Government electricity price forecast ticks higher, as consumer advocate warns there is little relief in sight

Dive Brief:

Average U.S. residential electricity prices will reach almost 15 cents/kWh in 2022 and 15.33 cents/kWh in 2023, according to the latest forecast from the U.S. Energy Information Administration. While the pace of the agency’s forecast increases appears to be slowing for next year, consumer advocates see little reason for optimism.
“Underlying fuel prices for natural gas and coal remain high and could go higher next month,” National Energy Assistance Directors Association Executive Director Mark Wolfe said in an email.
Some bright news: Less of the nation’s electricity will come from fossil fuel sources in 2023, EIA said. Electricity demand is expected to fall by about 2% next year, according to the agency’s Short-Term Energy Outlook. Renewable resources will grow to 24% of the generation mix in 2023, from 22% this year.

Dive Insight:

EIA has forecast progressively higher prices in recent short-term outlooks. While the pace of next year’s forecast increase appears to be slowing, Wolfe said there is little reason to cheer and warned consumers are increasingly behind on their home energy bills.

EIA is now predicting 2022 retail electricity prices to average 14.97 cents/kWh. That’s up from a 14.86 cents/kWh forecast in October and 14.75 cents/kWh in September.

For 2023, EIA in October forecast retail electricity prices of 15.32 cents/kWh and in September had them pegged at 15.24 cents/kWh.

If Europe follows thorough on a plan to boycott Russian oil, and Russia retaliates by cutting access to natural gas, that could drive international demand and prices higher, Wolfe said.

“Natural gas exports from the US are at an all time high,” he said. Winter temperatures remain an unknown factor though, and some forecasts are calling for a mild season across parts of the country. “So yes, prices could start to stabilize, but there are a lot of wild cards out there,” he said.

NAEDA, which represents state directors of the federal government’s Low Income Home Energy Assistance Program, on Monday said about one in six American families are behind on their utility bills and in total owe more $16 billion as of August.

“Preliminary data suggests that utility arrearages will continue to rise this winter as all signs point to higher home energy prices, with natural gas hitting a 16 year high and no end in sight,” NAEDA said in a statement.

EIA said it expects a decline in gas prices next year, as the fuel falls from 38% to 36% of U.S. generation. Coal’s share of generation will fall from 20% this year to 19% in 2023.

Generators are planning more than 20 GW of coal retirements in 2022 and 2023 combined, EIA noted.

EIA expects about 2% less electricity generation next year, “driven mostly by a decline in air-conditioning use because of cooler forecast temperatures next year, and also by slight economic contraction.”

As demand falls for electricity, renewable energy will account for a greater share of U.S. electricity generation, with other sources, “notably natural gas and coal,” diminishing, EIA said.