Why Your Electric Bill Is So High — and Could Keep Climbing
Electric - Bill
Why Your Electric Bill Is So High — and Could Keep Climbing
As temperatures rise for summer,
from January of last year, but some changes can help manage the cost.
electricity prices usually follow the same upward trend.
But this year, rates could be especially high.
There's higher air conditioning use during
the summer, which means people are using more electricity.
And when there's higher demand, it can result in higher prices.
An estimate from Eversource Energy,
new England's largest energy delivery company, said the average residential
customer could see bills increase by as much as 25% through the end of June.
So how did the cost of electricity get so high?
And what can households do to manage the price hike come summertime?
It's a story involving geopolitics, severe weather events and inflation.
And at the center of it lies one resource natural gas.
It's very important.
It's the largest source of generation at this time.
Renewables, including hydro, are second.
But natural gas is still far and away
the largest source of generation that we have.
Natural gas is used to produce electricity using a threestep process.
First, it's extracted from beneath
the earth's surface and delivered to power plants via pipelines.
Those power plants use natural gas
to power turbines that allow for the generation of electricity.
That electricity is then sent through power lines for use of your home.
In 2011, the United States surpassed
Russia to become the world's largest producer of the commodity.
But extreme weather events of the last year, like the freeze in Texas heat
waves
in the west and a hurricane in Louisiana, have challenged domestic supply.
2021 was a rough year in terms
of disasters that had an effect on natural gas production.
So at first, joining Texas freeze, a big part of the problem with a lot
of wildheads were frozen off, and therefore the production dropped
pretty precipitously at a time when demand was very high.
Hurricane IDA didn't help either because there was a drop off in production as
oil
and gas producers paused production in the Gulf.
Producers in the US.
Have benefited from strong global demand
as they've increased exports to places like Europe.
There is not a direct correlation between prices in Europe and prices in the
US.
But they are related in the sense
that for the last several years we have been exporting natural gas abroad.
The US. Has steadily increased its exports
of liquefied natural gas to Europe since 2016.
Russia is also one of Europe's top suppliers.
But with the war in Ukraine, concerns about natural gas supply are growing.
The war in Ukraine has made it so
that European countries are trying to quickly reduce their reliance
on Russian gas, which creates the need for greater supplies coming from
elsewhere.
And we are helping to fill that gap
by exporting more abroad, which drives up prices here by reducing supplies.
The confluence of weather events,
depleting inventories and higher demand pushing up prices has led to increased
residential electricity prices across nine regions on a year over year basis.
In general, when a company is incurring higher energy costs, it was able to
recoup
that to customers in the form of higher prices.
There is some level of regulatory approval
associated with that, but it's usually not disallowed in any way.
A number of utilities offer plans that allow you to pay less for electricity if
you're using it outside of peak hours, which is typically maybe four to.
09:00 p.m..
For instance, take this mock electric bill from Con Edison.
If the customer opted for time of use
rates, they would see separate charges for on peak versus off peak usage.
During the summer, Con Edison's peak rate is approximately twenty six cents per
kilowatt hour, which is around double the standard rate.
But during off peak hours that customer
would only pay about two cent per kilowatt hour.
Peak rates can vary depending on the.
Utility, so if you want to run your AC or charge your electric vehicle,
it may be cheaper to do so around 09:00 A.m. To 10:00 a.m. Instead
of in the afternoon when you see a surge in demand beyond what.
A consumer can control a state's public
Utility Commission can regulate costs, but its reach is limited.
They do not regulate natural gas prices, but what they can do is determine
the extent to which the utility can pass through those costs to consumers.
In general, those costs are passed through with no change.
But if, you know, for example,
you had an issue like the Texas freeze in which gas prices went through the
roof,
the utilities commission can help determine whether the utility should pass
through all those costs or whether it should do so over a longer period of time
so that it's not to hit consumers with huge rate increases.
Still, many believe high electricity costs
may be longer term, as power companies plan to spend the most
money in decades to shift to renewable energy and replace aging infrastructure.
These spending plans have the potential to further boost rates at a time when
natural gas prices are already fairly high and other inflationary pressures
have
made, for example, building renewable energy projects more expensive.
For now, the increase in electric bills relate to higher natural gas prices.
But if these utilities receive regulatory
approval for their capital spending plans over the next several years,
you may begin to see rate increases associated with that spending you.


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