By Avi Salzman
Electricity costs have been surging, up 0.9% on a seasonally adjusted basis in March over February, and 5% on an unadjusted year-over-year basis, according to the latest consumer price index. Last year saw a 10.2% annual increase.
That's surprising, given that the top input cost for electricity -- natural gas -- has gotten cheaper. Natural gas generates 42% of U.S. electricity. Gas prices spiked after Russia invaded Ukraine, as more U.S. gas went to Europe to replace Russian supplies. But prices have since fallen under $2 per million British thermal units, down from above $9 in 2022.
In some states, utilities cut electricity prices as prices fell; others raised rates months after prices dropped. One reason for the price hikes is that about half of the average consumer bill reflects transmission and distribution costs, which are rising fast as electricity demand grows from electric vehicles and AI-focused data centers.
Some utilities have been asking regulators for permission to raise prices. In Indiana, Duke Energy and CenterPoint Energy want to raise rates by double-digit percentages to pay for priorities, including the cost of moving from coal to cleaner options. Duke also cites "dramatic inflation."
Price pressure is bound to escalate as natural-gas prices rise again in the years ahead and demand grows. Says David Springe, National Association of State Utility Consumer Advocates executive director, "It's going to get a lot worse."
Write to Avi Salzman at avi.salzman@barrons.com
Last Week
Markets
Oil prices fell after Iran's retaliation against Israel (the response was limited). U.S. retail sales in March grew a hot 0.7%; Treasuries sold off and the dollar rallied. China had a strong first quarter, up 5.3%. Federal Reserve Chair Jerome Powell suggested inflationary signs would delay rate cuts. Stocks were volatile and lost ground. On the week, the Dow Jones Industrial Average barely budged, up 0.01%, the S&P 500 lost 3.05%, and the Nasdaq Composite fell 5.5%.
Companies
The federal government committed $6.4 billion in grants to Samsung Electronics to expand chip production in Texas. Microsoft invested $1.5 billion in G42, Abu Dhabi's artificial-intelligence start-up. G42 cut ties to China to make the deal. Goldman Sachs beat earnings expectations, with first-quarter net income up 28%; Morgan Stanley beat on higher revenue. President Biden called for a tripling of tariffs on Chinese steel and aluminum. Apple removed Meta Platforms' WhatsApp and Threads from its China App Store on Beijing's orders.
Deals
The Wall Street Journal reported that Salesforce was in talks to buy data-management software firm Informatica...Milan-based Prysmian agreed to buy cable maker Encore Wire for $4.15 billion... International Paper agreed to buy the U.K.'s DS Smith for $7.2 billion, all in stock...The WSJ said the U.S. was readying an antitrust suit against Ticketmaster parent Live Nation...The New York Times said Sony and Apollo Global were mulling a Paramount Global bid.
Write to Robert Teitelman at bob.teitelman@dowjones.com
Next Week
Tuesday 4/23
Four of the so-called Magnificent Seven release earnings. Tesla, which recently announced layoffs of at least 10% of its workforce, reports results on Tuesday. Shares are down 41% this year, the second-worst performer in the S&P 500 index, as demand for EVs has slowed markedly. Meta Platforms releases earnings on Wednesday, followed by Alphabet and Microsoft on Thursday.
Thursday 4/25
The Bureau of Economic Analysis releases its advance estimate of first-quarter gross-domestic-product growth. Consensus estimate is for real GDP to have grown at a seasonally adjusted annual rate of 2.2%, after an increase of 3.4% in the fourth quarter.
Friday 4/26
The BEA releases the personal consumption expenditures price index for March. Economists forecast a 2.6% year-over-year increase, one-tenth of a percentage point more than in February. The core PCE, which excludes volatile food and energy prices, is expected to rise 2.7%, compared with 2.8% previously. Stubbornly hotter-than-expected inflation readings this year have pushed bond yields to their highest levels in five months and finally dented the equity market, with the S&P 500 down 5.5% in April, which would be its first losing month since October.
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April 19, 2024 19:16 ET (23:16 GMT)
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