Sticker Shock for Consumers: Inflation, Ukraine war causing East Coast electricity bills to soar

Shutterstock / koya979
Shutterstock / koya979
Published On
Jul 15, 2022

Electric utility customers across the United States are feeling sticker shock these days when they open their monthly bills. Those living along the East Coast and in the eastern Midwest are getting hit especially hard. Such hikes are likely to continue, thanks to geopolitical forces driving natural gas prices higher across the globe—an international market the United States has come to dominate in just the last six years.

Retail electricity prices have risen nationwide over the past year or so by an average of 4.3%, according to the U.S. Energy Information Administration (EIA). However, utilities served by regional transmission operator ISO New England have seen wholesale power prices (what electric utilities that don’t produce their own power pay to supply customers) jump by a whopping 83% in the first quarter of 2022. PJM customers, who span all or part of 13 Mid-Atlantic and Midwestern states and the District of Columbia, have faced a 51% increase over the same period.

While solar, wind and other renewable energy resources have grown over the last decade, natural gas has had the top spot among electricity generation options for several years, totaling 38% in 2021, compared to 20% total for all renewable sources. Utilities went big for natural gas in the early 2000s, when new fracking technology created cheap and plentiful supplies. The fuel had the added advantage of creating lower greenhouse gas emissions than coal. Also driving prices down in those early days was the fact that U.S. producers had little opportunity to sell outside U.S. borders, thanks to a ban on almost all export facilities, which was in place until 2015.

Natural gas concerns

That consumer price advantage shifted dramatically in 2016, when the first plant designed to export liquefied natural gas (LNG) opened. Producers seeking new markets for their newly abundant supplies had pushed regulators to support this effort.

In January 2022, U.S. producers passed Australia and Qatar to become the world’s largest LNG exporter. Now, U.S. electric and gas utilities are facing competition from counterparts in China, South Korea and Japan—the three largest importers of U.S. gas—among others.

Inflation has added to natural gas prices. June figures showed costs had tripled since 2021, according to the EIA, to levels not seen since prefracking days. The war in Ukraine is set to make the commodity even pricier.

In March, President Joe Biden announced plans to substantially expand U.S. LNG exports to European Union nations to help offset their current dependence on Russia, which now supports about 40% of the bloc’s demand. The move would increase EU liquefied petroleum gas shipments by almost 70% over 2021 figures, which were the highest to date, to 37 billion cubic meters (bcm), up from last year’s 22 bcm total. By 2030, annual U.S. exports to the EU could total 50 bcm, according to White House figures.

Environmental concerns

Critics of U.S. assistance include some environmental advocates who fear the ramp-up will raise climate change risks with prices here. In addition to the CO2 produced when natural gas is combusted during electricity generation, methane—an even more potent greenhouse gas in the short term—is released when the fuel is pumped out of the ground and piped to LNG plants. The tanker ships used to export natural gas also add to the total carbon footprint.

Energy bills for the Eastern United States and related greenhouse gas emissions could begin to level off over the next several years, as renewable generation continues to expand. In December 2021, the International Energy Agency estimated that U.S. renewable capacity will increase by 65% (over 2021 levels) by 2026—a 35% boost over previous estimates.

While more than 75% of this total will come from new solar installations, a boom in offshore wind will bring direct relief to East Coast grids and its consumers in the next several years. Vineyard Wind I off the Massachusetts coast and New York’s South Fork are expected to begin operations by the end of 2023.

That will be just the start. In February, analysts with S&P Global Market Intelligence estimated the U.S. pipeline for offshore wind development, all primarily along the Atlantic coast, stood at 30.7 gigawatts (GW), with about 21 GW currently scheduled for completion by 2030.

In the meantime, consumers in the most highly impacted areas are facing real financial pain. In March, the National Consumer Law Center, using data from Massachusetts investor-owned utilities, estimated bill payments more than 90 days late in the state totaled $558 million, up from $387 million a year earlier. These figures came with a caution that the problem is likely to get worse, as it can take two to six months for wholesale price increases to affect retail customers’ bills.

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

Stay Informed Join our Newsletter

Having trouble finding time to sit down with the latest issue of
ELECTRICAL CONTRACTOR? Don't worry, we'll come to you.