Canva ImageOne month it may look manageable. The next, it’s noticeably higher, even if your usage hasn’t changed much. The reason often comes down to fuel prices, aka fossil fuel prices.
Most electric bills have two main components:
1) The energy charge covers the cost of operating and maintaining the electric system — wires, poles, power plants, transmission lines, substations, and related infrastructure. It’s calculated by multiplying the number of kilowatt-hours (kWh) you use by the approved rate — a complex formula that utilities use to recoup costs and make their allowed profit margin of typically 8-11%.
Who determines the rate you pay depends on where you live and who your utility provider is.
2) The fuel charge covers the cost of the fuel used to generate electricity and any purchased power. Power plants need fuel to produce electricity, and in Louisiana and much of the Southeast, that fuel is primarily natural gas, fossil fuels.
The price of natural gas changes often and can rise or fall quickly based on supply and demand pressures like extreme weather, war and conflict, and global commodity markets — as we’ve seen recently with Winter Storm Fern and the war in Iran.
Here’s the key: Utilities pass these fuel cost increases directly onto your bill. The good news is they are not allowed to profit from it, or “mark up” these costs. But that still means when the price of natural gas goes up, every unit of energy you use gets more expensive.
More than 76% of our electricity in Louisiana is generated by burning natural gas as fuel. At the same time, one in three households in Louisiana also use natural gas in their homes for heating or cooking. During winter storms or extreme cold, demand for gas for heating increases at the same time power plants are burning gas to generate electricity. If supply tightens, prices climb quickly — and those higher prices show up directly on customer bills. This also often happens in the summer during times of extreme heat when everybody is using their air-conditioner.
Utilities don’t have any skin in the game, they just pass the cost increases onto us.
A balanced energy mix reduces exposure to any single fuel’s price swings. Wind and solar energy play a unique role because they have no fuel cost.
Once a wind or solar farm is built, the wind and sun itself is free. Wind and solar energy do not fluctuate with global commodity markets, pipeline constraints, or sudden demand spikes. When natural gas prices increase, wind and solar continue delivering power at a stable cost, helping cushion the overall system and keep your bill from increasing too.
Wind energy is often strongest during the very conditions that strain the grid. Cold air is denser, and winter weather systems frequently produce sustained winds. In many regions, low temperatures and strong winds occur at the same time.
For example, during past cold snaps in New England, natural gas shortages required emergency measures to maintain reliability. Yet wind data from those same periods showed strong offshore winds that could have supplied substantial electricity during peak demand.
Wind energy is not just a clean energy resource — it’s a winter reliability resource.
Today, onshore wind is one of the lowest-cost sources of electricity generation in the United States. In many cases, it is cheaper to build new wind and solar facilities than new natural gas or nuclear plants.
That matters because the cost of building new power plants is ultimately paid by customers not utilities, and recovered by utilities through customer rates. Choosing lower-cost generation helps protect consumers from long-term increases.
Across the country
Wind is now the largest source of renewable electricity in the United States.
