By Will Wade and Naureen S Malik
US households are about to get some unwelcome mail this summer: some of the highest power bills they’ve ever seen.
Residential electricity rates have been surging for months and are poised to climb even higher this summer on a combination of tight supplies of natural gas and coal, an unrelenting drought in the Western US, and a nationwide forecast for extreme heat. Barclays Plc calculates that monthly bills will be more than 40% higher than last year’s, and projections from the US Energy Information Administration show this year’s retail residential rates rising the most since 2008.
It’s all pointing to a summer of pain for Americans beset by the highest inflation in four decades. Gasoline prices have reached record highs, an order of chicken wings fetches $34, housing expenses are soaring, and now the cost of running the air conditioner could become a make-or-break expense. That’s going to force people to make tough choices, especially in places like Miami, where energy costs have increased more than in any other US city.
“You might be able to drive less,” says Charles Rehwinkel of Florida’s Office of Public Counsel, which carries out advocacy work on behalf of utility customers. “You can’t turn off the air conditioner when it’s 102 degrees.”
Miami households spent 38% more on energy in April than a year earlier, according to consumer price data compiled by the US Bureau of Labor Statistics. That was partly because higher rates kicked in this year from Florida Power & Light, the NextEra Energy Inc. unit that is the state’s biggest power provider. Another key driver has been higher prices for natural gas—the source of 38% of electricity generated in the US.
Utilities have little control over this expense, which they pass on to customers, and prices are expected to remain elevated through next winter, Rehwinkel says.
“Our continued overreliance on gas only sets us up for these burdensome and unnecessary rate increases,” says Natalia Brown of Catalyst Miami, a nonprofit consumer advocacy group. “This business model is unsustainable, and it’s hurting people.”
It’s not just Miami. Spending soared 28% in Dallas and jumped 27% in Minneapolis. Nineteen of the 23 metropolitan areas surveyed saw double-digit hikes in April from a year earlier.
Source: US Bureau of Labor Statistics. Note: Household energy is defined as “energy items used for heating, cooling, lighting, cooking, and other appliances and household equipment.”
US residential power bills averaged $122 a month last year, but with natural gas prices above $8 per million British thermal units, that figure could rise by $49, according to Barclays analyst Srinjoy Banerjee. A year ago, gas cost less than $3.
The burden “disproportionately falls on lower-income groups,” Banerjee says.
Higher bills are a significant issue for older people living on fixed incomes, says Cristina Martin Firvida of the AARP. Many are concerned not only about rising costs, but also having their power shut off if they can’t afford to pay their bills. “We have seen some really tragic and deadly outcomes,” she says.
Moratoriums instituted during the pandemic to bar utilities from shutting off power to households for nonpayment have expired. Federal funding for the Low Income Home Energy Assistance Program more than doubled this year, but most states drained those funds in wintertime, Martin Firvida says. Some states are putting aside additional funds to help cover rising bills; California included $1.2 billion for consumer assistance in its proposed budget this month.
“We in the United States—and California in particular—are facing something of a perfect storm of higher costs for electricity and less reliable electric grids,” says Cisco DeVries, chief executive officer of OhmConnect Inc., which helps households reduce electric bills by remotely adjusting their thermostats.
California utility bills rose 25% in the past year and are set to rise a further 25% this summer, DeVries says.
Power costs are already becoming a burden for Kim McDermott of Victorville, Calif., about 80 miles northeast of Los Angeles. Summer bills have come to about $150 a month in the past, but the 50-year-old retired property manager is expecting them to top $300 a month this year.
“With everything else rising, it will begin to cut into our savings,” she says.
— With assistance by Michael Sasso, and Alexandre Tanzi