Electric bills are climbing and may go higher

Yahoo Finance Live's Karina Mitchell breaks down why electric bills are rising.

Video Transcript

JARED BLIKRE: US customers are facing some of the largest bills in years due in part to surging gas prices, winter weather, and also exacerbations by the war in Ukraine. Karina Mitchell has more. And Karina, I know my electricity prices more than doubled in January. How about you?

KARINA MITCHELL: You and me both, and we'll complain about it later on. But all of this despite hitting the brakes temporarily, at least, on sky high oil and nat gas prices over just the last 24 hours, right, in part, tied to fears of an economic slowdown in China because of that rise in COVID cases, lockdowns in key production centers in that country. Let's remember that China is the world's biggest importer of oil. And of course, there are ongoing talks, as you guys know, between Ukraine and Russia about a possible ceasefire that could alleviate some of the price pressures.

But nat gas has been squeezed for a while, right? And that's caused utility companies to have to pay more to buy or produce gas at natural gas and electricity. And those costs are being passed on to the consumer with the result that some customers have had to pay at least 20% or more for their electricity bills over the winter season year over year.

Now the average retail electricity prices for residential consumers by 4.3% year over year, but it is important to note that that increase is the biggest annual increase since 2008. And that's according to the Energy Information Administration. So why are they going up? Well, it's not just tied to the war in Ukraine because domestically, prices have been volatile, and they've been going up for a while. In fact, domestic prices hit their peak back in October. I think if you look at a chart, it's something like $6.30 for nat gas.

So the reason for that is that domestic producers have been exporting record amounts overseas, including to places like Europe. So while the war is exacerbating things, it's not the only reason why our electricity bills are higher. Guys.

BRIAN SOZZI: Is there any regulation here that could prevent these prices from really going much higher?

KARINA MITCHELL: Well, it's really interesting that you ask that, Brian, because these utility companies can't just hike prices on their own. They have to get approval from regulators, but the standard practice is that regulators will allow these utility companies to pass on higher fuel costs and supply costs to the customers. So that's why we're seeing these higher bills.

And one city, New York in particular, we've seen electricity bills skyrocket. They've really been exacerbated, and in part, due to Con Edison is one of the providers in the New York City area. They supply electricity to nearly 3 and 1/2 million customers. So in January-- this is maybe what Jared was talking about-- they spiked bills on some customers by 23%. Think about that, 23%. So most of the increases they said resulted from higher supply costs. But customers were outraged, local lawmakers got up and jumped and made a lot of noise.

So now Con Edison is actually having to backtrack a little bit. They say they're working to hedge against volatility, which I find kind of funny. And they're also changing the way they charge customers, their billing structure, so it works more in favor of customers. But then my question is that how do you hedge against this kind of volatility? I mean, we were just seeing today, you know, oil and gas prices down 25% from a recent high. So even for companies, it's incredibly hard to hedge against this and all of these higher electricity bills. You guys know. They're coming as real wages are negative, inflation is soaring. Guys.