American voters have expressed their dissatisfaction with the state of the economy, with 67% of respondents in an ABC exit poll stating that they believe it is in “bad shape.” This sentiment is not surprising, given the significant impact of inflation on family budgets. In some parts of the United States, the price of a half-gallon of milk has skyrocketed to as much as $10. The underlying causes of this budget-busting inflation and potential solutions are worth examining.
One of the primary drivers of inflation is the surge in energy costs. CBS News reports that electricity prices in the United States have surged by 28.5% since 2019, with certain states experiencing even higher increases. California, the most populous state in the nation, has witnessed electricity rates at its major utility companies rise by up to 110% over the past decade. These substantial spikes in electricity costs have had tangible consequences across the country.
The U.S. Energy Information Administration highlights that inflation driven by electricity costs has left more than one-third of American families unable to afford basic energy needs. Unfortunately, the current trajectory suggests that the pain will only intensify. The demand for electricity is rapidly increasing due to factors such as artificial intelligence, electric vehicles, and the exponential growth of data centers. In fact, new data centers alone require as much power as a small city.
While soaring power demand would not be an issue if matched with increased supply, the Biden administration’s regulatory agenda has made it exceedingly difficult for the power sector to keep up. Essential power plants are being forced offline just when they are most needed. The U.S. Environmental Protection Agency (EPA) has been pushing rules that aim to eliminate the nation’s coal fleet and make it nearly impossible to construct new baseload coal and natural gas plants. There were also concerns about potential rules targeting the existing natural gas fleet.
Utility companies and grid operators have repeatedly urged the Biden administration to reconsider this approach, warning that it is unworkable. PJM Interconnection, the largest grid operator serving 65 million Americans, has even cautioned that there will be a significant power shortage by 2030. American consumers do not want mandated scarcity and skyrocketing prices. It is common sense to maintain existing natural gas and coal plants until new, reliable capacity is built to replace them.
The incoming administration has an opportunity to provide relief for American consumers by reversing the EPA’s current agenda. Simply keeping up with the surging power demand will require utilizing every available power plant. Consumers deserve affordable and reliable power, and energy policies should support rather than undermine this goal. A decisive course correction towards American energy abundance is urgently needed.
Matthew Kandrach, president of Consumer Action for a Strong Economy, emphasizes the importance of addressing these concerns promptly. The rising electricity costs and regulatory policies are contributing to inflation worries among American consumers. It is crucial to find a balanced approach that ensures affordable and reliable power while transitioning to cleaner energy sources.