Many Americans have felt the pain of inflation at the gas pump or when buying groceries. But not all have noticed that electricity prices have also quietly gone up. For this coming summer, or maybe a much longer time, more American families will be hit by hefty electricity bills.
According to the U.S. Energy Information Administration (EIA), in 2021, the average residential electricity price rose by 4.3 percent from 2020 to 13.72 cents per kilowatthour (kWh), the fastest rate since 2008. The latest data show the increase rates for the first three months in 2022 were 8.1, 3.6, and 8.8 percent, respectively, suggesting an even higher increase rate this year for residential electricity prices.
Typically, prices are the highest in the summer months and the lowest in January. However, in January 2022, the average residential electricity price was close to that of the summer months of 2021.
“We forecast the U.S. residential electricity price will average 14.4 cents/kWh between June and August 2022, up 3.9 percent from summer 2021,” EIA said in a May report.
The agency’s data show that residential electricity prices are expected to keep rising almost throughout 2023.
Not only residential electricity prices, but also other retail electricity prices—be it commercial, industrial, or transportation—are expected to go up in the coming months, which will be another contributor to inflation.
The Federal Energy Regulatory Commission (FERC) also forecasts that wholesale electricity prices will rise significantly this summer.
“Forecasted hotter temperatures, slightly increased electricity demand, and higher natural gas prices indicate higher prices in wholesale electric markets for the summer—with futures prices for major electricity trading hubs between 77 percent and 233 percent higher than last year,” a May FERC report stated.
Normally, retail electricity prices are less volatile than wholesale electricity prices because retail electricity prices are affected by contracts, rate regulation, and other elements.
Why Electricity Prices Keep Rising
Fuels to generate electricity, cost of transmission and distribution, weather conditions, and local regulations are key factors determining the electricity prices.
A main driver of the rising electricity prices has been the significantly higher cost of natural gas, which has tripled over past year.
According to EIA, the cost to generate electricity accounts for 56 percent of electricity prices in 2021, and distribution and transmission account for the rest. Natural gas now accounts for over 43 percent of electricity generation—the largest source of electricity.
The EIA expects that “significantly” higher natural gas costs will drive up electricity prices in the coming months, along with “the increased difficulties experienced by U.S. power suppliers” in recent months.
The Wall Street Journal reported this month that electric-grid operators are struggling to keep up with demand. The main reason is that traditional coal-fired plants are being retired more quickly than they can be replaced by renewable energy and battery storage or nuclear power. Power grid operators warn of electricity shortages or even blackouts during peak periods this year.
Some energy experts have said that the Biden administration’s policies are resulting in the surging natural gas price.
“This administration’s efforts against the oil and gas industry are starting to bear fruit,” Don Whaley told NTD in a recent interview. Whaley, president of Whaley Energy Consultancy, has over 40 years of experience in the energy industry.
“Natural gas prices are not historical levels, but they’re the highest we’ve seen in decades, or in a decade or two. And they haven’t shown any real signs of relenting,” he said.
Whaley said the current administration had “pushed production of natural gas down.”
According to the EIA, low storage inventories below the five-year average, steady demand driven by high levels of liquefied natural gas (LNG) exports, a cooler spring, and high demand in the electric power sector have all contributed to the rapid surge in natural gas prices.
“We’re behind where we were last year. But more importantly, we’re about 350 billion cubic feet behind where the five-year average, and we need to catch up because if we’re lagging behind, then prices are going to stay up, and prices at home for heating in the Northeast this winter are going to be profound,” Whaley said, adding natural gas is a primary source of heating fuel for the Northeast during the wintertime.
Residential electricity prices in the New England area is also among the highest in the nation, largely due to the higher cost of natural gas. Early this year, the natural gas price in New England increased significantly because of cold weather, regional pipeline constraints, and limited incremental LNG supply.
Biden administration’s policies suppressed natural gas supply and increased the distribution cost, said Jerry Simmons, president and CEO of Domestic Energy Producers Alliance.
“The Federal Energy Regulatory Commission that regulates gas pipelines in this country recently enacted new rules, new environmental rules, before they’ll permit a pipeline,” Simmons told The Epoch Times.
On Feb. 17, FERC issued two policy statements: the certificate policy statement and the interim greenhouse gas policy statement, which stresses that environmental risks and their impact must be considered when issuing certificates for pending and future applications.
“So that, again, we can draw all the wells we want to, but if we can’t get it to a market, then it doesn’t do us any good. So they’ve hindered that … That’s just an increased cost to consumers here that buy our product,” Simmons said.
According to FERC, during the Trump administration, the numbers of approved major natural gas pipeline projects that could add capacity were 33, 29, 24, and 11 in 2017, 2018, 2019, and 2020, respectively. Meanwhile, after President Joe Biden took office, only four major projects were approved in 2021, and only one has been approved this year so far.
Some mainstream media have claimed that increases in natural gas prices are only to be blamed on the Ukraine war and U.S. producers sending more fuel to Europe. However, the EIA had already reported natural gas prices rising between March and early October 2021 before Russia’s war on Ukraine.
The EIA said that weather and natural gas prices would be critical in determining the actual electricity prices for the coming months.
“Demand and supply patterns for electricity are highly dependent on the realized weather, especially during the summer, so actual industry conditions in the future may differ substantially from initial expectations,” EIA said. “In addition, natural gas prices have shown high degrees of volatility in recent months. Therefore, this summer’s electricity supply outlook is subject to heightened levels of uncertainty around the current STEO [short-term energy outlook] forecast.”
Last week, Biden referred to the surging gas and energy prices as an “incredible transition.”
“When it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over,” Biden said during his trip to Japan on his administration’s efforts to combat U.N.-led predictions of catastrophic climate change.
Melina Wisecup contributed to this report.