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Cost of electricity rising like summer heat

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With the nation's demand for electricity soaring, the cost of staying cool this summer is on the rise.

As many consumers will find out when they get their utility bills, gasoline is not the only form of energy that costs more. Even before air conditioners were cranked all the way up, many utilities were predicting that prices would rise 7 percent or more. Now, with the heat and humidity of August yet to come, utility companies aren't sure how much more consumers will pay - except to say they will.

An indication of how much some utilities are paying to meet the demand: The price of electricity on the spot market has doubled in two months.

"Spending on electricity is the highest as a share of total consumer spending since the California electricity crisis in 2000," says Mark Zandi, chief economist at "Total spending on both electricity and energy is at a record high."

The higher cost is not a good sign for the economy. Paying for the extra kilowatt hours will hit consumer pocketbooks later this summer or early in the fall - one of the peak retail periods, when many families could be wandering the aisles for back-to-school purchases. And the cost of beating the heat is especially difficult for senior citizens and the poor, prompting calls for federal emergency funds.

In a normal summer, electric bills rise as individuals use more air conditioning. But this summer has been so hot that to meet the soaring demand, many utilities have had to turn to more expensive power plants, known as "peak generating plants." Instead of relying on coal or nuclear fuel, many of these power producers use more expensive oil or natural gas to power their turbines.


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