Sun Sentinel Palm Beach Edition
Americans’ next big shock? Surging costs for electricity
Already frustrated and angry about high gasoline prices, many Americans are being hit by rapidly rising electricity bills, compounding inflation’s financial toll on people and businesses.
The national average residential electricity rate was up 8% in January from a year earlier, the biggest annual increase in more than a decade. The latest figures, from February, show an almost 4% annual rise, reaching the highest level for that month and approaching summer rates, which are generally the most expensive.
In Florida, Hawaii, Illinois and New York, rates are up about 15%, according to the Energy Department’s latest figures. Combined with a seasonal increase in the use of electricity as people turn on air conditioners, the higher rates will leave many people paying a lot more for power this summer than they did last year.
The immediate reason for the jump in electric rates is that the war in Ukraine has driven up the already high cost of natural gas, which is burned to produce about 40% of America’s electricity. And supply chain chaos has made routine grid maintenance and upgrades more expensive.
These short-term disruptions could be just the start. Energy experts fear that electricity rates will rise at a rapid clip for years because utilities and regulators are realizing they need to harden electric grids against natural disasters linked to climate change. Power companies are also spending more on new transmission lines, batteries, wind turbines, solar farms and other gear to reduce greenhouse gas emissions.
Almost all of those costs will filter down to monthly electric bills.
“This is an affordability emergency,” said Mark Toney, executive director of The Utility Reform Network, or TURN, which represents ratepayers in California, where rates in February were up 12% from a year earlier and utilities are asking regulators to approve further increases. “If you want to control inflation, one of the things you have to control is energy costs.”
Natural gas prices have surged in recent months as U.S. producers have sent more fuel to Europe, which wants to use less Russian gas. Utilities in a few places, like Hawaii and Puerto Rico, rely on some power plants fueled by oil, which has also become much more expensive. The price of coal, which accounts for roughly 20% of U.S. electricity, has gone up, too.
The Biden administration has been urging the industry to produce more oil and natural gas, but energy experts say it could take a year or two to significantly increase supplies.
Demand for electricity is also rising because of climate change. The National Weather Service expects this summer to be hotter than average in most of the country. People who can least afford higher bills could feel the pain the most because most moratoriums on power shut-offs during the pandemic have ended.
“Consumers are going to pay the price for this,” said Gordon van Welie, CEO of ISO New England, the electric grid operator in the Northeast, where electric rates are among the highest in the country. “The reality is, we’re going to be dependent on gas for a very long time.”
Even the cost of wind turbines and solar panels, which had been falling for years, has risen recently because of supply chain problems. But analysts said that over the next decade, those renewable sources should help tamp down energy costs.
The problem is that building new wind and solar installations and the related power lines and batteries will have an upfront cost.
“Wind, solar and hydro are exactly what you need,” said Mark Cooper, a senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School. “We should have been much further along in the transition.”