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Electric bills have skyrocketed in the last five years, a sharp reversal from a quarter-century when Americans enjoyed stable power bills even as they used more electricity.
More electricity use at homes and higher prices are driving up power bills.
Households paid a record $1,419 on average for electricity in 2010, the fifth consecutive yearly increase above the inflation rate, a USA TODAY analysis of government data found. The jump has added about $300 a year to what households pay for electricity. That’s the largest sustained increase since a run-up in electricity prices during the 1970s.
Electricty is consuming a greater share of Americans’ after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated, a USA TODAY analysis of Bureau of Economic Analysis data found.
Greater electricity use at home and higher prices per kilowatt hour are both driving the higher costs, in roughly equal measure:
•Residential demand for power dropped briefly in 2009 but rebounded strongly last year to a record high. Air-conditioners and household appliances use less power than ever. A new refrigerator consumes half the electricity as a similar one bought in 1990. But consumers have bigger houses, more air-conditioning and more electronics than before, outpacing gains in efficiency and conservation.
“People have made a lot of money selling weight loss programs. It’s the same for energy. Behavior is hard to change,” says Penni Conner, vice president of customer care at NSTAR, a Boston-based utility.
•Prices are climbing, too, hitting a record 11.8 cents per residential kilowatt hour so far this year, reports the Energy Information Administration. The increase reflects higher fuel prices and the expense of replacing old power plants, including heavily polluting — but cheap to operate — coal plants that don’t meet federal clean air requirements.
“Higher bills are a huge problem for low income families,” says Chris Estes, executive director of the North Carolina Housing Coalition, which opposes a proposed rate hike in its state by Duke Energy. “Utilities are what people’s budgets start with.”
Duke Energy says the rate increase is needed to pay for replacing old power plants and making the transmission system more reliable. The Charlotte-based utility has reached a tentative agreement with North Carolina to raise rates 7.2% in February, lower than its original 17% request.
“The industry as a whole is facing higher costs because we’re retiring our aging fleet” of power plants, says Duke Energy spokeswoman Betsy Conway.
Electricity cost varies widely depending on where you live. Cheapest: Northwest communities near hydropower dams — as low as 2 cents per kilowatt hour. Most expensive major utility: Consolidated Edison, supplier of New York City — 26 cents per kilowatt hour, according to EIA.
High taxes, limits on air-polluting fuels and the expense of maintaining an underground transmission system keep consumer costs high, says ConEd spokesman Chris Olert.
A potential bright spot: Electric bills appear roughly the same so far this year as last when adjusted for inflation, based on preliminary reports.
However, the future of energy prices and the upcoming closure of more polluting coal plants makes the long-term outlook cloudy for consumers. Duke Energy plans to ask for another rate hike next year to cover the costs of new natural gas-fired plants.
CNN Money recently reported: “The price of heating the average home with oil is expected to jump 10% this year to an average of $2,535 over the winter heating season (October 1 through March 31), according to the U.S. Energy Information Administration (EIA). That’s 45% higher than just two years ago, when the average bill was just $1,752.
Even while keeping the thermostat in the low 60s, the McLaughlins burn about 750 gallons of oil a year. At about $3.50 a gallon, that’s more than $2,600. “We’re in a real bind; There’s no safety net,” said Bill. “We’ve run through all our savings and if we pay for heat, we have less money for food and medicine. We don’t even have our car out on the road. My wife depends on friends when she has to go someplace.”
The McLaughlins can partly blame their soaring heating bills on political unrest in Libya, which has caused oil prices across the globe to soar, explained Neil Gamson, an economist and forecaster for the EIA
Less reliance on oil: One bright spot is that the rising price of oil affects far fewer households than it did in the past. Most homeowners have already transitioned to natural gas, with less than 10% of all households still burning oil. That percentage is expected to drop even further as the cheaper fuel option becomes available in more towns, said Gamson.
The new faces of poverty
For those who heat their homes with gas, prices are projected to be stable over the next few years. There’s a glut of natural gas available and more is coming on line as new sources, like the Marcellus Shale in Pennsylvania and New York, open up for development.
The EIA projected gas prices will be just 2.2% higher during this winter season and nearly 18% lower than two years ago. The average homeowner will pay only about $732 to heat their home with gas this season.
But those kinds of energy bills are a pipedream for people like the Bill McLaughlin. “I don’t want anything extra,” he said. “I just want to be able to go to bed at night with the temperature set at 60 degrees.”