Will Your Utility Bill Increase Even More This Year? Here’s What Experts Say
In February, The Harris Poll Thought Leadership Practice released its “The Status of Real Estate in 2024” report. The study found that seven in 10 Americans saw their utility bills rise over the past year.
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The climate and politics influence energy prices, and both seem to grow less stable and more unpredictable with each passing year. Here’s a look at what families can expect from their utility bills now that the expensive hot months are approaching and the country is eight months out from an election that will determine its energy policy.
Also see what utilities cost in every state.
Double Trouble: It’s an Election Year and Wall St. Is Seeing Dollar Signs
Politics, policy and global events all steer energy prices and impact utility bills — and America is lumbering toward a consequential and divisive presidential contest that will make intense market volatility all but inevitable.
According to Utility Dive, the election’s outcome “could have significant impacts on energy policy and the implementation of clean energy tax credits and federal loan guarantees.”
The result, the publication concludes, is market jitters and price instability either way.
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Another bad omen for Main Street is coming from Wall Street: The big investment banks are salivating.
The publication noted that Bank of America research analysts predict 2024 will provide “an exceptional level of volatility and opportunity” in the energy market — but they won’t be distributed equally. Bank of America gets the opportunity. Average households on a budget get the volatility.
Electricity: Plan for Peaks, Valleys and Unpredictability in the Short Term
As with every year in history, seasonal weather will play an outsized role in whether energy prices and utility bills increase or decrease over the next 365 days.
“For the foreseeable future, electricity bills are expected to rise, particularly during the summer months, as there’s a clear trend of increased electricity usage for air conditioning in homes,” said Javier Hinojosa, vice president of retail power at BKV Energy, a residential electricity provider in Texas.
Price spikes in the hot months when households crank up the AC are fairly standard. But the market is evolving, and emerging trends are adding complex new variables that will make it harder for laypeople to predict utility costs confidently.
“The energy market is witnessing a surge in solar generation,” Hinojosa said. “Yet the underinvestment in thermal generation, like natural gas power, is leading to a peculiar pricing scenario. We see periods of low-cost, abundant electricity contrasted with times of scarcity when the demand remains high after sunset.”
Hinojosa summarizes the electricity market’s weather-influenced pricing dynamic this way: “Cheap when sunny, costly post-dusk.”
In the Long Term, You’ll Pay More for the Protection of Fixed-Rate Contracts
Energy providers are working to remedy the erratic pricing structure that Hinojosa described, but their efforts will be slow and expensive.
“The industry is actively seeking solutions to this dilemma, with battery storage showing potential, albeit with high initial costs,” Hinojosa said. “It may take years to sufficiently alter our infrastructure to alleviate these shortages.”
In the meantime, most households avoid real-time market volatility by opting out of variable-rate pricing. They’re relatively safe under predetermined price ceilings — but those ceilings likely will rise with each new annual renewal.
“In the short term,” Hinojosa said, “most consumers are shielded from price fluctuations due to fixed-rate contracts, but we anticipate a gradual rise in contract prices over time.”
For now, however, organizations like Constellation Energy still recommend locking in annual fixed-rate contracts in the spring or fall, when prices tend to drop.
Natural Gas Is Cheap and Plentiful — for Now, at Least
According to the U.S. Energy Information Administration (EIA), natural gas is currently trading at a record low. The agency predicts that prices will remain depressed “in the second quarter of 2024 because we expect natural gas inventories will remain high relative to the five-year average as the United States enters the shoulder season when there is typically less U.S. natural gas consumption than at other times of the year.”
Here, too, weather and climate drive the trend.
The EIA says an exceptionally mild winter — particularly February — sent demand for natural gas down by nearly 10% in the residential and commercial sectors. Simultaneously, production went up and the agency predicts it will remain that way for the foreseeable future, potentially flooding the market with cheap gas as demand continues to fall.
As Always, Water Will Be the Wild Card
As volatile as gas and electricity rates may be, water is the most arbitrary and hyper-localized utility of all.
In December 2023, the journal PLOS Water published a peer-reviewed paper that found, “Over the past decade, rising residential drinking water bills across the U.S. have raised concerns about households’ ability to access safe and affordable drinking water services.”
Soon after, the National Resources Defense Council (NRDC), which commissioned the paper, wrote, “When it comes to affordability, local water rates matter a lot. Rates are set individually for each of tens of thousands of water systems across the country. These rates, in combination with a customer’s usage and sometimes other factors, determine customers’ bills.”
The NRDC proposed several local, state and federal remedies for streamlining prices and increasing predictability. But until they or other fixes are implemented, the organization says consumers can continue to expect “incredibly wide variation in bills within states, and even within metropolitan areas.”
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