Why is my utility bill going up? And will it continue to rise?

Why is my utility bill going up? And will it continue to rise?

The recent rise in energy prices in our area is not only causing an increase at the pump, but also causing utility bills to soar. The reasons for both increases are tied to all of the current crises around the world, including the invasion of Ukraine, climate change, the pandemic, and supply chain constraints. But are you wondering why these issues are connected to electricity prices, and how much are they going to keep rising? Read on!

All of these worldwide crises affect us daily as they put a strain on household budgets and our wallets, especially among low-income families and in communities of color. Add in US inflation and we are all having a tough time at the pump, at the grocery store, and most recently when we receive our electric bill from the utility company.  

What is driving these utility price hikes in our region?

Many people don't realize that the electricity in our area is mostly powered by fossil fuel natural gas. The energy mix on the electrical grid is different depending on where you live, but near us, natural gas makes up over 60% of it, with coal, nuclear, and renewables making up the balance.   

It's important to note that natural gas is a fossil fuel, as explained by the US Energy Information Agency (EIA): “Coal, crude oil, and natural gas are all considered fossil fuels because they were formed from the buried remains of plants and animals that lived millions of years ago.”

So when fossil fuel prices rise, natural gas (and therefore your electricity bill) goes with it. In fact, the cost of natural gas that’s delivered through pipes was up 24% in February from the year prior, while electricity went up 9%. Utility price spikes are notably higher in places where electricity is generated from natural gas, and in our region, utility prices are predicted to continue rising as much as 12-20% in the near future.

How do I see the mix of fuels on our grid?

You can track the mix of fuels on your local grid through the EIA's website. The EIA is tasked with compiling the utility prices for homes, businesses, and industries across the nation so that our government can make informed decisions about energy policy. The good thing is that this data is available to the public. https://www.eia.gov/. You can see on EIA's website which energy is being produced in your State, and consumed https://www.eia.gov/state/?sid=US

How do I track and predict where prices are going in the future? 

One can easily track the cost of fossil gas by looking at the prices of the Henry Hub. The Henry Hub is a huge distribution hub connected to major fossil fuel pipelines. The price in the graph below is a good indicator of the gas futures contracts used on the New York Mercantile Exchange (NYMEX) and the OTC swaps traded on Intercontinental Exchange (ICE).

Henry Hub Gas prices

Source: https://markets.businessinsider.com/commodities/natural-gas-price


This means that if the price at the Henry Hub goes up, it's safe to expect a price increase in several months.

My utility tells me electricity is cheap, but is it?

Utilities can tell you that the electricity price is low, but after adding taxes and transmission costs and usually some other fees, you end up with a much higher price you pay to have your house powered by the utility. 

The average Retail Price of Electricity for the Residential Sector is :

  1. Virginia: 12.07 c/kWh
  2. Maryland: 14.06 c/kWh
  3. Washington DC: 13.39 c/kWh

Electricity prices per State - Residential

Sources: https://www.eia.gov/state/rankings/?sid=VA#series/31

The conclusion is simple:

Once you paid for your solar panels, your price of your electricity is fixed and won't change any more. You produce your own power and you are more immune to the price volatility of the fossil fuel market. Go solar, it's good for your wallet!

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