Soaring electricity bills are the latest inflation flashpoint

Updated September 13, 2022 8:41 a.m. ET

Inflation has eased a bit in the last month, thanks in part to falling gas prices, but for many families there is another major pressure on their family budget: soaring utility bills. electricity.

Take Bernice Brown, a retiree from Tuscaloosa, Alabama. In July and August, his electricity bill exceeded $400.

“It was damaging to be honest,” she says.

But she can’t do much about it.

“The heat here is awful,” she says, noting that her neighborhood near the University of Alabama campus doesn’t have many shade trees. “Houses are just sitting, cooking.”

A report from the Department of Labor on Tuesday shows that the country’s annual inflation rate fell to 8.3% in August from 8.5% in July. But many families are still struggling with the rising cost of groceries, rent and other essentials like electricity.

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Electricity prices have jumped 15.8% over the past year, mainly due to the high price of natural gas, which is used to generate almost 40% of the country’s electricity.

Rising electricity prices were compounded by soaring temperatures, which meant air conditioners continued to work overtime.

“It was one heat wave after another,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association. “Families need to use air conditioning to stay safe.”

NEADA estimates the cooling costs of an average family went from $450 last summer to around $600 This year.

six months of summer

Dale Cooper’s electric bills in Phoenix are even higher.

“We have six months of summer with over 100 degree heat,” says Cooper, who earns $13.50 an hour as a restaurant cashier. “If I didn’t have roommates, I couldn’t earn with the salary I have.”

While Cooper, who is 59, will likely benefit from reduced utility costs during Phoenix’s mild winter, residents of colder parts of the country are likely to face significantly higher heating bills. .

Patrick T. Fallon/AFP via Getty Images

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AFP via Getty Images

A plane takes off from Los Angeles International Airport (LAX), with power lines visible at sunset as California’s independent system operator announced a statewide power flex alert urging conservation to avoid power outages in El Segundo, California on August 31.

NEADA predicts the average family will pay $1,202 to heat their home this winter, 17% more than last year. For the six out of 10 families whose heating comes from natural gas, the increase in heating costs could be 34%.

“There’s no sign that those prices are going down,” Wolfe says. “All signs point to higher home heating costs, and they could spike if it’s cold.”

NEADA says more than 20 million families have fallen behind on their utility bills and the average amount they owe has risen to $792, nearly double what it was before the pandemic.

“It’s not about whether families heat and cool their homes responsibly,” Wolfe says. “Families do this. They turn the heating down as low as they can. They use air conditioning sparingly. It’s just that the cost of heating and cooling the home has gone up so much that low-income families are struggling to pay those bills.”

Other costs still sting

Heating and cooling bills come on top of rising costs for other essentials like housing and food. Housing costs rose 6.2% for the year to August, while grocery store prices jumped 13.5%.

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“To get decent, healthy food, the prices are extremely high,” Brown said in Tuscaloosa.

That keeps the Federal Reserve on its toes, even as headline inflation was tempered last month by the sharp decline in gasoline prices. Gasoline prices fell nearly 40 cents a gallon in August to $3.84, according to the American Automobile Association.

Gas prices are among the most visible in the country and often have a disproportionate psychological impact. As pump prices have fallen, Americans’ concerns about inflation have also eased somewhat.

A new NPR/PBS news time/Marist survey finds that inflation is the number one concern for 30% of adults this fall, up from 37% in July.

Despite lower gasoline prices, Fed officials still say they are unhappy with the return of headline inflation to their 2% target.

“I got burned last year,” Fed Governor Christopher Waller said in a speech last week.

He noted that inflation appeared to have eased last summer for prices to take off again in the fall.

“We’re very careful about getting burned again,” Waller said. “So it must be a real and permanent longer-term decline than what happened last year.”

The Fed is expected to raise interest rates by 0.75 percentage points next week and keep borrowing costs high until authorities are satisfied that prices, including for essentials like electricity , are under control.

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