Consumers Paying Billions in Fees on Their Utility Bills to Cover Repairs
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What is the main topic discussed in this episode?
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Here's your money briefing for Friday, December 16th.
What extra charges are appearing on my utility bill because of recent storms?
I'm J.R. Whalen for The Wall Street Journal. The cost of using electricity has risen along with nearly every other household expense. But look a little more closely at your monthly bill. Utility companies are tacking on extra costs as a result of more frequent severe weather patterns and natural disasters.
So it's almost like mortgages for your house that get attached to your utility bill. And what's happening is that your utility is sort of passing through that cost to you.
Our energy reporter Jennifer Hiller has been tracking the numbers and will ask her about these extra charges and the impact they're having on households. That's after the break.
How much weather-related utility debt have consumers been saddled with recently?
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Why have securitized utility repair costs surged after 2021?
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Severe weather and natural disasters have wreaked havoc on America's utility systems in recent years. And as electric and gas companies rebuild to recover from the damage, they're passing those costs on to consumers. So what does this mean for your monthly bill? WSJ Energy reporter Jennifer Hiller joins me with more. Hey, Jennifer, thank you for being with us.
Thanks for having me.
So Jennifer, how big of an issue has this become? How much are consumers on the hook for?
Just in the last year, we've seen about $12.4 billion of weather-related utilities debt that customers are on the hook for get securitized. And there's more to come. We only had about $7 million of this kind of debt issued between 2007 and 2021. So this is a pretty enormous increase.
How does securitization make customers pay utility repair costs over decades?
But utilities have been dealing with severe weather for years. Why are these numbers growing so quickly?
We've just had a lot of events back to back. And the winter storm in particular, a couple of years ago that hit Texas and a lot of other states was particularly damaging in terms of fuel costs. And so that's a really large expense that's coming through the system. And we've also had states like Louisiana that got hit with a really unfortunate number of hurricanes in a row a few years ago, and we've had things like wildfires. So we've just sort of been on a roll of severe weather, and that all has to get paid for now.
Okay, so how does this work? What is the consumer actually paying for that's driving up their monthly utility bills?
Basically what happens is a long-term bond gets sold. So an investor will come in and purchase that bond, and then over a really long period of time, utility customers sort of pay that back. So maybe it's a few dollars a month, maybe it's $10 a month, but it's paid over potentially a really long period of time, 10 years, 20 years, 30 years in some cases. So it's almost like mortgages for your house that get attached to your utility bill. And what's happening is that your utility is sort of passing through that cost to you. It's not a debt that is attached to the utility. It's a debt that's actually the responsibility of the ratepayers.
How does securitization differ from utilities borrowing directly or other financing?
So how does this method of buying a bond compare to other ways a company might borrow money?
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:38
2
What extra charges are appearing on my utility bill because of recent storms?
0:38–1:14
3
How much weather-related utility debt have consumers been saddled with recently?
1:14–1:39
4
Why have securitized utility repair costs surged after 2021?
1:39–2:37
5
How does securitization make customers pay utility repair costs over decades?
2:37–4:07
6
How does securitization differ from utilities borrowing directly or other financing?
4:07–6:20
7
What is the real impact of higher utility fees on household budgets?
6:20–7:09
8
Can consumers avoid or reduce these long-term utility repair charges?
7:09–7:42
Speakers
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