After years of soaring energy prices, people in the US could finally see their utility bills level off in the coming months — or at least rise more modestly.
According to the Bureau of Labor Statistics’ Consumer Price Index report, the cost of residential electricity jumped 14.3% between 2021 and 2022. From April 2022 to April 2023, the increase was only 8.4%.
And while prices are still up from last year, they actually decreased 0.7% from March to April.
“We’ve seen a pretty chaotic few years in electricity markets, to say the least,” said Joseph Politano, an economic analyst who writes the biweekly Apricitas newsletter. “There’s had to be a lot of adapting to new consumption patterns from the pandemic and a lot of big shocks to energy sources due to the Russia-Ukraine situation.”
Now the industry is finally righting itself, according to Politano.
“It’s going to be a much more normal summer than we had last year,” he told CNET.
Energy prices are still higher than pre-pandemic levels, though, and savvy consumers are offsetting costs by using smart home devices and energy-efficient appliances, shopping for new energy providers and even investing in home solar.
Read more: Save on Utility Bills This Summer With These Eco-Friendly Smart Home Devices
This summer’s energy forecast
Politano’s prognosis is in tune with the latest forecast from the Energy Information Administration, which predicted electricity prices will rise just 2% in 2023, averaging 15.45 cents a kWh for the year.
In its May 9 report, the EIA said it anticipates an uptick in both electricity consumption and prices this summer, when households are more likely to run air conditioners. But the agency said the typical US customer would pay only “slightly more,” — about 2.2% — than they did last summer.
Electricity bills should average about $176 in June, July and August, according to its forecast, only a slight increase from the $172 seen in 2022.
“I think we’re going to see some serious decreases in electricity prices,” Politano said. “It’s going to depend on a lot of factors — how the natural gas situation looks abroad, a lot of the usual weather stuff, and adoption rates for wind, solar and electric vehicles — but things are normalizing.”
The biggest increase will be in New England, where EIA predicts electricity bills will average $179.66 a month in June, July and August, an 8.1% increase from summer 2022.
While electricity consumption will be “relatively unchanged” from last summer in most of the country, the EIA reported, one exception is the south-central US, which had a harsh summer in 2022.
Residents in Arkansas, Louisiana, Oklahoma and Texas are expected to use 6% less electricity this summer, according to the agency, averaging about 1,490 kWh per month.
In the Midwest, meanwhile, the average customer will use about 3% more electricity than in summer 2022.
“Once we get to Memorial Day, we’ll have a better sense of what to expect for the summer months,” said Chris Lafakis, who oversees Moody’s Analytics climate risk initiative.
“If it’s temperate, the rates will be even better,” Lafakis told CNET. “With climate change, though, we’re probably looking at a hotter-than-usual summer.”
Watch this: Easy Ways to Lower Your Utility Bills and Save Money
The picture could look rosier this winter: Natural gas prices, which spiked after Russia invaded Ukraine, have continued to drop but will likely take until late 2023 for the decline to be fully reflected in residential electricity bills, Lafakis said.
The EIA also predicted 7% fewer U.S. heating degree days in 2023 due to milder temperatures.
That’s good news but many Americans are still struggling with utility bills even as other costs decline.
Last year, residential electricity prices rose 14.3%, more than double the overall 6.5% rate of inflation. According to the National Energy Assistance Directors’ Association, 20.5 million US households fell behind on their electric bills in January, up from 19 million in 2022.
“Energy prices are increasing on average faster than the rate of inflation and are becoming increasingly unaffordable for millions of low-income families,” the association said in a statement.
What influences electricity prices?
Residential electricity prices are based on the retail cost of electricity and the amount of energy used. But they’re influenced by myriad outside forces, including weather and geopolitics.
Worldwide, 2022 was the fifth warmest on record, according to data from NASA. Temperatures last summer set records in dozens of US cities across the US. (A September heatwave saw more than 60 million people under extreme heat warnings in California, Arizona and Nevada.)
Nearly 40% of electricity is generated using natural gas, and Russia’s invasion of Ukraine upset the global natural gas supply. In the first 11 months of 2022, US exports to Europe skyrocketed 137% to make up for the absence of Russian natural gas imports on the continent.
Oil and gas production was also severely curbed during the height of the pandemic, leading to sharp price increases in much of 2021 and 2022.
But those trends started to reverse by the end of last year.
“We’ve seen a pretty full recovering in terms of domestic production of natural gas,” Politano said. “And the European energy crisis is a lot better. They’ve increased efficiency and decreased consumption.”
Natural gas prices declined as much as 41% from December 2022 to January 2023, according to the EIA.
Politano added that changes to energy prices can often be regional.
“Experts can look at weather patterns, but it’s hard to predict how much electricity you’re going to get from wind and solar this far out,” Politano said. “If people are putting up solar panels faster than expected, it’s really hard to track.”
Solar energy was responsible for about 4.7% of electricity in 2022, according to the EIA. That’s the level when it starts to become noticeable, Politano said. “Before the pandemic, it was 2.5%. So we’re talking nearly double.”
On the flip side, he added, demand for electric vehicles is also rapidly expanding, “and that can cause demand to increase greatly.”
How to lower your electricity bill
While the price of electricity is beyond our control, we do have a say in how much energy we utilize, even during the summer.. Here are some ways to cut your utility bill.
- Use energy-saving devices like programmable thermostats, smart outlets, LED light bulbs and motion sensors.
- Buy Energy Star appliances. The US Environmental Protection Agency and Department of Energy grade products in over 75 categories, from air conditioners to dishwashers. Appliances with the blue Energy Star logo are deemed more energy-efficient by the agencies.
- Get a home energy audit. Many utility companies allow you to check your electricity usage and compare it to other customers, and some will even send out a technician to determine how you can save energy. You can also do a self-audit using instructions from the Department of Energy or find a residential energy audit company in your area on Angi and Yelp for a more detailed assessment.
- Switch energy providers. If you live in a state with a deregulated energy market, you can shop around for a company with better rates.
- Look into solar panels. Depending on where you live, a rooftop solar setup can lower your electricity bill dramatically or even eliminate it entirely. (Check out the best solar providers here.)