- Consumers should expect electric bills to continue rising this year despite inflation slowing overall.
- Business operating costs are rising and more natural gas is going overseas, driving up prices.
- Already, 75% of Americans worry about their utility or electric bills. This could get worse.
Although price increases for gas, furniture, electronics and clothing are slowing after a long period of strong gains, one expensive item is not expected to get cheaper anytime soon: electricity.
Economists say consumers should expect their electric bills to continue to rise at an accelerated rate since liquefied natural gas (LNG), a fundamental fuel for generating electricity, continues to be scarce in the US. and business operating costs increase. Average electricity prices in the US USA could rise 10% again this year and possibly next year, predicts Mark Wolfe, director of the National Association of Energy Assistance Directors (NEADA), although economists have predicted that overall inflation will fall between 3% and 4%. at the end of the year.
Electric rates in Illinois, for example, could continue to rise after an increase last year. Utility ComEd has asked state regulators for a record $1.5 billion in rate increases over the next four years, starting in 2024.
If that next round of increases wins approval, household electric bills in Illinois would increase an average of $4.25 a month each year, a cumulative increase of $17 a month by 2027. That means rates there have doubled since 2012, according to the Illinois Public Interest Research Group, a nonprofit advocacy group.
Electricity rates are also rising elsewhere. While Illinois saw the third-largest percentage increase (32%) last year, New Hampshire and Hawaii took the top two spots at 40% and 38%, according to a survey released earlier this month by Texas utility Payless Power.
“It’s fair to say that, overall, we will see upward pressure by 2023 on the cost that consumers pay for electricity,” said Dallas Federal Reserve economist Jesse Thompson.
Why don’t electricity prices go down?
First, tighter supplies of LNG, which powers more than a third of Americans’ electricity, have raised costs for consumers. LNG is scarcer because the US is sending record amounts to Europe to replace lost imports from Russia, which have fallen sharply amid the war with Ukraine. That situation is unlikely to change soon, Wolfe said.
Since June, the United States has been the world’s top LNG exporter, he said, and companies were happy to grab higher prices as Europeans eagerly bought the fuel to prepare for winter.
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Winter there it has been mild so far, which has lowered and stabilized natural gas prices. But Wolfe says they don’t count on the calm to last with the ongoing war in Ukraine and China’s economic reopening that could make supplies scarce again. China is the world’s largest importer of LNG.
The unprecedented level of US exports are “For the first time in history, we are linking the energy bills of American households to global calamities,” Wolfe said in a letter to Energy Secretary Jennifer M. Granholm in October. That result is a “home energy price crisis.”
More than 75% of Americans were worried about their ability to pay their utility or electric bills, with 51% buying less to budget for the cost and a quarter getting a second job to cover the expense, Payless Power said.
The second reason electricity bills will stay high is more familiar: Labor shortages and tighter supplies have pushed up wages and other costs for utilities.
“They’re also experiencing inflation — higher wages because of reduced labor and materials,” said Thompson of the Dallas Federal Reserve. “The job market is very tight, especially in skilled trades like network operator. Some of these people work under high voltage and need training. You can’t just send anybody up there.”
In addition, customers will have to pay for a more stable network and network upgrades, Thompson said. Business operating costs have increased because businesses must maintain a backup if their main power fails, he said.
“Nowhere in the world do people suffer from blackouts well,” he said. “Energy production has to increase. You won’t see demand drop much, even in a recession.”
Can anything be done to lower the price of electricity?
The path to lower electricity prices is up to the Energy Department, Wolfe says.
The DOE “can’t control the price of natural gas, but it does approve export licenses,” which determine how much LNG can be exported, he said. If the DOE limits exports, domestic prices can be kept lower.
The US must also continue to move towards making renewable sources the main source of electricity, experts say.
In addition, Wolfe says the U.S. should suspend the Jones Act, a century-old law that requires goods shipped between U.S. ports to be carried only by U.S.-owned and crewed ships. Last July, six New England governors sent a letter to Granholm to consider this. Since there are zero LNG vessels that meet this requirement, it is impossible to ship US LNG to US ports.
The law “restricts competition and raises prices for businesses and households,” Wolfe said. Without it, more LNG could reach New England ports where needed and, hopefully, lower prices.
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“People don’t pay attention to this kind of thing. It’s not like oil when people see it in gas prices,” Wolfe said. Oil and gasoline prices can also be cushioned by releases from the US Strategic Petroleum Reserve (SPR). the Biden administration did last year.
There is no SPR for natural gas.
“The only thing left to do is try to reduce consumption to protect yourself,” he said.
Medora Lee is a money, markets and personal finance reporter for USA TODAY. You can reach her at [email protected] and sign up for our free daily newsletter for personal finance tips and business news Monday through Friday mornings.
