Fuel cost now driving up electric bills

Not only are coal prices rising, but utilities are now asking for rate increases for the equipment they have installed to remove pollutants from power plant smokestacks. AEP, which operates in eleven states, has asked for a 17 percent rate increase in West Virginia partly to pay for the new emission reduction equipment.

Some of the rate increases reflect the rising cost of commodities such as copper and the rising cost of gasoline and diesel for utilities' large vehicle fleets.

Utilities are trying to pass on these rising expenses. For example, AEP in Virginia has asked for a 24 percent increase (on top of the 12 percent fuel adjustment). "Power poles are up 39 percent since 2003, copper wire has more than doubled since then," says AEP spokeswoman Melissa McHenry in Columbus. Ohio.

Not all of the rate increases are in the double digit range. There are also many smaller 3 to 4 percent increases such as 4.5 percent at Pacific Gas & Electric, 2.5 percent at ComEd in Chicago and 2.85 percent at Connecticut Light & Power.

Tyson Slocum of Public Citizen says his organization has found rate increases are higher in deregulated utility markets.

"In a deregulated market, the prices are set by the cost of the last kilowatt of power," he says. "In a fully regulated market, prices are set by the average of all costs."

However, John Shelk, the president of Electric Power Supply Association, which argues for utility deregulation in Washington, says his organization's surveys have found the rate of increase is the same for both regulated and deregulated utilities. The difference is that regulated utilities face a lag in getting back their rising fuel costs.

"The rate of increase (of the price of electricity) is 30 percent in both deregulated and regulated types of states," he says.

In the June Consumer Price Index, the Bureau of Labor Statistics found natural gas and electric prices were 10 percent higher than a year ago. Washington-based economist Richard DeKaser of National City Corporation estimates the rising rates have trimmed about 0.5 percent off household discretionary income. "If it's in isolation, it's manageable," he says. "But it's not in isolation, it's part of a larger trend of rising energy prices."

In fact, for some consumers the utility rate hikes are just too much. "In the summer it used to be that 1 percent to 2 percent of consumers were shut off for not paying their bills, now it's in the range of 5 percent," says Mr. Wolfe of NEADA, which lobbies for federal aid to help low income families with their heating and air conditioning bills. "What's happened is that it's moved from a problem for the poor to the middle class. When people are living paycheck to paycheck higher energy costs become more significant."

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