Inflation and Electric Rates

July 13's Consumer Price Index report said inflation over the twelve months ending in June was 5.4 percent. This is indeed a relatively high rate of increase in the prices that the American consumer pays for goods and services, as compared with the rate of increase in recent years.

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Over those same twelve months, the price that the American consumer pays for electricity rose 3.8 percent. An increase to be sure. Though one that’s just seven-tenths of the increase for all goods and services.

All these CPI percentages, whether for all goods and services or for electricity only, are weighted averages of course. For some consumers, their price increases are higher.  For other consumers, their price increases are lower.

Why are electricity prices rising as they are? A big factor is what’s happening to the price of natural gas, a driver in the cost of electricity generation.

Yesterday’s Producer Price Index report said the price that electricity generators pay for gas rose 33.3 percent over those same twelve months. No wonder consumers’ electricity price is up. Though fortunately this increase is only one-tenth of the increase in the price of gas.