US electricity customers are facing some of the largest bills in years because of volatile natural-gas prices, which are being driven higher by winter demand and a global supply shortage being made worse by Russia’s war against Ukraine.
Already, the natural-gas supply crunch has made it substantially more expensive for utilities to purchase or produce electricity. As a result, some customers have seen winter power bills increase by 20% or more compared to the year before, in addition to seeing higher home-heating bills.
Now, with sanctions against Russia threatening to further constrain global natural-gas supplies, higher prices are likely to persist, executives and analysts say, especially in regions heavily reliant on the fuel for power generation.
Domestic natural-gas prices reached the highest levels in years ahead of winter as exporters shipped record amounts of it overseas, and prices have recently risen again on fears of another global shortage.
“It will have an impact on customers’ bills,” said Nick Akins, chief executive of American Electric Power Co.
a utility company that serves more than five million customers in 11 states.
US Henry Hub gas prices on Friday reached about $ 4.73 per million British thermal units. That is up from about $ 2.66 per million British thermal units a year ago.
Utilities across the country recover gas and electricity supply costs by charging them to customers, driving prices sharply higher this winter after a year of steady increases. Average retail electricity prices for residential customers rose 4.3% last year to 13.72 cents per kilowatt-hour, the largest annual increase since 2008, according to the Energy Information Administration. The increase, which generally matched inflation overall, was spurred in part by the cost of natural gas delivered to power plants, which more than doubled from 2020.
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Utilities must receive regulatory approval to raise rates, but it is generally standard practice for regulators to allow for them to recoup higher fuel and supply costs through customers.
The recent surge in electricity prices has been especially acute in New York. Consolidated Edison Inc.,
which provides electricity to about 3.3 million customers in the New York City region, said city residents using about 300 kilowatt-hours a month saw their January bills increase by roughly 23%. Most of that increase resulted from higher supply costs.
ConEd said it is working to hedge against price volatility and adjusting its billing processes to benefit customers.
Hector Ruiz, 44 years old, a fiber-optic engineer who has lived in his house in Clifton Springs in upstate New York for the past eight years, said he had never paid more than about $ 500 a month for gas and electricity. His bill last month was just shy of $ 1,000, he said, scrambling the budget for his family of four and prompting him to tap into funds set aside for other purposes.
“My utility bill literally doubled overnight,” Mr. Ruiz said. “Has it been a punch to the gut? Yes. ”
Gabriel Thompson, 40, a photographer who lives with his wife in Westchester County just north of New York City, saw his electricity bill rise sharply alongside his gas bill in January. His cost of electricity supply reached 18 cents a kilowatt-hour that month, up from about 6 cents a kilowatt-hour the prior month. Including delivery charges, he paid more than $ 200 for electricity and about $ 585 for natural gas.
“It makes me glad I do not have an electric car, which I’d love to have,” Mr. Thompson said. “People do not have infinitely expendable income.”
The increases come amid broader concerns about high inflation. The consumer-price index surged 7.9% in February, the highest rate in 40 years.
a utility that serves 3.6 million electric and natural-gas customers in Connecticut, Massachusetts and New Hampshire, raised electricity rates at the start of January to account for higher wholesale prices. The company said an average residential customer could see bills increase by as much as 25% through the end of June.
James Daly, Eversource’s vice president of energy supply, said regional pipeline constraints exacerbated a gas-supply shortage resulting from higher seasonal demand and relatively flat domestic production. The company also saw a surge in prices for liquefied natural gas as exporters shipped more of it abroad, though it does not rely heavily on that type of fuel.
“We can see prices run up faster than in other parts of the country if there’s a supply-demand imbalance,” Mr. Daly said.
In California, wholesale power prices have risen as the state’s largest utilities plan to invest billions of dollars to reduce the risk of their power lines igniting wildfires. San Diego Gas & Electric, a unit of Sempra that serves about 1.5 million electric customers and 900,000 natural-gas customers, raised rates at the start of the year to account for higher supply costs. Average residential bills increased by 11.4%.
Guggenheim analyst Shahriar Pourreza said utilities have long counted on low gas prices to keep supply costs down, giving them greater leeway to invest in their systems without major rate increases. Now, with gas prices likely to remain elevated, companies will face more pressure from regulators to keep spending in check and consumers’ bills lower, Mr. Pourreza said.
“You have not seen the same level of inflation in utility bills as you’ve seen in other industries and other products,” he said. “It’s been a subsidy for them, and that subsidy is likely going away.”
Write to Katherine Blunt at Katherine.Blunt@wsj.com
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