A dramatic rise in energy prices in the US is causing utility bills to soar, with many left wondering: what is driving the rise and will it persist through the warmer months?
A variety of factors that range from the invasion of Ukraine to the pandemic to climate-related events are behind the increase that’s affecting millions of people, putting a strain on household budgets and affecting home health and safety, especially among low-income families and communities of color.
The cost of natural gas that’s delivered through pipes was up 24% in February from the year prior, while electricity went up 9%. Price spikes are notably higher in places where electricity is generated from natural gas, such as the north-east, which saw a 16% increase in January from the same time last year, with prices dipping down to a 6% increase in February.
While it is common for utilities to go up in the winter, in 2021 the price of natural gas had been rising all year long following the pandemic-induced lows of 2020. At the same time, weather-related disruptions from the February Texas freeze and a category 4 Hurricane Ida halted oil production in the Gulf coast, and the supply constraints led to higher prices as the demand increased.
Fuel oil, still a major source of home heating in the north-east but less so in the rest of US, has seen the sharpest increase of 44% compared to the year prior. Its movement as a petroleum product, follows similar trends as gasoline, which also dipped in the early pandemic before surging.
Nearly 1.3m households in New York state are at least two months behind on utility bills, accruing a debt of over $1.7bn, according to state filings from 10 major utility companies.
“Almost one in five New Yorkers are staring into potential multi-generational debt,” said Richard Berkley, executive director of the Public Utility Law Project.
Before the war in Ukraine, he would have expected the prices to dip back down as the weather warms up. “But now with sustained disruption of the world energy markets, we should expect to see higher prices till the end of the year,” Berkley said, adding that the situation been different if the US wasn’t so reliant on an energy source that that hinges upon the supply chain and the global market.
“We need to build more wind, solar, hydro and tidal power, which are quite honestly expensive to create but are much cheaper in the future,” Berkley said.
Following the price increases, the New York governor, Kathy Hochul, called on the utility company Con Edison, which services New York City and Westchester county, to review its billing practices. A utility bill consists of the delivery charge and supply charge for the energy, the latter of which is not set by providers like Con Edison, nor the state and regulatory entities.
“The extreme utility bill increases all of us are seeing are having a serious impact on our household budgets, and in response we are taking action,” Hochul said in a press release. In a statement to the Guardian, a Con Edison representative wrote: “We are reviewing all of our practices that affect customer supply costs, including our energy-buying practices.”
The state’s utility regulator has sent letters to all of the state’s major electric and gas utilities requiring them to increase their outreach and education efforts with customers. Local and state governments have directed customers who are struggling to pay their utility bills to assistance programs such as Home Energy Assistance Program (Heap), while energy providers encourage customers to enroll in payment plans.
But environmental justice groups worry that these options are not enough.
“There are already people who are in massive utility debt from the pandemic,” said Jasmine Graham, an energy justice policy manager at We Act for Environmental Justice non-profit.
Graham gave an example of one of the group’s members who is $5,000 in debt, is supplementing her heating with a gas stove, and is pregnant while raising a child under the age of one. “Tell me how a payment plan is going to be enough for her?” Graham said.
Additionally, undocumented residents don’t have access to most federally funded programs that require citizenship, leaving a significant part of New York City’s population without access for help.
Communities of color and low-income people are more likely to live in older, less efficient buildings that result in a higher energy burden, or the percentage of the income spent on cost of heating, cooling and powering a home. In 2016 the state set a target that low-income New Yorkers should pay no more than 6% of their income toward energy bills.
In New York City, 32% of Black and 33% of Latino households have an energy burden above 6%, and one in four New Yorkers have an energy burden of over 17%.
Utility companies have a legal duty to hedge, or essentially protect their customers against rapid price increases, by means of accounting for winter-related spikes and locking in a lower price ahead of time. But both Graham and Berkley expect the investigations into Con Edison to reveal potential negligence in the hedging practice on the utility company’s end.
Meanwhile, Con Edison has asked the state for permission to increase its prices.
If passed, the utility company would raise its electric rate by 11% and gas by 18%. According to the company, the roughly $1.7bn in additional revenue they seek would go to upgrading energy delivery systems. Graham said the recent and proposed hikes make a greater case for the importance of public power, or not-for-profit utilities that are community-owned and locally controlled.
“We need to move away from a model that’s reliant on corporations,” Graham said. “And move toward a democratic, renewable energy system that prioritizes energy affordability for low-income folks.”