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Are Electricity Prices Rising?

why are electricity prices rising in the US

Great, another bill. Here’s yet another reason your cash flow is going out the door, and you can’t help but wonder, “Are electricity prices rising?” Well, the short answer is “yes,” and we’re sure it comes as no surprise to you. This year, residential retail electricity prices are expected to rise to an average of 14.36 cents per kilowatt hour (kWh) in the U.S., which is the highest they’ve ever been. There’s been a lot going on in the last few years: a worldwide pandemic, fluctuating natural gas prices, and the list goes on. The reality is, yes, electricity prices are rising ― and they’re expected to keep going up.

Let’s cut to the chase and get the skinny on why your electric bill might be climbing.

Why Is My Electric Bill So High?

Chances are, if you’re asking that million-dollar question, you’ve seen a steady uptick in your own bills. An increase on your utility bill might point towards your energy consumption. However, there are a variety of factors that may contribute to higher bills that might have nothing to do with your individual household. Here are a few:

are electricity prices rising

The Pandemic Increased the Demand for Power

Want to know the true cost of working from home? The 2020 Covid-19 Pandemic has changed the way we consume energy. In the U.S., households spent “$6 billion more on at-home power consumption from April to July 2020.” During that time, there was a change in patterns of residential energy consumption. People were at home more and many have even transitioned into working remotely on a permanent basis.

With retail electricity purchases accounting for 43% of total residential sector end-use energy consumption in 2020, many U.S. households would benefit from increased energy efficiency. Something as simple as swapping out your incandescent light bulbs with LED light bulbs could significantly impact your electric bill. LED bulbs use “at least 75% less energy, and last[ing] up to 25 times longer” as incandescent bulbs.

But there’s more to it than that. While it’s typically common for demand for electricity to rise in the summer and winter, subsequently resulting in higher energy bills, electricity prices have been headed uphill for a while now. From 2020 to 2021, there was a rapid spike in the cost of electricity. This increase goes hand-in-hand with a rise in the demand for power. According to the U.S. Energy Information Administration (EIA), electricity rates jumped more than 4% and a similar increase is predicted to occur in 2022.

home energy prices line graph

Source: The Guardian

How Does the War in Ukraine Affect Fuel Prices?

Are electricity prices rising? Yes, and the conflict in Ukraine may be partly to blame. Consumption aside, there’s an issue with relying on non-renewable energy. The U.S. is largely dependent on oil and natural gas to produce its power. This “dirty” energy comes with a hefty price tag.

And we’re not even talking about the environmental toll that costs us daily, but more of an economical one. In fact, if you’re interested in learning how natural gas, coal, and oil (or non-renewables) are impacting the world around you, check out our blog on the matter.

Currently, the U.S. imports most of its oil from Canada and only about 8% from Russia. This was before President Biden placed a ban on Russian oil imports. Fortunately, America isn’t one of the nations largely dependent on Russia for oil and natural gas, but that doesn’t mean we’re in the clear. Oil and gas prices are set in the international market. So, what happens overseas will ultimately trickle down to American pockets. Russia supplies about 40% of the European Union’s natural gas imports, and even more to individual European countries. Subsequently, bans on Russian imports cause other countries that are dependent on Russian oil to turn to other sources of oil and natural gas, decreasing supply and increasing demand.

The Faulty Power Infrastructure Can’t Take the Heat

Whether it’s extremely hot or extremely cold, the U.S. power grid is struggling to take on the extra work. Let’s take a look at one of the biggest reasons why electricity prices are rising and continuing to rise: a rickety power infrastructure.

electric company workers working on power lines

A C- Power Grid

This isn’t a matter of opinion. In 2021, the U.S power grid was graded a C- by the American Society of Civil Engineers (ASCE). According to the ASCE, about 30% of the transmission and distribution lines are well past their life expectancy of 50 years. The remaining lines (about 70%, or over 600,000 miles) are more than 25 years old. The fact of the matter is, the U.S. power grid is outdated and struggling.

According to research out of the University of Minnesota’s Technological Leadership Institute, “The U.S. has more power outages than any other developed country.” American electrical generation reached about 3.9 trillion kilowatt hours (kWh) in 2021. Our increasing demand for power is pushing our electrical grids to the max. As a result, many people are seeking alternative ways to generate electricity that are more cost-effective and reliable.

Raining Cats, Dogs, and High Electricity Bills

Weather has always played a role in energy consumption. Electricity bill increases often coincide with extreme weather conditions. For instance, people might run their air conditioning units more in the summer to cool down their homes. Likewise, in the winter, they might run their heaters more often. This is coupled with the tendency to stay home more often during these times. But are electricity prices rising higher than normal, regardless of consumption? We’d still say yes.

Let’s look at some of the catastrophic events that have greatly impacted the cost-to-supply electricity rate in recent years.

why are electricity prices rising

2021 Weather-Related Disruptions

From hurricanes to winter storms, climate change is transforming the world around us. Regardless of where you live, these natural disasters are becoming more commonplace. According to Gallup, one in three Americans have been affected by extreme weather. Storms and other natural disasters can lead to widespread power outages. And an unreliable power system doesn’t make it any better.

Why Are Electricity Prices Rising?

Here’s the crude reality about crude oil. Many different factors can spike your electricity bill ― from natural disasters, to foreign affairs, to the power grid’s ability to transmit power to your home. Ultimately, electricity rates are affected by our ability to obtain the resources needed to generate power.

So, yes, electricity prices are rising. The way we generate electricity through the use of renewable energy is more cost effective. America’s dependence on non-renewable resources, like coal, oil and natural gas, means fluctuations in the supply that drives costs up. It’s a costly mistake to choose dirty electricity over a cleaner alternative ― a mistake you’re footing the bill for.

But there are other options. The carbon footprint of a solar panel is about 20 times less than the carbon output of coal-powered electricity sources. Many U.S. cities are incorporating clean energy goals into their power infrastructure. Solar could be the more affordable, cleaner alternative to powering your home. Contact one of our Solar Energy Specialists today to discover the ways solar panels could help reduce your electricity costs.

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Graph source: The Guardian

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