Inflation is easing, but electricity prices continue to rise

Finally, energy prices are falling, and falling fast. But don’t be fooled.

Prices remain a lot higher than they were months ago, they’re generally not going to reach 2021 levels anytime soon — and the price of electricity continues to climb.

The federal Bureau of Labor Statistics’ report on inflation Wednesday was a good news/bad news mix.

Good news: Energy prices nationally tumbled 4.6% last month. Gasoline dropped 7.7%, and a gallon of regular in California Wednesday was more than $1 a gallon less than the mid-june peak price..

Supply and demand for most energy products are edging back to a point where they’re heading for balance. A variety of factors, including sudden demand and supply crunches exacerbated by Russia’s invasion of Ukraine helped push prices up.

“As the supply chain comes back into sync, demand cools off and you see energy prices cool down,” said Sanjay Varshney, professor of finance at California State University, Sacramento.

But there’s also sobering energy news. Electricity prices nationally were up 1.6%, the third straight month they jumped more than 1%. They rose 15.2% over the last 12 months, the biggest annual spike in 16 years. Natural gas prices fell last month but have gone up 30.2% over the year.

PG&E spokesperson Katie Allen said that customers should expect their electric bill to be about 20% more this summer compared to last summer. This is due to increased energy supply prices, Allen said. PG&E is California’s primary electric provider.

“PG&E does not add any mark up on the energy we buy for our customers’ use, neither gas nor electric,” she said in an email to The Bee. “What we pay, you pay.”

Allen said the company is focusing on keeping prices from increasing with methods such as keeping operating costs low, using a gas storage to keep natural gas for later use and having diverse electricity generation resources.

If you have a local provider like Sacramento Municipal Utility District, or SMUD, you might be shielded from the increase — for now.

Alcides Hernandez, revenue strategy manager at SMUD, said that the district’s board approves rates for two year increments.

Last year, the board approved rate increases of 1.5% effective March 1, 2022, and a 2% rate increase effective Jan. 1, 2023, for residential and non-residential customers. According to the fact sheet, the increases are below the forecast rate of inflation.

There are still risks that inflation will re-ignite, or at least won’t cool as much as hoped.

“The flow of energy from Russia to Europe will be reduced significantly. The slowing economic growth here and abroad will soften demand somewhat but not enough to cut the price of energy significantly on a continuing basis,” said Sung Won Sohn, president of SS Economics in Los Angeles.