High inflation may finally be starting to cool, but rising electricity prices continue to put financial pressure on millions of U.S. households.

Electricity costs rose 0.1 percent in July from the previous month, putting them 4.9 percent higher than a year earlier, the Labor Department said on Wednesday. That is significantly more than the 2.9 percent increase in overall inflation last month.

According to a recent report from S&P Global, average household electricity prices across the country increased by nearly 22% between 2018 and 2023.

The problem could soon get worse.

INFLATION ANALYSIS IN JULY: WHERE ARE PRICES STILL RISING THE FASTEST?

Prices “will continue to rise at an ever-accelerating pace,” Paul Cicio, chairman of the Electricity Transmission Competition Coalition, told FOX Business.

READ ON THE FOX BUSINESS APP

Transmission costs are the main reason for higher electricity bills, Cicio said. That’s because Federal Energy Regulatory Commission rules allow the construction of large transmission lines worth “tens of billions of dollars” a year without requiring companies to bid competitively for the work, which would lower costs for consumers.

Transmission lines are special cables or other lines that conduct electromagnetic waves.

Cicio estimates that competitively tendered projects reduce costs by 25 to 30 percent because they include legally binding cost caps and other accountability measures.

“The high costs we are seeing are due to monopoly utilities building transmission lines without having to put them out to tender,” he said.

As the U.S. works to decarbonize its economy and transition from fossil fuels to renewable energy like wind and solar, electric utilities are spending more money on transmission. But that higher spending on transmission is leading to higher electricity bills.

Inflation rises by 2.9% in July, less than expected

“We have already seen the impact of rising transmission costs, and these will continue to increase,” Cicio said. “There was no competition in building these transmission lines, which drove up the cost of electricity.”

Rising summer temperatures and a higher number of extreme heat events are also forcing Americans to spend more money than before to keep their homes cool, according to a recent study released by the National Energy Assistance Directors Association and the Center for Energy Poverty and Climate.

In fact, the cost of cooling a home this summer was expected to rise 8% across the U.S. to an average of $719, up from $661 during the same period in 2023. The report also shows that nearly 24% of households reported being unable to pay at least one energy bill in the past year.

The high inflation has strong financial pressure for most U.S. households, who are forced to pay more for everyday necessities like groceries and rent. Price increases are especially devastating for low-income Americans, as they tend to spend a larger portion of their already scant paychecks on necessities and therefore have less room to save money.

Source of the original article: Rising electricity costs pose another financial threat to American households