As a result of volatile natural gas prices, U.S. electricity customers are facing the biggest bills they’ve seen in years because of the high winter demand and a lack of natural gas around the world caused by Russia’s war in Ukraine.

The shortage of natural gas has already increased the cost of purchasing or producing electricity for utilities. As a result, some customers’ winter electricity costs have increased by 20% or more compared to the previous year, on top of increasing home-heating bills.

With sanctions against Russia threatening to severely curtail global natural-gas supply, executives and analysts predict that higher prices will endure, particularly in places that rely significantly on the fuel for power generation.

Domestic natural-gas prices soared to their greatest levels in years ahead of the winter season as exporters transported record amounts of the commodity overseas, and prices have since surged again on fears of a global shortage.

“It will have an impact on customers’ bills,” said Nick Akins, CEO of American Electric Power Co., a utility serving over five million customers across 11 states.

On Friday, Henry Hub gas prices in the United States were around $4.73 per million British thermal units. It was around $2.66 per million British thermal units a year ago.

Utilities across the country charge customers to recover gas and electricity supply costs, driving prices considerably higher this winter after a year of gradual hikes. According to the Energy Information Administration, average retail power prices for residential consumers increased 4.3 percent last year to 13.72 cents per kilowatt-hour, the biggest yearly increase since 2008. The cost of natural gas provided to power plants, which has more than doubled since 2020, contributed to the increase, which about matched total inflation.

New York has been hit particularly hard by the recent increase in electricity prices. Consolidated Edison Inc., which serves about 3.3 million customers in the New York City region, stated that city households who use around 300 kilowatt-hours per month witnessed a 23 percent rise in their January bills. The majority of the increase was due to rising supply costs.

ConEd said it is striving to protect customers from price volatility by modifying its invoicing processes.

Hector Ruiz, a 44-year-old fiber-optic engineer who has lived in his Clifton Springs home for the past eight years, said he has never spent more than $500 per month on gas and electricity. He said his charge last month was just shy of $1,000, causing him to scramble his family’s budget and force him to use monies set aside for other uses.

“My utility bill literally doubled overnight,” Mr. Ruiz said. “Has it been a punch to the gut? Yes.”

In January, Gabriel Thompson, a 40-year-old photographer who lives with his wife in Westchester County, just north of New York City, saw his power and gas bills both skyrocket. That month, his electrical supply cost rose to 18 cents per kilowatt-hour, up from roughly 6 cents the month before. He spent more than $200 on power and $585 on natural gas, including delivery fees.

“It makes me glad I don’t have an electric car, which I’d love to have,” Mr. Thompson said. “People don’t have infinitely expendable income.”

The hikes come amid widespread fears about rising inflation. In February, the consumer price index rose 7.9%, the highest rate in 40 years.

3.6 million customers in Connecticut, Massachusetts, and New Hampshire are now paying more for electricity as a result of rising wholesale costs. This increase was implemented at the beginning of January. According to the firm, average residential customers’ costs could rise by up to 25% by the end of June.

Regional pipeline difficulties, according to James Daly, Eversource’s vice president of energy supply, worsened a gas supply bottleneck caused by higher seasonal demand and relatively flat domestic production. Although it does not rely substantially on liquefied natural gas, the company noticed a rise in pricing when exporters moved more of the fuel abroad.

“We can see prices run up faster than in other parts of the country if there’s a supply-demand imbalance,” Mr. Daly said.

Wholesale power costs have climbed in California as the state’s top utilities intend to invest billions of dollars to lessen the risk of wildfires starting on their power lines. San Diego Gas & Electric, a Sempra subsidiary that serves 1.5 million electric and 900,000 natural-gas customers, hiked prices at the start of the year to account for rising supply costs. Residential bills increased by 11.4 percent on average.

According to Guggenheim analyst Shahriar Pourreza, utilities have traditionally relied on low gas prices to keep supply costs low, allowing them to invest in their systems without having to raise rates. With gas costs certain to continue high, corporations will face increased pressure from authorities to rein in spending and keep customer bills reasonable, according to Mr. Pourreza.

“You haven’t seen the same level of inflation in utility bills like 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.”

Image Credit: Getty

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