Why your electric bill is skyrocketing and likely to rise

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U.S. electricity customers are facing some of the biggest bills in years due to volatile natural gas prices, which are driven higher by winter demand and a global supply shortage compounded by the Russia’s war against Ukraine.

Already, the natural gas supply crisis has made it much more expensive for utilities to buy or generate electricity. As a result, some customers saw their electricity bills increase by 20% or more over the previous year, in addition to seeing their home heating bills increase.

Today, with sanctions on Russia threatening to further restrict global natural gas supplies, rising prices are expected to persist, executives and analysts say, especially in regions heavily reliant on fuel for power generation .

Domestic natural gas prices are at their highest levels in years before winter as exporters ship record quantities overseas, and prices have recently risen again on fears of another global shortage.

“It will impact customer bills,” said Nick Akins, general manager of American Electric Power. Co.

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a utility company that serves more than five million customers in 11 states.

On Friday, US Henry Hub gas prices hit around $4.73 per million British thermal units. That’s about $2.66 per million British thermal units a year ago.

Utilities across the country are recouping gas and electricity supply costs by charging them to customers, leading to a sharp rise in prices this winter after a year of steady increases. Average retail electricity prices for residential customers rose 4.3% last year to 13.72 cents per kilowatt hour, the largest annual increase since 2008, according to the Energy Information Administration. The increase, which generally matched headline inflation, was driven in part by the cost of natural gas delivered to power plants, which more than doubled from 2020.

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Utilities must receive regulatory approval to raise rates, but it is generally common practice for regulators to allow them to recover higher fuel and supply costs through customers.

The recent spike in electricity prices has been particularly acute in New York. Consolidated Edison Inc.,

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which supplies electricity to about 3.3 million customers in the New York area, said city residents using about 300 kilowatt hours a month saw their January bills rise by about 23%. Most of this increase is due to higher supply costs.

ConEd said it is working to hedge against price volatility and adjust its billing processes to benefit customers.

Hector Ruiz, 44, a fiber optic engineer who has lived in his home in Clifton Springs in upstate New York for eight years, said he has never paid more than about $500 per months for gas and electricity. His bill last month was just under $1,000, he said, scrambling his family of four’s budget and prompting him to dip into funds set aside to d other purposes.

Hector Ruiz said his last gas and electric bill was just under $1,000, double what he was paying.


Photo:

Malik Rainey for The Wall Street Journal

“My utility bill literally doubled overnight,” Mr. Ruiz said. “Was it a punch in the stomach? Yes.”

Gabriel Thompson, 40, a photographer who lives with his wife in Westchester County, just north of New York, saw his electric bill rise sharply alongside his gas bill in January. Its cost of supplying electricity reached 18 cents per kilowatt hour that month, compared to about 6 cents per kilowatt hour the previous month. Including delivery charges, he paid over $200 for electricity and about $585 for natural gas.

“It makes me happy that I don’t have an electric car, which I wish I had,” Mr Thompson said. “People don’t have infinite disposable income.”

The increases come amid broader concerns about high inflation. The consumer price index jumped 7.9% in February, the highest rate in 40 years.

Gabriel Thompson says higher utility costs make him happy not to have an electric car.


Photo:

Clark Hodgin for The Wall Street Journal

Eversource Energy,

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a utility that serves 3.6 million electricity and natural gas customers in Connecticut, Massachusetts and New Hampshire, increased its electricity rates in early January to account for higher wholesale prices. The company said an average residential customer could see their bills increase by up to 25% through the end of June.

James Daly, Eversource’s vice president of energy supply, said regional pipeline constraints have exacerbated a gas supply shortage resulting from higher seasonal demand and relatively stable domestic production. The company has also seen a spike in liquefied natural gas prices as exporters ship more of it overseas, although it is not heavily dependent on this type of fuel.

“We can see prices rise faster than in other parts of the country if there is an imbalance between supply and demand,” Daly said.

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In California, wholesale electricity prices have risen as the state’s largest utilities plan to invest billions of dollars to reduce the risk of their power lines igniting wildfires. San Diego Gas & Electric, a unit of Sempra that serves about 1.5 million electric customers and 900,000 natural gas customers, raised rates earlier this year to account for rising supply costs. Average residential bills increased by 11.4%.

Guggenheim analyst Shahriar Pourreza said utilities have long relied on low gas prices to reduce supply costs, giving them more leeway to invest in their systems without major rate increases. . Now, with gas prices likely to remain high, companies will face more pressure from regulators to control spending and lower consumer bills, Pourreza said.

“You haven’t seen the same level of inflation in utility bills that you’ve seen in other industries and other products,” he said. “It’s been a subsidy for them, and that subsidy will probably go away.”

The recent spike in electricity prices has been particularly acute in New York. A street in Mount Vernon.


Photo:

Clark Hodgin for The Wall Street Journal

Write to Katherine Blunt at Katherine.Blunt@wsj.com

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