HEADLINE: “Electricity prices across the US have increased 4.5% in the past year” , By Doug Sheridan

“The EIA expects the average US residential electric bill to be about 4% higher this summer than last, mostly because of a jump in nat-gas prices.”

The WSJ writes, electricity prices across the US have increased 4.5% in the past year, topping the 2.2% jump in the price of groceries. The EIA expects the average US residential electric bill to be about 4% higher this summer than last, mostly because of a jump in nat-gas prices. Nat gas deliveries to power plants will cost about 50% more from Jun through Sept than last year.

The EIA also expects electricity prices to outpace inflation through next year. NextEra Energy, Inc.'s Florida Power & Light is asking regulators to let it increase rates between 1% and 5% a year through 2029. The utility says it needs to invest in the grid and new generation. Since 2021, its labor costs are up 16%, wires and cables 30%, utility poles 49% and transformers 101%.

The frenzy over AI, along with new manufacturing and the adoption of EVs, is helping drive US power demand forecasts higher for the first time in two decades. The US wants to build more gas-fired power plants to meet the soaring demand, but construction can cost three times as much as it did a few years ago.

Across the US, the growing pains are sparking fights over how to pay for upgrades and costs. About $9.3B in additional electricity costs will begin trickling down this month to customers in the PJM Interconnection, the country's largest grid operator and wholesale electricity market.

The higher bills are putting a strain on the wallets of consumers who are already stretched thin by rising costs for food, shelter and insurance. Mark Wolfe, NEADA executive director, said one of every six US households is behind on their electricity or natural-gas bills.

Investor-owned utilities are projected to spend $202B on capital projects this year, up 9% from last year and 18% from two years ago, according to the Edison Electric Institute. The main cause is the “unprecedented" demand from new and planned data centers, according to a report from Monitoring Analytics, the independent grid monitor for PJM, which provides power to 13 states and DC.

Power plants bid into capacity auctions to deliver electricity when called upon, usually in times of high stress on the grid. PJM's auction reached a record price last year.

Our Take 1: To be clear, the price of natural gas at Henry Hub was $2.02 per MMBtu in the first five months of last year, the lowest price ever on an inflation-adjusted basis. For the same five months this year, it’s averaged $3.80. That’s an increase of $1.78 per MMBtu—and hardly a sky-high price. European generators regularly pay 3x or 4x this level.

Our Take 2: One big reason for rising costs for new natural gas-plants is that the supply of key equipment has been limited. With California, Texas and others states having poisoned the economic well for gas-fired plants, gas turbine manufactures have had no reason to believe expansion of their production capacity was warranted. They acted rationally to bad gov't policy... and now here we are.

BOTTOMLINE: “One big reason for rising costs for new natural gas-plants is that the supply of key equipment has been limited. With California, Texas and others states having poisoned the economic well for gas-fired plants, gas turbine manufactures have had no reason to believe expansion of their production capacity was warranted. They acted rationally to bad gov't policy... and now here we are.”