Energy: What rising electricity costs mean for your bill

Electricity prices rise higher despite overall energy prices cooling in January, according to the most recent Consumer Price Index (CPI) print. Yahoo Finance Senior Reporter Ines Ferré explains the inflationary pressures pushing energy costs higher as utility operators pass off fixed costs.

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Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

[AUDIO LOGO]

AKIKO FUJITA: Well, electricity prices rising in January remaining sticky despite the overall cost of energy coming down. Here with the details on what's driving this move, let's bring in Yahoo Finance's Ines Ferre. Ines, what's behind the sticker shock?

INES FERRE: Yeah, that's right, Akiko. And we saw electricity prices, as you mentioned, go up in January. In fact, for the last six months they have been going up. And on a year-over-year over year basis, they're up 3.8%. So in fact, when all the other components in the energy index were down on a year-over-year basis, electricity was the only one up.

Now, a large part of the electricity in the US is made from natural gas. And we saw what happened with natural gas prices. From 2022 to 2023 they were down 50%. Did your electricity bill go down 50%? I didn't think so. Part of this is because of the fixed cost which utility companies have. These are costs that are related to maintenance of generators.

These are costs that are related to land. These are costs that are related to delivery. Also, investments in renewables, new transmission lines that have to receive renewable energies. All of these are costs which are going up for companies, and those are being passed on to the consumer.

Now, the utility industry is highly regulated. PG&E in California had to go ask for approval in order to hike rates out in California, Akiko, and those rates were hiked this year by 13%. They did receive that approval. And part of the money that they are recouping from that hike is in order to bury their lines after those wildfires out in California.

Now, some good news. The EIA says that this year electricity prices on average are set to decline by 1%. That's on average. That means in some parts of the country you will still see electricity prices going up. In other parts you will see rates going down but on average down 1%. Look, I spoke to one energy expert. They told it to me this way, sure, you may see prices decline by 1% in one year but then they go up by 8% the next Year that's an anomaly really, when it comes to the steep climb with electricity.