Soaring electricity bills are the latest inflation flashpoint
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Vehicles drive past a sign on the 110 Freeway warning of extreme heat and urging energy conservation during a heat wave in downtown Los Angeles on Sept. 2. Soaring electricity bills are pinching many household budgets across the country even as gasoline prices have come down.Patrick T. Fallon / AFP via Getty Images -
An aircraft takes off from Los Angeles International Airport (LAX), with electric power lines visible at sunset as the California Independent System Operator announced a statewide electricity Flex Alert urging conservation to avoid blackouts in El Segundo, Calif., on Aug. 31.Patrick T. Fallon / AFP via Getty Images
Inflation cooled a bit last month, thanks in part to falling gasoline prices, but for many families, there's another major strain on their household budget: soaring electricity bills.
Take Bernice Brown, a retiree in Tuscaloosa, Ala.. In both July and August, her power bill topped a jaw-dropping $400.
"It's been damaging to be honest," she says.
But there's little she can do about it.
"The heat here is horrible," she says, noting her neighborhood near the University of Alabama campus doesn't have many shade trees. "The houses are just sitting, baking."
A report from the Labor Department Tuesday shows the country's annual inflation rate dipped 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.
Electricity prices have jumped 15.8% in the last year, largely as a result of high-priced natural gas, which is used to generate nearly 40% of the nation's power.
The rising price of power has been compounded by soaring temperatures, which have kept air conditioners working 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 average family's cooling costs rose from $450 last summer to about $600 this year.
Six months of summer
Dale Cooper's power 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 wouldn't be able to make it on the salary that I have."
While Cooper, who's 59, will likely get a break on utility costs during the mild Phoenix winter, people in colder parts of the country are likely to face significantly higher heating bills.
NEADA predicts the average family will pay $1,202 to heat their home this winter — 17% more than last year. For the six in 10 families whose heat comes from natural gas, the increase in heating costs could be 34%.
"There's no sign these prices are coming down," Wolfe says. "All the signs point to more expensive costs of home heating, 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 grown to $792 — nearly double what it was before the pandemic.
"It's not a question of are families heating and cooling their homes responsibly," Wolfe says. "Families do this. They turn the heat down as low as they can. They use air conditioning sparingly. It's just that the cost of home heating and home cooling has gone up so much that low-income families are struggling to pay these bills."
Other costs still sting
Heating and cooling bills come on top of rising costs for other essentials such as shelter and food. Housing costs rose 6.2% for the twelve months ending in August, while grocery prices jumped 13.5%.
"To get decent, healthy food, the prices are extremely high," said Brown, in Tuscaloosa.
That's keeping the Federal Reserve on guard, even as overall inflation was tempered last month by the steep drop in gasoline prices. Gas prices tumbled nearly 40 cents a gallon during August to $3.84, according to the American Automobile Association.
Gasoline prices are among the most visible in the country, and they often carry an outsize psychological impact. As pump prices have declined, Americans' worries about inflation have also eased a bit.
A new NPR/PBS Newshour/Marist poll finds that inflation is the number one concern for 30% of adults this fall, down from 37% in July.
Despite the drop in gasoline prices, officials at the Fed say they are still not satisfied that overall inflation is moving back towards their target of 2%.
"I got burned last year," Fed governor Christopher Waller said in a speech last week.
He noted that inflation appeared to be falling last summer only to have prices take off again in the fall.
"We're very cautious about getting burned again," Waller said. "So it's got to be a real, permanent longer-term decline than like what happened last year."
The Fed is expected to raise interest rates by another 0.75 percentage points next week, and keep borrowing costs elevated until officials are confident that prices — including for essentials like electricity —are under control.
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Transcript
STEVE INSKEEP, HOST:
When I was filling up the car over the weekend, I noticed the price for gas was well under $4, meaning considerably below the summer peak. At some gas stations in this country, it's gone below $3. Falling gas prices helped to keep a lid on inflation in August. The Labor department says the annual rate in August was 8.3% higher than the prices one year earlier. That's a bit down than the rate in July. But many months of high energy prices have left millions of Americans behind on a different expense - their utility bills. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: There's not much shade where Bernice Brown lives in Tuscaloosa, Ala. She tries to stay indoors during the hottest time of the day, and she's grateful for her central air conditioning.
BERNICE BROWN: The heat here is horrible, and pretty much the houses are just sitting, baking.
HORSLEY: Brown's electricity bill is no laughing matter. In both July and August, she paid about $400 for power.
BROWN: And it's been damaging, to be honest.
HORSLEY: Utility bills across the country have jumped sharply in recent months, largely because of the soaring cost of natural gas, which is used to generate nearly 40% of the nation's electricity. The rising price of power has been compounded by hotter-than-usual summer weather, which has kept air conditioners working overtime.
MARK WOLFE: It was one heat wave after another, which, of course, families need to use air conditioning to stay safe.
HORSLEY: Mark Wolfe runs a trade group for officials who help low-income families pay their power bills. The group estimates the average family paid about $600 for air conditioning this summer - up from $450 last year. Dale Cooper lives in Phoenix, where the cost of keeping cool is even higher.
DALE COOPER: With the summertime, we have six months of summer with over hundred degree heat.
HORSLEY: Cooper, who's 59, works as a cashier in a restaurant and makes about $13.50 an hour. His paycheck has not kept pace with his rising utility bills.
COOPER: If I didn't have roommates, I wouldn't be able to make it on the salary that I had to be able to stay in a place.
HORSLEY: Cooper will likely enjoy lower utility bills during the mild Phoenix winter, but people in colder parts of the country may not. Wolfe's group, the National Energy Assistance Directors Association, expects the average family's winter heating cost this year will be about 17% higher than last year. For the 6 out of 10 families who heat with natural gas, the increase could be twice as large.
WOLFE: There's no sign these prices are coming down unless we have a warm winter. All the signs point to more expensive costs of home heating, and they could spike if it's cold.
HORSLEY: Wolfe's group says some 20 million families have now fallen behind on their utility bills, and the average amount they owe has nearly doubled since before the pandemic.
WOLFE: It's not a question of, are families heating and cooling their homes responsibly? Families do this. They turn the heat down as low as they can. They use air conditioning sparingly. It's just that the cost of home heating and home cooling has gone up so much that low-income families are struggling to pay these bills.
HORSLEY: And that's on top of the rising cost of other essentials, like food and rent. Bernice Brown says other than her power bill, the grocery store is where she feels inflation the most.
BROWN: To get decent, healthy food, the prices are extremely high.
HORSLEY: To be sure, those costs have been partially offset in the last two months by the steep drop in the price of gasoline. AAA says gas prices fell nearly 40 cents a gallon during August, and they've continued to fall in early September. Gas prices carry outsize weight in public attitudes about the economy. So as pump prices have eased a bit, so have Americans' worries about overall inflation.
Watchdogs at the Federal Reserve, however, are not so easily swayed. Fed Governor Christopher Waller says he and his colleagues thought they had inflation under control last year, only to see prices take off again.
CHRISTOPHER WALLER: I got burned last year - we all did - and we're very cautious about getting burned again.
HORSLEY: The Fed's expected to keep raising interest rates until policymakers are confident that the overall cost of living, including essentials like electricity, are under control.
Scott Horsley, NPR News, Washington.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.
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