“Volatility in natural gas prices, including the huge spikes following Russia’s invasion of Ukraine, has certainly contributed to some price increases on the supply side. But the transmission and distribution costs have actually been going up at twice the rate of inflation nationwide, the report’s author, Brendan Pierpont, told me.
“That trend of increasing transmission and distribution costs is something that is noticeable all across the country, and so I think it’s an underlying factor in rate increases everywhere,” Pierpont said.
Utility companies have a lot of freedom in setting rates for transmission and distribution — and that directly contributes to how much profit they make. Utilities get to pick what gets upgraded when, and they also have an incentive to spend heavily, thanks to regulations that allow them to collect return on investment, usually around 10 percent, for those expenditures. This is actually built into the price most people pay for electricity.
Here’s how it works: Every year, utility companies ask regulators to approve a “revenue requirement,” which is basically a budget for what the utilities think it will cost to deliver enough electricity to their customers. Those estimates include spending on new equipment but not the cost of repairing old equipment. It also includes that return on investment, or profit, which regulators regularly approve. In Pierpont’s words, “That rate of return has a direct link to the costs that customers pay for electricity.”
What utilities don’t seem to be doing, however, is expanding the grid in a way that would benefit clean energy producers, the Energy Innovation report finds. Investments tend to cover local upgrades, like installing new metering equipment, rather than installing the high-voltage transmission lines that renewable energy sources need to connect to the grid. Meanwhile, consumers are facing more frequent outages that last longer, while utilities keep making more money for installing new, potentially unnecessary equipment.
“It’s like the utilities have a rewards credit card,” said Joel Rosenberg of Rewiring America, a nonprofit focused on electrification. “And they get to keep the rewards for how much they spend, and the [customers] have to pay off the bill, even if that bill takes 80 years to pay off.”
This plays right into the misconception that investment in renewables leads to higher rates.
Many of the states leading the way to clean energy are actually seeing lower energy prices than the rest of the country. Data from the US Energy Information Administration shows that 17 states, including California and Massachusetts, have increased their share of renewable energy sources by more than 20 percent since 2010. And with the exception of California, all of those states have seen the price of residential rate increases rise more slowly than inflation. The higher rates in California can be explained, in part, by rate increases to account for wildfire prevention. In Massachusetts, natural gas is the problem.
States where residents are seeing electricity bills that outpace inflation tend to be the ones with the highest reliance on natural gas, as highlighted in the Energy Innovation report. Some states in New England, including Massachusetts, have depended on natural gas for around 60 percent of electricity generation since 2020 and have seen prices increase by around 10 percent in the same period. Volatility in the price of natural gas also means that some of the highest price spikes are spread out over several years, so there could be more high prices in these states’ futures.”
“Last September, California Governor Gavin Newsom (D) signed a bill mandating a $20 minimum wage for fast food workers. The new wage is among the highest in the county, surpassing even Washington, D.C.’s $17.50 minimum wage. While supporters touted the wage increase as a way to help struggling Californians, detractors warned that restaurant owners would respond by laying off workers, cutting their hours, or speeding up the already starting shift to automation.
The law went into effect in April, meaning that it’s likely too early to tell what the ultimate effects of the law will be. However, a recent report from the Associated Press detailed concerns from several California fast food restaurant owners who say they’ve been forced to reduce hours and hike food prices.
“We kind of just cut where we can,” Lawrence Cheng, whose family owns several Wendy’s franchises told the A.P. “I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour.”
Juancarlos Chacon, who owns nine Jersey Mikes locations in Los Angeles told the A.P. that he’s resorted to reducing staff, cutting his part-time workers by about 20 employees. He’s also had to raise prices. A turkey sub, for example, that used to be under $10 now costs $11.15. As a result, the amount customers spend, he says, has been falling.
“I’ve been in the business for 25 years and two different brands and I never had to increase the amount of pricing that I did this past time in April,” he told the A.P.”
“The Fed hiked interest rates around the same time that the supply chain got back up and running, which makes it hard to assign credit. But there’s an even more fundamental issue here. “Anything in macroeconomics is very hard to empirically test,” says Vox senior correspondent Dylan Matthews. “You can’t run experiments with the Fed.”
Ultimately, Matthews says that inflation — and our economy as a whole — is still so hard to understand because of the nature of money. “Money feels like this very hard thing, but money is also a psychological idea. Money is this idea that we can put numbers on what we owe to each other, even as we understand that these numbers are kind of made up.”
Inflation, in a sense, is a psychological phenomenon. “So understanding inflation, I think, is ultimately about understanding people and how they relate to each other. And that’s the ultimate mystery.””
Millennials & Gen-Z are Poorer Than Ever (Here’s Why) Humphrey Yang. 2023 5 17. Have the Boomers Pinched Their Children’s Futures? – with Lord David Willetts The Royal Institution. 2020 1 23. https://www.youtube.com/watch?v=ZuXzvjBYW8A Some numbers at beginning for UK and Europe. The
“Though there are a number of factors involved in this price creep (including high fees, which a 2018 Government Accountability Office report says make up an average of 27 percent of the ticket’s total cost), the heart of the matter is simple: demand. People all over the world are clamoring to go to just a handful of the most popular artists’ concerts. Live Nation reported that 145 million people attended one of its shows in 2023, compared to 98 million in 2019. The momentum doesn’t appear to be slowing, with ticket sales in the first quarter of 2024 higher than they were this time last year. ”
“Early in his column, Powell writes that since 2019, America’s working-class has “weathered 20 percent inflation and now rising interest rates—which means they’ve lost more than a fifth of their purchasing power.”
This is simply false. You cannot measure a trend in workers’ purchasing power over time by looking exclusively at changes in their costs. Since 1947, the consumer price index has risen by roughly 1,400 percent. If we applied Powell’s logic to that data point, we would conclude that Americans’ purchasing power had apocalyptically collapsed since the Truman administration. But of course, Americans are not poorer today than they were in 1947 — because since that year, the median US household income has increased by roughly 2,400 percent.
Similarly, although consumer prices have risen 20 percent since 2019, the average hourly wage among nonmanagerial workers in the US has grown by 25 percent over the same period. Put differently, at least for Americans who don’t debt-finance their expenditures, purchasing power is higher today than it was in 2019.”
“It makes sense that the recent run of inflation would leave a psychological scar. After all, the peak inflation rate of 9.1 percent in June 2022 was not only the highest annualized rate seen in more than four decades, it was also more than twice as high as the average inflation rate in any year since 1991. That means prices were rising two to three times more quickly than during the worst bout with inflation that most Americans can easily recall.
In March, the annual inflation rate was 3.5 percent. Yes, that’s 60 percent lower than the peak rate in June 2022, but that’s still higher than the average annual rate in every single year between 1991 and 2021, except for 2008.
Meanwhile, higher interest rates are likely compounding the perception that inflation is a major problem.
From an economic perspective, those higher interest rates are necessary to calm inflation. But from a consumer’s perspective, the money in your wallet now has less buying power and it’s more expensive to borrow money for a car loan or mortgage. It’s a squeeze from both directions.”