Rising gas prices lead to a 6.6% increase in residential electricity rates from last year
In recent times, electricity prices have become a contentious issue in various states, particularly in New Hampshire, New Jersey, and throughout the PJM Interconnection. The rising costs have sparked a public backlash, increasing pressure on elected representatives and regulators.
According to the Energy Information Administration, natural gas prices are expected to rise to $4/MMBtu in 2022 from $2.20/MMBtu in 2021. This increase, coupled with the growing demand for electricity, seems to account for the bulk of requested utility rate increases. The Institute for Energy Economics and Financial Analysis also predicts that natural gas and the loss of federal support for renewable energy will drive up prices.
The average price per kilowatt-hour (kWh) for all sectors increased by 5.2% over last June, reaching 13.88 cents/kWh. Residential customers experienced the highest increase in prices, followed by transportation, the industrial sector, and the commercial sector.
The governor of Indiana, Eric Holcomb, has called for lower utility rates from investor-owned utilities, stating, "We can't take it anymore." Similarly, the Arizona attorney general has opposed a proposed rate hike and suggested considering lowering rates instead.
The growing demand is not only from residential customers but also from artificial intelligence data centers that have stressed utilities' budgets. Moreover, extreme weather has increased utilities' costs. Natural gas prices at the Henry Hub rose by 22.6% to $3.11 per million British thermal units in June 2022 compared to the same month in 2024.
The Center for American Progress, led by Senior Director of Domestic Climate and Energy Policy, Shannon Baker-Branstetter, predicts that U.S. residential electricity rates could rise by 7% between June 2024 and June 2025 based on utility rate filings. According to their reports, the largest increases in electricity rates were observed in Maine (25.5%), the District of Columbia (23.3%), and New Jersey (21%).
The full impact of tariffs and the loss of clean energy tax credits has yet to show up in electrical rates. However, concerns about affordability could lead to increased scrutiny of utility requests in the future.
At least 102 gas and electric utilities have proposed higher rates effective in 2025 or 2026, according to the Center for American Progress. As these rate increases could potentially raise Americans' total electric bills by $67 billion, the debate over electricity prices is likely to continue.
