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Cost of electricity rising like summer heat

By Ron SchererStaff writer of The Christian Science Monitor / July 27, 2005



NEW YORK

With the nation's demand for electricity soaring, the cost of staying cool this summer is on the rise.

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As many consumers will find out when they get their utility bills, gasoline is not the only form of energy that costs more. Even before air conditioners were cranked all the way up, many utilities were predicting that prices would rise 7 percent or more. Now, with the heat and humidity of August yet to come, utility companies aren't sure how much more consumers will pay - except to say they will.

An indication of how much some utilities are paying to meet the demand: The price of electricity on the spot market has doubled in two months.

"Spending on electricity is the highest as a share of total consumer spending since the California electricity crisis in 2000," says Mark Zandi, chief economist at Economy.com. "Total spending on both electricity and energy is at a record high."

The higher cost is not a good sign for the economy. Paying for the extra kilowatt hours will hit consumer pocketbooks later this summer or early in the fall - one of the peak retail periods, when many families could be wandering the aisles for back-to-school purchases. And the cost of beating the heat is especially difficult for senior citizens and the poor, prompting calls for federal emergency funds.

In a normal summer, electric bills rise as individuals use more air conditioning. But this summer has been so hot that to meet the soaring demand, many utilities have had to turn to more expensive power plants, known as "peak generating plants." Instead of relying on coal or nuclear fuel, many of these power producers use more expensive oil or natural gas to power their turbines.

"Usually, they are the last to run," says George Lewis, a spokesman for PPL in Allentown, Pa., which has turned on its peaking units.

At the same time, Americans are buying more electricity-intensive gadgets such as plasma television sets, giant blenders for the kitchen, and Xboxes for the kids. "Our refrigerators and stoves and air conditioners have gotten way more efficient, but we're using so many more devices that require electricity," says Jim Owen, a spokesman for the Edison Electric Institute in Washington. "Houses have gotten significantly bigger than a generation ago."

Last July, the average electric bill was $79.65, according to Edison. Nationally, bills were actually higher in 2000 during the California energy crisis, when wholesale power was selling for $1,000 per megawatt hour in California. This resulted in an average July bill that year of $85.03.

Still, this year, some consumers are dealing with steep bills. Mr. Zandi recently opened up his bill for mid-June to mid-July and was shocked to see a $600 total. "I hit the roof," he says.

On Twopeasinabucket.com, a website for scrapbooking enthusiasts, one woman, identified as damorales, complains that last month her electric bill for her 1,800-square-foot house was $527. One reason her costs might so high: a window unit that runs nonstop to keep the garage cool for the dogs.

Yet, another chat-room user, Scottlyn, complained that the air conditioner needed repairs, but then they wouldn't be able to afford to pay the electric bill. Now, Scottlyn keeps the thermostat at 80 degrees during the day and turns it to 73 at night.

In consumer surveys, the cost of energy is still a major concern, says Richard Curtin, director of consumer surveys at the University of Michigan.

"It is especially tough for those with less than the median income. Some 20 percent of all respondents say the rising energy prices are why they are worse off financially."

On Monday, the state directors of the Low Income Home Energy Assistance Program (LIHEAP) called on President Bush to release $47.6 million in emergency funds to help families pay for their cooling needs.

"The reason we are calling on the president is our concern about the impact of high temperatures on people's health, and we know that many low-income and elderly people don't turn on their air conditioning because they are afraid of the bills," says Mark Wolfe, executive director of the National Energy Assistance Directors' Association in Washington.

In New York's Spanish Harlem, that's true for Anibal Diaz and his wife, Ana Torres, who are sitting outside their apartment. Ms. Torres has health problems and can't take the heat in their stuffy apartment. But the couple can't afford air conditioning. "It's too expensive," says Mr. Diaz. "I bring my wife down in the mornings where it's cool, and here we sit, all day."

So far, despite the heat and energy demand, the nation's utilities have been able to meet the demand without any major interruptions. Only two years ago, a third of the nation was blacked out. "We're lucky we are not seeing any brown-outs or blackouts," says Rozanne Weissman of the Alliance to Save Energy, which has just mounted a major public-service campaign to get people to reduce their energy usage. "We all have control over those bills."

Deborah Blumberg contributed to this article.

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