Byron Goldstein closely monitors the energy usage at his Glenside home. So when he got a $651 bill from Peco Energy for combined electric and gas usage in January, 37% more than the $477 he paid the previous January, he knew something was off.
Goldstein discovered that Peco’s gas supply charge skyrocketed since January 2021, accounting for most of the increase. Goldstein, 74, was unsatisfied by the company’s response to his phone calls, so he filed a formal complaint to the Pennsylvania Public Utility Commission, urging the state regulator to roll back Peco’s “outrageous and irresponsible” price increase.
He was not alone. Across the Philadelphia area, thousands of utility customers opened their bills in recent weeks to learn that the cost of heating their homes had soared much more than the 7% inflation rate. Social media platforms lit up with posts from unhappy customers, directing their wrath at energy companies, regulators, and politicians.
“I have never paid this much for heat in the winter,” wrote a Philadelphia resident posting on Nextdoor.com, where several threads contained hundreds of comments venting about the price increase.
The price has indeed gone up: A typical Peco customer who used 150 hundred cubic feet (ccf) of gas was billed $171.25 in January, up 38% or $46.90 from January 2021, according to PUC data. A Philadelphia Gas Works customer who used the same amount of gas was billed $261.71 in January, up 17% or $37.91 from a year ago.
Electricity bills also went up in Pennsylvania on Dec. 1, though not as much as gas bills.
The reason your utility bill has increased is pretty straightforward: Energy prices are up across the world. You see it at the gas pump. Residents with furnaces that use heating oil or propane are experiencing it. And natural gas prices, which set the market rate for electricity, have doubled in the last year.
There’s much impassioned debate about who or what is responsible for energy prices. In 2020, during pandemic lockdowns, energy demand fell and fuel prices sank to their lowest levels in a decade. The worldwide economy is now booming, and energy demand and prices have soared, particularly in markets where supply is short.
The high gas bills could get worse
With tensions soaring over the Russian invasion of Ukraine, global energy markets are bracing for what could become a crippling supply-chain disruption if the conflict affects pipelines that carry Russian natural gas upon which Europe depends. Germany also suspended the launch of the giant Nord Stream 2 gas pipeline, which has not yet gone into service.
“Natural gas prices, along with other heating fuels, are increasing worldwide, which is being caused by a combination of factors,” Mayra Bergman, Peco spokesperson, said in an email. “In addition, this winter has been colder than last year, which has resulted in increased energy consumption and higher energy bills for both natural gas and electric customers.”
It’s not just Pennsylvania. Commodity prices for New Jersey utility customers are higher this year than the previous five years, according to the New Jersey Board of Public Utilities, the state regulator.
“New Jersey customers may experience an increase in their respective gas and electric bills this year when compared to prior years,” a BPU spokesperson said in a written response to questions. The BPU does not prepare an annual comparison of utility rates in the state, he said.
In October, the average U.S. natural gas price was $5.51 per thousand cubic feet, more than double the price from a year before, according to the U.S. Energy Information Administration.
How to understand your bill
Gas prices haven’t spiked this high since the winter of 2014, when an infamous polar vortex sent average prices to $6 per unit.
A doubling of the commodity price does not equate to a doubling of gas bills, however, since the cost of the natural gas itself is only part of a customer bill.
A rule of thumb 10 years ago is that energy costs were about two-thirds of a customer bill. But energy prices have declined in the last decade, with the advent of U.S. shale-gas production, and now account for less than half a typical utility bill.
As energy prices declined, regulators have encouraged utilities to step up the replacement of aging infrastructure. That has contributed to increases in utilities’ distribution charges to pay for the networks that deliver energy to customers. Those increases have partly offset declines in energy costs. Distribution costs now account for the larger part of a customer bill.
State regulators carefully review and approve the distribution rates that utilities charge, allowing private utilities to include a profit margin. A utility rate case is a laborious proceeding in which adversaries, including consumer advocates, are allowed to challenge a utility’s proposed rate. Because a rate case is costly and takes nine months to review, utilities only seek rate increases every few years.
But the commodity charges are different. In Pennsylvania, utilities are allowed to adjust their energy costs every three months to reflect fluctuations in the price they pay for gas or electricity. They are not permitted to make a profit on the fuel costs -- the cost is passed through to customers without a markup. Regulators audit the fuel charges annually to make sure the fees are justified.
“That purchasing is overseen by the PUC,” said Terrence J. Fitzpatrick, the president of the Energy Association of Pennsylvania, a trade group of utilities. “It’s regulated to make sure that you’re paying a fair market price for it. There’s no profit earned on those sales of that energy to customers.”
The fuel costs for various Pennsylvania utilities do not move in perfect unison. Utilities have different arrangements for procuring gas from suppliers to ensure they have a reliable supply on the coldest winter days. Some gas is bought on seasonal contracts at fixed prices. Some is purchased on the spot market at current prices. Peco and PGW also buy gas in the summer and store it locally in the form of liquefied natural gas (LNG), whose main purpose is to guarantee a supply on peak winter days when customer demand increases.
The sting of recent rate increases
Pennsylvania utilities most recently increased the energy charges on electric and gas bills on Dec. 1. Peco issued a notice to its natural gas customers, warning that some bills could increase 24%. But not many customers apparently noticed because the weather in December was relatively mild, softening the impact of the energy price increase.
But January’s weather was the coldest of any month in the last four years in Philadelphia. Combined with higher energy charges, it resulted in some eye-popping bills. So far in 2022, Peco has delivered 17% more gas to customers than anticipated.
Utilities say they’re getting more applications from customers for bill-payment assistance.
More than 150,000 New Jersey households enrolled in the state’s Universal Service Fund program in the last three months of 2021, surpassing the number that applied in the previous nine months. But it’s unclear whether that increase was caused by higher prices or the end of pandemic-related assistance programs, Peter Peretzman, a BPU spokesperson, said in an email.
Pennsylvania utilities are also seeing greater enrollments in assistance programs, said Fitzpatrick of the utility trade association. “I’m hearing they are seeing some activity, which they’re attributing to the colder temperatures and the fact that energy prices are up.”
Applications for assistance may pick up closer to the April 1 deadline when the winter moratorium on shutoffs ends. Utilities are prohibited from shutting off nonpaying customers during the cold weather.
Prices were higher in 2007
Though the recent increase in utility bills is shocking to many, the cost of energy is actually lower than it was 15 years ago. A Peco residential customer who used 150 ccf and was billed $171.25 this January, would have paid $193.64 in 2007. Adjusted for inflation, that 2007 bill would be $268.96
But customers can have short memories. “Somebody once said that from a political standpoint, the only kind of energy prices we like are low prices,” said Fitzpatrick.
Goldstein, the Glenside homeowner, received a formal reply from a Peco lawyer on Thursday that asked the PUC to dismiss his complaint. The utility said the public was notified of the rate changes, and rising energy costs “were anticipated” for Pennsylvania customers who use natural gas, fuel oil, and propane.
Goldstein also received his February electric and gas bill last week. It was for $624, up from $463 a year ago.
The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.