Utility bills in some states are expected to rise due to high demand for electricity, primarily driven by the rapid expansion of artificial intelligence, oil and gas drilling, space heating, and electrified forms of transportation. The latest federal data shows a 5.5% increase in electricity costs and an 13.8% hike in natural gas prices over the past year.
Nearly 60 utility companies will raise electricity rates this year by more than $38 billion, affecting over 57 million Americans. The main reason for the price increases is higher demand, not just supply chain disruptions caused by Russia’s invasion of Ukraine. Experts say that after a flat demand for energy for 25 years, it rose once economic activity picked up after the pandemic.
The U.S. Energy Information Administration expects residential electricity rates to increase steadily by as much as 18% in the next few years, outstripping the annual inflation rate of about 2.7%. To meet growing electricity needs, the U.S. needs to expand transmission systems by 60% by 2030 and potentially triple that amount by 2050.
Grid Strategies’ president, Rob Gramlich, says that the shortage of transmission capacity is the major problem, not a lack of fuel. There are over 2,600 gigawatts of energy waiting to get connected, representing more than twice the current installed capacity of the U.S. power grid. Artificial intelligence-driven data centers consume far more power from the grid than regular data centers, with an estimated increase of up to 10 times in power intensity.
Tariffs and equipment shortages are also making energy projects more expensive. Gas turbines have become extremely scarce, holding up the expansion of natural gas power plants. The price of a turbine has almost tripled, with wait times ranging from three to seven years.
The Trump administration’s policies aim to boost fossil fuel development and limit new clean energy projects, which could exacerbate cost increases for utility bills. The president recently issued an executive order calling for “reliable, diversified, and affordable supply of energy” without mentioning renewable sources. This stance is expected to increase wholesale energy prices by 74% by 2035, resulting in a $170 annual increase in the average household energy bill.
Experts warn that the administration’s policies are fueling cost increases, with the top four clean energy states seeing price declines this year, while the 10 states with the least renewable power face rising costs. The Energy Department has also ordered some utility companies to keep coal power plants open beyond their retirement dates, which will be borne by ratepayers and could grow to over $6 billion annually.
Source: https://www.cbsnews.com/news/why-utility-bills-are-rapidly-rising-in-some-states