May 06, 2022

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Rising Fuel Costs

Soaring fuel costs have become an unfortunate reality for our nation. We feel the effects at the gas pump, grocery store, and in almost every other aspect of our daily lives. In recent months we have seen the price of gasoline make a steady climb, exceeding $3 per gallon at the pump. Other fossil fuels – like natural gas – have also experienced drastic cost increases.

So why are fuel costs rising so dramatically?

Several factors influence fuel costs, including supply constraints, global demand, post-pandemic economic growth, decreased domestic supply, and natural disasters – such as hurricanes in the Gulf of Mexico. Gasoline, diesel fuel, natural gas, propane, and coal all go up in cost as a result of these types of events, which in turn cause electricity costs to rise.

Natural gas is a key fuel consumed by wholesale electric generating utilities. U.S. natural gas inventories ended September 2021 at about 3.3 trillion cubic feet, or 8% less than the five-year (2017–21) average. Withdrawals from storage this past winter have been above the previous five-year average due to colder-than-normal temperatures, increased exports to Europe and elsewhere, and increased natural gas used for electricity generation.

In recent years, in certain times and regions of the country, natural gas demand has grown faster than available supplies can be delivered. Such tightening of the market has resulted in dramatic price volatility. According to the Electricity Information Administration, natural gas consumption in the U.S. has steadily increased since 1997. Increased use of natural gas for electric generation is a significant reason. In large part, the electric utility industry has turned to natural gas to meet additional needs that have come with the retirements of coal-fired power plants. Consumption of natural gas in the United States is growing at a faster rate than for any other primary source of energy.

Carroll Electric Cooperative is impacted by these high fuel costs, much like consumers. In April, the price of natural gas purchased by Arkansas Electric Cooperative Corporation (AECC), our wholesale power provider, was double the price paid last year at this time and over triple the price paid in April 2020.

In 2019, Carroll Electric began spreading fuel cost fluctuations over a rolling 12-month period. This simply means fluctuations in fuel costs are not recovered from electric bills in a single month. Instead, these costs are gradually phased in and collected from electric bills over a 12-month period. This eliminates the highs and lows Cooperative customers used to experience on a month-to-month basis. 

Because you are served by a not-for-profit electric cooperative, you can rest assured that your electric energy is provided at the lowest feasible cost. In the face of rising fuel prices, Carroll Electric Cooperative will take every opportunity to provide you with the best value for your dollar.