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Construction, fuel jolt energy costs

Jeff Tyler Jun 16, 2008

Construction, fuel jolt energy costs

Jeff Tyler Jun 16, 2008


Kai Ryssdal: Whether or not the oil bubble that Mr. Greenberger and I were just talking about ever does pop, we’re still going to be paying more for energy. Forget oil; think electricity.

Nationwide, power prices have risen an average of 30 percent over the past five years and they’re spiking now. Utility customers in Virginia, for example, face another 29 percent jump next month.

Marketplace’s Jeff Tyler reports now on the shocking rate of electricity inflation.

Jeff Tyler: About 70 percent of your electric bill covers the cost of fuel.

Coal is the cheapest, but it’s getting more expensive as the U.S. exports more to China. More environmentally-friendly fuels have also become pricey, says Morningstar utilities analyst Paul Justice.

Paul Justice: Natural gas prices are up dramatically and natural gas, while it’s clean burning relative to coal, it’s also very expensive when it comes down to electricity generation.

Many utilities also are long past due for an infrastructure overhaul. The cost of building new power plants has doubled in the past eight years. That’s partly due to skyrocketing prices for commodities.

Ed Legge is spokesman for the Edison Electric Institute, a trade association. He says utilities must make improvements to meet growing demand — it’s expected to increase by 30 percent over the next two decades.

Ed Legge: Because of the need to modernize the electrical grid and to make it more efficient, to build the infrastructure we need to continue providing electricity. All those things are going to add up to one of the biggest construction phase in our industry’s history.

Legge says a likely federal cap on carbon emissions could drive utility prices even higher.

But there may be some relief from an unlikely source: electric cars.

Legge: Plug-in hybrids actually are one way that could give us a giant virtual battery.

Legge says some utilities eventually hope to borrow electricity from electric car batteries during peak energy hours. The cars would recharge at night, when demand is at its lowest.

I’m Jeff Tyler for Marketplace.

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