maryland: 15.95 cents
California: 15.91 cents
Maine: 15.19 cents

Lowest electricity rates
West Virginia: 7.87 cents
Washington: 7.93 cents
Louisiana: 8.24 cents
Idaho: 8.44 cents
Kentucky: 8.58 cents
Oklahoma: 8.79 cents
North Dakota: 8.86 cents
Tennessee: 8.97 cents
Wyoming: 9.07 cents
Oregon: 9.07 cents

The impact of the price disparities can be significant:

A household in Hawaii with the Samsung RSG257AA[WP], a side-by-side unit that scores a poor for energy efficiency in our tests and consumes an estimated 841 kilowatt hours of electricity per year, would spend about $193 to run its refrigerator.

A household in West Virginia with the Maytag MTF2142EE[W], a top-freezer that scored an excellent in our efficiency tests and consumes an estimated 472 kWh per year, would spend around $37 annually to run its refrigerator. Swap the refrigerators, and the West Virginia household would still pay $42 dollars less than the folks in Hawaii. (At least the weather's better out in the middle of the Pacific.)

Several factors contribute to the price of electricity, but the biggest is the type of energy used to generate it. Oil-generated electricity tends to be the priciest; hydro- and coal-generated are among the cheapest. And according to the Hawaiian Electric Company, "The cost of electricity in Hawaii is higher than on the U.S. mainland for a number of reasons. For one, the electrical systems on each island are independent. Unlike on the mainland, there are no neighboring utility companies from which to draw power in the event of a problem with the generation or distribution systems. That means we must have reserve generating capacity and multiple distribution routes. Additionally, our state’s remote location adds to the cost of doing business."

Regardless of the generating method for your electricity—read "Uncover the Source of Your Power" to find out where your electricity comes from—you might be able to shop around for a cheaper price, as we covered in "How to Buy Green Electricity."

Check out the EIA's Electricity Restructuring by State map to see whether the electric industry has been deregulated in your state. If it has, visit your public-service or public-utility commission's Web site for a list of reputable suppliers and to see which one offers the lowest price. You'll find contact information for the commission in your state on the National Association of Regulatory Utility Commissioners's site. (Read our Q&A on pricing plans for natural gas.)

If retail choice isn't an option, put a call into your utility and inquire about efficiency-based incentives. For example, the utility might offer time-of-use rates, which would enable you to lower your bills by reducing electricity use during peak hours, known as demand-response pricing. With the rapid development of the smart grid, more utilities are moving in this direction.

It's worth noting that some of the upfront costs of creating the smart grid could be passed onto you, in which case rates will go up before they go down That's why using less is always the best way to lower your electric bill, regardless of where you live.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn how to save big bucks on your annual utility bill. And visit our Energy Saving & Green Living guide to learn more ways to save energy and money.