The political cost of America’s surging electricity bills

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0:30If you live in the United States and you got a bill in the mail recently... The climbing cost of utility bills across our region just as that winter cold sets in. In the district, gas customers are facing a 13 % hike. You might have noticed your electricity is a lot more expensive. According to one estimate, electricity rates are on the rise year to year in most states. And that's got political ramifications for a president who ran on making things cheaper.

1:00Myles McCormick: I will cut the price of energy and electricity in half.

1:12This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about everything happening in U.S. politics, finance, and the economy. I'm Mark Filippino, and this week we're asking, How are skyrocketing energy prices changing U.S. politics? Joining me from New York is Martha Muir. She's the FT's U.S. energy reporter. Hi, Martha. Hi, Mark. And we've also got Miles McCormick, who used to be our U.S. energy reporter, but now he's our U.S. economics correspondent here in Washington. Hi, Miles. Hey, Mark. So, guys, the temperature has been below freezing for a while now. I don't know about you guys, but my heat is cranked.

1:46Yeah? Yeah, same thing. Totally. Absolutely. I'm not looking forward to my electricity bill. Exactly. And that's exactly what I'm getting at. So I'm not surprised to see energy bills are up right now. But Martha, how far back does this energy crunch go? Well, it's hard to say because Russia's invasion of Ukraine was an incident which pushed gas prices right up. Back in 2022, yeah. Yeah. And then general tariffs and inflation are making bills go up. But it's really, I guess, kind of recently that a lot of focus has been on it because of the rise of electricity demand due to data centers. And it's also kind of the increasing amounts of extreme weather events, which are prompting utilities to make repairs and fortify the grid.

2:29And then those prices are getting passed on to consumers. Give me some numbers here. How expensive has energy gotten? So since Trump was elected, bills on average have gone up by about 12 percent. But that kind of obscures the pressure points. Like in New Jersey, bills have gone up by about 23 percent. In Ohio, it's around 18 percent. And so you're seeing some really big swings across the country. And what are we talking about when we talk about energy going up? What exactly is causing this spike in prices? It varies across the country, but largely the biggest spike is due to transmission and distribution.

3:01And that's the kind of wires and poles that feed electricity from the power plant to your house. And the price of that has gone up a lot because of general inflation, tariffs, etc. But also because utilities are having to spend a lot on kind of getting new power to the new places it's needed, like data centers. But also because they need to weatherproof them to kind of protect them from collapsing when, you know, the U.S. sees increasing amounts of hurricanes and wildfires. So, Miles, we've kind of gotten a sense of why things have gotten this way. But, you know, you used to be the energy reporter for the FT, as I mentioned.

3:36Are there any themes that we can draw from over the past couple of years?

3:40Myles McCormick: Yeah, well, I suppose one of the big things is just this kind of pendulum swing that we've had politically that has hurt America's ability to, like, generate increasing levels of electricity at a time when demand is surging. I mean, under the Biden administration, there was a sense that it was, I don't know, open season on some of the fossil fuel guys. There was kind of litigation left, right and center that made it very difficult to build new fossil fuel generation plants. And now that pendulum is kind of like swung under Trump, who has kind of launched all a war on some of the renewables guys.

4:17Myles McCormick: So it's increasingly difficult to build wind farms, for example. So you've got this kind of situation playing out in the background where it's increasingly difficult to build the stuff that makes electricity at a time when demand for that electricity is gradually ratcheting up and ratcheting up. Yeah. And just to add to that, it's not just that President Trump has an obvious distaste for renewable energy sources. He's also promoting some kinds of electricity generation, which are a lot more expensive, like coal. The Department of Energy has recently ordered a bunch of coal plants, which were near their natural retirement date because they weren't very economic, to stay open.

4:55And, you know, by some estimates, that's going to cost the ratepayers billions of dollars in the utility bills. Now, guys, I've alluded to the fact that there's political ramifications to the much higher energy costs. Miles, what are people saying about these prices in Washington?

5:13Myles McCormick: Well, it's front and center. And like Mark, you and I have spoken on this podcast before about how much of an issue affordability has come for President Trump. I mean, it was kind of the heart of the platform that he ran on. He said he was going to get into office, bring prices down across the board. And a core part of his message on the campaign trail was that he was going to focus his efforts on bringing energy prices down. It was all this kind of narrative of drill, baby drill, kind of unleashing American energy dominance, etc., etc. So while, I mean, across the board, prices are still going up, inflation slope prices are still going up.

5:51Myles McCormick: While that's a general problem, it's a specific problem when it comes to energy bills, purely because it was such a focal point of what the president promised to address during the election. And I mean, yeah, we've seen it playing out lately. I mean, in some of the recent offseason elections that we've had, Democrats have won partly because of people's frustration over affordability and with power prices specifically. It's a sore point for the administration, and there's kind of a scramble to try and address it as we kind of peer down the barrel of midterms rapidly approaching later this year.

6:30How is the administration addressing some of these things?

6:34Myles McCormick: Well, there's been a few bits and pieces. And something we should probably mention that we didn't go into detail in earlier is like one of the big reasons for the recent surge in power costs is AI. and these like massive data centers that are needed for AI. And they hoover up power. And as a result of hoovering up power, they jack up prices. So that has been at the heart of how the administration has been trying to tackle the issue. The president's repeatedly said that people shouldn't be paying more for their power bills as a result of AI and as a result of data centers, which, I mean, incidentally, he's kind of promoting on the other hand, fueling big tech and the stock price gains that we've seen there.

7:19Myles McCormick: So he's come out and said that people shouldn't be paying more. But in terms of more kind of material actions, there was a deal struck with Microsoft where Microsoft said it would cover the costs of its AI generation power demand. Yeah, I remember that. It would pay its way, right? Yeah, exactly. Exactly. And that's kind of like, it's this standoff between kind of big tech and big money on one hand and ordinary kind of consumers that are paying more for their electricity. And Martha will know more about this, but there was this recent auction with PJM, one of the big grid operators. And the idea, as I understand it, was that some of the proceeds of that auction would go to kind of trying to build out additional power generation.

8:02Myles McCormick: So, yeah, the administration is kind of trying to stick its oar in how effective it can be at a time of, as I say, kind of surging power demand on the back of this AI boom is another question. Yeah, I think you're totally right to bring up the question of how effective it can be, because the answer is it's pretty limited. Because responsibility for electricity and, you know, the prices that consumers ultimately pay is very fragmented across the country. And I guess to go back to your point about data centers, that's a leading cause of bill increases in places like the Northeast and the Midwest.

8:35But over in California or the South, like parts of Florida, North Carolina, the cause is more kind of a hangover of extreme weather. And so what's a solution that might work in one region might not do anything for you in another one. The other thing to say, I guess, about the PJM power auction, the idea is that tech companies that are building data centers pay directly for the cost of new power generation. That brings down rates for everybody else. But the president really doesn't have the authority to make that happen. The language used in that order was that he, I think it was that he directs or that he is calling for it to happen.

9:11that would be in the hands of PJM, which is probably not inclined to make that happen just at his directive because they weren't even involved in the announcement. They weren't invited to the meeting where it was decided. And the utilities and independent power producers probably don't want that to happen. Martha, you spent some time talking with business owners who are really feeling the brunt of these energy spikes. What are they saying? Yeah, so it's frustrating for them because I guess if you're a domestic manufacturer, like one of the guys I spoke to who owns a metal stamping company, you're going to be fully on board with President Trump's agenda to reshore domestic manufacturing.

9:49But when that happens, if you can't afford to pay your energy bills, then I guess what's the point? And so there's definitely frustration with President Trump for kind of not allowing every electron possible on the grid by stamping out renewables. But then there's also a lot of frustration with utilities. There's kind of a corporate greed narrative happening that they're being incentivized to build as much as possible and then pass on the cost to consumers, regardless of whether, you know, a lot of that infrastructure is necessary. Because we have barely scratched the surface on oil, which, you know, is such a complex issue in terms of domestic drilling versus the consequences of OPEC decisions that the administration has no control over.

10:32Then there's the whole Venezuela oil saga. I mean, where does oil play into all of this?

10:37Myles McCormick: So it's a slightly different kind of piece of the puzzle. I mean, still comes under this overall energy umbrella. And as I say, yeah, it was a big part of what President Trump promised to bring down the price of on the campaign trail. But where we see the price of oil kind of factoring into people's day to day costs is in terms of what they pay at the pump when they're fueling their car with gasoline slash petrol. Yeah. Thank you for that, by the way. Thank you for including gasoline and translating that for me. Yeah, no, no. One of the key things I've learned since coming over to the States is that, yeah, that one definitely needs to be translated back.

11:11Myles McCormick: So the price here has come down. The president often kind of points to this as evidence of his energy policies to kind of unleash domestic drilling working. But as you say, there's so much stuff that feeds into the price of oil and crude prices are set internationally. traditionally and there's just been a scenario where kind of OPEC have increased production over over the last few years. Which would bring prices down. Which would bring prices down exactly because you've got greater supply and therefore therefore prices come down. So I suppose my point here is that yes oil prices are down and as a result prices at the pump are down and that's a good thing for Donald Trump and of course as a politician he's claiming credit for it but But the degree to which he's got influence over it is a bit more limited.

11:59Because, I mean, even his kind of key attempt to bring prices down was to encourage U.S.

12:06Myles McCormick: oil producers to drill baby drill, to pump more oil. And they don't really want to do that because prices are already low and they wouldn't make that much money. So, I mean, we're going to have U.S. production falling this year. So, yeah, the factors that are driving oil lower are a little bit more international than maybe the president would have you think. All right, guys, we're going to take a quick break. We will be back in a moment. Thank you.

13:01Listen at schwapp.com slash Washington Wise.

13:08All right, we're back. Guys, Miles mentioned earlier that last year's off-year elections were really centered on the affordability crisis. And I'm wondering if we can pick this apart a little bit. How has this battle over energy factored into the elections in New Jersey and the like? Yeah, so if I can take this one. Yeah. Governor Mikey Sherrill of New Jersey really came out swinging with this because New Jersey has been an absolute hotspot for electricity prices increases. And she ran pretty heavily on this, promising to freeze rates on day one of taking office. And already before her victory, a lot of people were kind of questioning whether that was possible because the governor of New Jersey doesn't have a ton of direct say over how far bills rise, both because the cost of generation and transmission is split and she only has control over one of them, but also because authority for allowing utilities to raise bills is with public commissioners.

14:06The utilities come to them and say, we want to increase by X amount, and then they have the authority to say yes or no. So really what the governor is able to do is make recommendations, but she can't mandate it. What she has done is offer credits to households in order to offset increases. And so it might be that if you're a New Jersey and you open your bill and because of the impact of the credits, your bill doesn't rise anymore. But obviously, if the increase in your bill exceeds the amount of credits she's able to offer, then it doesn't really qualify as a rate freeze. And so I guess it's an early indication that electricity costs can be a winning issue for Democrats.

14:44But whether or not politicians like Mike Sherrill are able to deliver on those promises kind of remains to be seen.

14:50Myles McCormick: I think Martha raises like a really important point here in terms of the control that politicians have over a lot of this. And this applies not just to the kind of electricity bills question, but to inflation and affordability more broadly. I mean, like we were saying earlier, Donald Trump was kind of swept his election victory, largely on the back of kind of bumper inflation that we'd seen during Joe Biden's presidency, which Biden wasn't totally responsible for. Yet voters get frustrated when things are more expensive and that leads them to look for kind of other political options. And now the shoes on the other foot that voters are getting frustrated about high prices in electricity and elsewhere.

15:34Myles McCormick: And they're blaming Donald Trump for it when in reality, the president's control or ability to bring prices down is somewhat limited. So you've got this kind of like, I don't know, this detachment, I suppose, that it's without a doubt one of the key issues that decides elections and probably the key issue that will decide the midterms. But in terms of what the kind of powers that be can do about it, it's a lot more limited. Do you think we'll see any consequences in the midterms coming up this year? Yeah, I absolutely do. I think this will be the deciding issue. I mean, inflation, affordability as a whole, and this kind of electricity piece as a significant part of it.

16:16Myles McCormick: If you look at any of the polling that's come out recently, affordability, cost of living, is consistently what voters put at the top of their list of frustrations with the status quo and with the current government. So unless the administration can pull some kind of rabbit out of the hat on this, Democrats are going to pounce on it. they're going to say to voters that your prices are going up under President Trump. That frustration is going to lead to an enormous backlash against Republicans and could ultimately be the deciding factor in terms of who has control of Congress as we go into the second two years of Trump's presidency.

16:54One thing I'd add to that, though, is that there are Republicans across the country who are kind of trying to distance themselves from President Trump's AI and ergo energy agenda. Like we've had Governor Ron DeSantis and Senator Josh Hawley be quite critical of, I suppose, the kind of impact on humanity of AI, but also speaking about the impact that it could have on energy costs. And so obviously, if you're a Republican who's running for office, the last thing you want to do is probably aggravate Donald Trump. But there is a space opening and, you know, the general public has not really bought into AI in the way that they may have done other technological innovations.

17:32like there's a lot of people who really like making pictures with JackTBT, but there's a lot of people who are kind of weirded out by some of the more unsavory aspects of it. I mean, just look at the market this week, right? There was a huge sell-off over the concern of AI disrupting so many industries. Right, and I think it's tough to get people to accept that their electricity costs are going to go up for the sake of this technology, which, you know, a lot of people are frankly not sold completely on the benefits of, But I think posing Trump on anything is tough. But I think that on this issue, there might just be enough kind of room to get people on side where maybe you're somewhat insulated.

18:12Martha, did any of the people that you spoke to for the story about this topic say this issue would be the thing that ends their support for the president or Republicans generally? No one I spoke to said that directly. I spoke to a lot of people who are already really unhappy. I guess the thing I would say is that people are very unhappy with President Trump about this, but it's not necessarily clear that other people that they could support have the answers. I think what a lot of people are feeling is pretty hopeless. And so I guess if that gets people to stay at home and not vote Republican, then that's one thing.

18:47But it's not necessarily clear that it's an issue that the Democrats can capitalize on, at least not yet. All right, guys, I think this is where we're going to stop. I want to thank both of our guests. Martha Muir is the FT's U.S. Energy Reporter. Thank you so much, Martha. Thanks, Mark. And Miles McCormick, the FT's U.S. Economics Correspondent. Thanks, Miles. Thanks, Mark.

19:13This was Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in our show notes. Our show is produced by Henry Larson. It was mixed by Sam Giovinco. We had help this week from Lauren Fedor, Special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our executive producer is Topher Forges, and the FT's global head of audio is Cheryl Brumley. Original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times. Thank you.

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