Editorial: Economy’s tough test

Friday, Sept. 23, 2005 | 9:03 a.m.

This week the Nevada Public Utilities Commission approved a 3.7 percent rate hike for customers of Nevada Power. This means that the average residential customer's electric bill will go up an extra $4.63 a month. While such a hike should be manageable for most residents of the Las Vegas Valley, the news on the horizon isn't so good. Commissioner Jo Ann Kelly said that continuing increases in the price of natural gas, the primary fuel used to run electric power plants in the West, could result in electric bills that are 20 percent higher next year.

The increase in the cost of natural gas and electricity comes on top of a recent spike in the price of gasoline, which hit an all-time high shortly after Hurricane Katrina caused the temporary closure of many oil refineries in Louisiana. Four refineries there are still shut down, and there is a growing concern that Hurricane Rita could create even more havoc if it causes devastation along the coast of Texas. The Associated Press reports that there are 26 refineries in the path of Hurricane Rita, and they account for more than 25 percent of the nation's refining capacity. Even if there isn't any damage to the refineries, including those that have been shut down in anticipation of Hurricane Rita, energy analysts say it could still take several days to start them up again. This pause in activity could put a crimp on supplies and cause prices to rise.

Prior to Hurricane Katrina, gasoline prices had been steadily climbing for a year without any appreciable negative impact on the U.S. economy. But the latest increase in energy costs overall, coupled with concern about the devastating consequences of Hurricanes Katrina and Rita, has shaken consumer confidence. This could result in a real drag on our economy, two-thirds of which is estimated to be driven by consumer spending. Many retailers already are saying the upcoming holiday season could be rough on them. The next few weeks and months will tell us how resilient our economy is -- not just dealing with an increase in energy costs but also in rebounding from at least one, and possibly two, natural disasters.