With economy-wide inflation still plaguing us and stretching paychecks thin, we should be paying extra close attention to energy prices. The cost of energy affects the price of almost everything.
In the transportation sector, high fuel prices increase the costs of getting products to market or directly to your home. High electric and natural gas bills contribute to inflation not only by raising the cost of doing business, but also by directly increasing the cost of powering your home.
In both cases, the higher prices can be attributed largely to the fact that fossil fuels are global commodities with their price set by international markets. That means that events virtually anywhere in the world can increase our energy costs here in the United States.
The recent spike in these energy costs are tied directly to Russia’s invasion of Ukraine. Sanctions on Russian energy in response to the invasion—and retaliatory measures by Russia—have tightened oil supplies and greatly increased Europe’s demand for U.S. natural gas.
Russia is a major energy producer, and over the years, Europe became heavily dependent on Russia for its oil and natural gas supplies. Europe has finally woken up to the strategic vulnerability posed by being over reliant on Russian energy, and is now turning to the U.S., the world’s leading producer of natural gas (Russia is second) to help wean itself off of Russian natural gas.
That has dramatically changed the natural gas market here.
For a long time we had to use all of the gas we produce domestically because there was no way to ship it overseas, which kept our natural gas prices low, but the advent of liquefied natural gas (LNG) changed that and we can now ship U.S. natural gas around the globe.
That new demand coming from Europe, and the fact that Europe will pay a high price for gas, has lead to much higher natural gas prices here. In fact, the price of natural gas here in the U.S. has tripled this summer—from just over $3 per million BTU (MMbtu) to roughly $10 per MMbtu—in a single year.
Why does all of this affect your electric bill?
For most electric utilities in the U.S., a large portion of the electricity they produce comes from natural gas-fired generating plants. They built a bunch of gas-fired power plants back when natural gas prices were bargain basement low. Now, with more than 40 percent of our nation’s electricity produced using natural gas, they are over dependent on a fuel that has become significantly more expensive than other options.
The result? Electricity rates have increased dramatically nationwide. The price of electricity has increased 15.8% in the past year alone.
Another factor in these rising prices is the fact that most of our nation’s natural gas-fired generation plants are more than 20 years old and costly to operate and maintain.
What are utility companies doing to help alleviate higher electric prices? Well, they’re not doing anything really. Instead of diversifying with cheaper sources of electricity, they just past the extra cost onto customers by raising rates.
In Florida, for example, all three major utility companies (Florida Power and Light (FPL), Duke, and Tampa Electric) requested record rate increases in 2021, all of which were approved by that state’s Public Service Commission.
In early September, due to the skyrocketing cost of natural gas, the NJ Board of Public Utilities approved massive rate hikes. New Jersey residents will see their energy bills increase as much as 25% in the coming months.
Texans are also facing rising utility bills, despite Texas being the leading natural gas producing state in the nation. Not only are Texas natural gas prices among the most expensive in the U.S., reliability problems plague the state. And, in the face of this inability to reliably provide its own residents’ with affordable energy, Texas is exporting more natural gas to other countries than ever before.
While natural gas prices typically ease a bit with the lower demand of fall and spring, summer and winter will see them skyrocket to new heights, with utility customers bearing the brunt of these costs.
Utility companies across the nation, most of which are monopolies, can see how much global demand for natural gas is driving—and will continue to drive—up prices, but are largely unwilling to diversify away from natural gas-fired generation. They want to squeeze every dollar out of their aging gas plants, even if it costs you and I a bundle.
We all need to work to reign in these monopoly utilities, which are largely insulated from the free market, and push for policies that force them to diversify with cheaper and cleaner sources of energy, such as solar, nuclear, and wind.
Please check our online Action Center for opportunities to make your voice heard on this.
Until we can secure the needed policies and better diversify the nation’s energy mix, there are a few ways you can help lower electric bills:
- Make sure your home is energy efficient. Insulation, weather stripping, efficient windows and LED lighting can make a huge difference.
- Be sure you have high efficiency air conditioning and heating equipment. Air conditioners more than 20 years old are energy hogs.
- Try to maintain you indoor home temperature at between 75 and 80 degrees in the summer and at 69-72 degrees in the winter.
- Utilize fans and shades in hot weather.
- Adjust the temperature setting on you A/C, furnace, and water heater to use less energy when you are away on vacation.
- Turn off the lights and television when you leave a room.