Inflation, Generation, Regulation

We’re an inflation nation. The Consumer Price Index was 6.2 percent higher in October than in October 2020. 0.9 percent of that increase came in just the last month.

The prices that consumers pay for energy particularly are climbing. Retail electric rates for example were 6.5 percent higher in October than in October 2020. 1.8 percent of that increase came in just the last month. Wow.

Reuters Events – Energy Transition North America 2022 – #ETNA2022 – Register Now – Houston, Texas; November 9–10

It’s rare for electric rates to rise faster than general inflation. But that’s what we have now.

Look no further than the oil and gas markets for the cause. Gasoline and fuel oil prices were very nearly fifty percent higher in October than in October 2020. Natural gas prices were twenty-eight percent higher.

Natural gas stations supply two-fifths of our electricity. And gas-fired generation often sets the price in power markets. So, inflation in gas begets inflation in electricity.

Consumers have benefited from the last few years when electric rates rose slower than general inflation and when general inflation itself was low. This reversal, electric rates outpacing general inflation, which is no longer low, will soon be an issue in utility regulation. If it hasn’t already.