Americans are likely to continue paying more for electricity in the coming year, as a combination of infrastructure needs, weather damage, fuel prices and policy decisions keeps pressure on power bills nationwide.
According to projections from the U.S. Department of Energy, the average residential electricity rate is expected to rise about 4% next year, following an increase of nearly 5% in 2025. Electricity is typically the second-largest energy expense for households after gasoline, making sustained increases a growing concern for consumers and policymakers alike.
While data centers have drawn attention as a driver of rising electricity demand, analysts say they are only one factor in a complex picture. Storm damage from hurricanes and wildfires, aging grid infrastructure, renewable energy mandates in some states and fluctuating natural-gas prices have all contributed to higher costs. Utilities are also replacing older or damaged equipment, expenses that are generally approved by state regulators and passed on to customers over time.
Nationally, residential electricity prices increased about 23% between 2019 and 2024, according to a study led by Lawrence Berkeley National Laboratory. When adjusted for inflation, however, rates were largely flat in many states, with sharp spikes concentrated in specific regions and years. The most notable exception was 2022, when global energy markets were disrupted following Russia’s invasion of Ukraine, sending natural-gas prices sharply higher.
Regional differences remain significant. New England and parts of the Middle Atlantic experienced some of the steepest increases due to fuel costs and storm-related repairs, while California saw large inflation-adjusted increases tied to wildfire mitigation, insurance costs and shifts in how rooftop solar expenses are shared among customers. In contrast, states such as North Dakota saw inflation-adjusted declines, in part because new industrial customers helped spread grid costs across higher electricity sales.
The Energy Information Administration projects the average U.S. residential electricity rate to reach about 18 cents per kilowatt-hour next year, up from roughly 17.3 cents this year. Regions expected to see increases of at least 5% include much of the East Coast from New York to Florida, as well as parts of the Midwest and Appalachia.
Utilities are also planning major long-term investments. Industry estimates suggest investor-owned utilities will spend more than $1 trillion between 2025 and 2029 on transmission, distribution and generation upgrades, roughly double the amount invested over the previous decade.
Source: wsj