While energy prices dipped in 2020 due to the pandemic, utility bills steadily rose again in 2021 and are now spiking due primarily to the war in Ukraine. The expectation is that energy prices will continue to rise for the time being, exacerbating the squeeze on homeowners and renters alike. Below are key statistics and information on the current energy environment, as well as tips to estimate utility costs and save money.
Key utility bill statistics
- Average monthly electric bill: $117.46 (U.S. Energy Information Administration, 2020)
- Average annual gas bill: $667 (American Gas Association, 2020)
- Average monthly water bill: $112.04 for four-person household (Circle of Blue, 2018)
- Average annual internet bill: $1,392 (Parks Associates, April 2022)
- Year-over-year increase in energy prices: 32 percent (Consumer Price Index, March 2022)
- Year-over-year increase in gasoline prices: 48 percent (CPI, March 2022)
- Year-over-year increase in fuel oil prices: 70.1 percent (CPI, March 2022)
- Year-over-year inflation rate: 8.5 percent (CPI, March 2022)
What’s causing energy price spikes?
The war in Ukraine is the main culprit behind the sharp rise in energy pricing. While the lockdowns in 2020 slowed demand, the cold winter of 2020 to 2021 in Europe brought demand back, pushing prices higher. The Russian oil ban has further driven energy prices up, and the sector isn’t expected to ease any time soon.
Beyond the current pressures, utility providers are tasked with cutting emissions and protecting grids against the effects of climate change. The enormous cost of these measures will translate to higher monthly bills for consumers. Similarly, rising temperatures will require homeowners and renters to spend significantly more on cooling costs. The transition to wind, solar and hydro power can help curb energy expenses, but implementing these sources has a significant upfront cost, which has risen further due to supply chain issues.
Typical utility expenses
Utilities are services that keep your home comfortable, functional and safe. These include:
- Heating and cooling
- Sewer use
- Trash and recycling
- Internet, phone and cable
How to estimate utility costs for a home
Most customers receive their utility services from state-regulated private companies. Among other factors, states oversee the prices those companies are allowed to charge.
The various energy sources you use, including renewable versus non-renewable, also have an impact on the utility costs you pay. Some potentially cheaper sources, like wind and hydro power, aren’t widely available, so you might be paying for more expensive sources simply due to location.
The age and efficiency of your appliances and systems, and the size of your home, also affect costs. If your home is older or has issues like insufficient insulation or deteriorating pipes, that can lead to higher bills, as well.
To estimate utility costs for a specific home, take into account the size of the home, the number of people in the household and the types of energy sources available. If possible, ask the seller or landlord, or your real estate agent or the utility company, for estimates. You can also get a rough idea using this map of average monthly electric costs by state:
Average electric bills by state
Ways to cut energy costs
There are a number of steps you can take to reduce energy usage and your utility bills:
- Turn off and unplug – While this change might seem minor, standby power accounts for 5 percent to 10 percent of residential energy usage, according to the U.S. Department of Energy (DOE). Turning off appliances regularly could save you up to $100 per year.
- Install ceiling fans – Ceiling fans promote circulation, so you might be able to get away with a higher thermostat setting, which lowers costs.
- Upgrade to more efficient appliances – Products with the Energy Star label meet government efficiency standards, and sometimes more so. Energy Star refrigerators, for example, are at least 15 percent more efficient than the minimum efficiency criteria. In short, these types of appliances use less energy and can help you save money.
- Switch to LEDs – Residential LED lighting uses at least 75 percent less energy, according to the DOE, and lasts longer compared to incandescent lighting. The result: an average annual savings of about $225. Pair the LEDs with timers and dimmers to really maximize these savings.
- Install solar panels – Solar panels produce energy from the sun, a free power source. The cost to install solar panels isn’t cheap, however, but the expense tends to pay off in the long run. You can estimate your potential savings using this tool.
- Use smart meters – Smart meters are devices attached to appliances that track their energy usage, sending readings directly to the utility provider. If the smart meter shows a spike in usage, you can take steps like using less power or water to reduce consumption.
- Request an energy audit – A home energy auditor can identify where your home is losing energy. If you make the energy upgrades recommended by the auditor, you could save between 5 percent to 30 percent on your bills, according to the DOE.
Homeowners and renters are facing higher costs across the board, including on utility bills, due to the war in Ukraine, inflation and other factors. While many homeowners were given a break on utility bills in the pandemic, those reprieves have expired or are about to. As of February 2022, approximately 20.1 million households were behind on utility bill payments, according to the National Energy Assistance Directors Association. With inflation weighing on pocketbooks, these households and more are at risk of long-term debt or utility shutoffs.
Looking ahead, the Energy Information Administration anticipates that electricity generation from renewable sources will continue to rise in the coming years, which in turn will decrease natural gas generation. This has the potential to reduce the amount Americans spend on utilities. For now, curbing energy usage at home can help offset rising costs.