Electricity prices are on the rise, with this winter’s energy expenditures in the United States projected to be a full 10% higher than this time last year. While initial projections had expected residential energy spending to fall this year, a combination of frigid weather and rising prices is hurting many Americans at the meter. U.S. energy prices are rising so rapidly that they are outpacing inflation, and have reached a 5% annual increase.
Each year, the United States Energy Information Administration publishes a Winter Fuels Outlook that outlines forecasts for energy consumption, prices, and expenditures for American households. This year’s initial report projected that homes mainly heating with natural gas would spend between 2% less or 7% more this winter than last. They’ve since had to update this report after frigid temperatures drove up energy demand and natural gas and propane prices have trended upward.
“January’s cold weather increased natural gas consumption and resulted in near-record withdrawals of natural gas from storage,” the EIA reports. “Similarly, U.S. propane inventories—which had been relatively full at the beginning of winter—were drawn down as consumption increased and are now near their previous five-year average. U.S. propane exports are also at record highs, which can also elevate domestic propane prices.”
Last year, a CNET survey found 78 percent of Americans are concerned about rising energy bills, and that anxiety is not likely to be alleviated any time soon.
While domestic energy prices are high across the board, the amount that you’re paying at the meter also varies enormously by what region you live in. The price of a kilowatt-hour of electricity varies dramatically across the United States, from about ten cents in Washington state (thanks to cheap and abundant hydropower) to over 40 cents in import-dependent Hawaii. Some states also have deregulated grids, which were supposed to create a more competitive energy market and therefore drive down prices, but in reality this has not materialized.
"It's unclear on a systematic level whether deregulation has actually led to decreases in electricity rates, and that's because there's so many factors, including things like what's going on in Ukraine and the rate-making process," Joshua Basseches, an assistant professor of public policy and environmental studies at Tulane University, recently told CNET. "Whether it's had the effect that was promised on prices of electricity is very much up for debate."
Some experts contend that it’s not really up for debate, and that it’s clear that deregulation has failed in terms of lowering prices. The New York Times reports that consumers on deregulated grids have paid higher prices since 1998. “On average, residents living in a deregulated market pay $40 more per month for electricity than those in the states that let individual utilities control most or all parts of the grid,” the Times reported back in 2023.
But rising electricity prices are not unique to deregulated grids, or even to the United States. Across the Atlantic, an ongoing energy crisis has pushed millions of European households into energy poverty. Part of this is fallout from Russia’s 2022 invasion of Ukraine, but new reporting indicates that it’s also at least partially due to predatory pricing, with utilities taking advantage of market volatility at the expense of consumers.
A report from British charity organization Citizens Advice found that UK utilities “have pocketed a windfall of nearly £4bn from household bills during the energy and cost crisis” according to The Guardian. “We now know that while households have struggled with sky-high energy bills, network companies have been making astronomical profits,” says Citizen Advice CEO Dame Clare Moriarty.
While electricity pricing in the United States is more complex thanks to multiple and overlapping grids with different regulatory mechanisms, there is also some concern that utilities are allowed to set prices in ways that over-emphasize profit and harm the consumer. They’re also allowed to set prices higher according to expected expenditures which they don’t always deliver on.
“It’s like the utilities have a rewards credit card,” Joel Rosenberg of Rewiring America, a nonprofit focused on electrification, told Vox last year. “And they get to keep the rewards for how much they spend, and the [customers] have to pay off the bill, even if that bill takes 80 years to pay off.”
There are many complex factors at play to determine what number shows up on your utility bill each month, the vast majority of which are outside of consumer control. However, not all hope is lost. There are key strategies that you can follow to lower your energy use and increase efficiency around your home to try to ease the sting of monthly bills in these frigid winter months.
By Haley Zaremba for Oilprice.com