Why Are Electricity Rates Rising—and Will They Keep Increasing?
Electricity rates have been steadily increasing across the U.S., and, unfortunately, all signs point to this continuing trend. Whether you’ve
Electricity rates have been steadily increasing across the U.S., and, unfortunately, all signs point to this continuing trend. Whether you’ve
Electricity rates have been steadily increasing across the U.S., and, unfortunately, all signs point to this continuing trend.
Whether you’ve been shocked by a higher-than-usual electric bill, are having trouble keeping up with payments, or are simply trying to understand the forces driving these increases, it’s important to know why prices are rising—and what this could mean for the future.
Additionally, it’s important to review a few basic things you can do to help keep your electricity bills as low as possible.
Let’s start with the most obvious question:
Electricity prices don’t just increase because someone decides they should, but rather, based on market conditions, weather patterns, and supply and demand.
The recent rise in electricity prices is due to several factors, including an aging utility infrastructure, upgrades to support new energy demands, and the push for cleaner energy sources, which requires significant investment.
According to a recent article from the New York Times, aging equipment and the need to reduce greenhouse gas emissions have led to a steady increase in electricity rates across the country.
As power companies upgrade their infrastructure and shift to more sustainable energy sources, these costs are passed down to consumers.
But that’s not the whole story.
Another factor driving up U.S. electricity prices is the growing demand for power.
Over the past year, utility companies have nearly doubled their forecasts for the amount of additional power needed by 2028.
This spike in demand is fueled by several factors, including:
In short, in addition to grid upgrades and investments in generating renewable energy, the U.S. electric grid faces an unprecedented demand for electricity, and power companies are scrambling to keep up.
The US Added 1.2 Million EVs To The Grid Last Year
“This share of the US’s power used by data centers will more than triple, according to Goldman Sachs”
So far, we’ve talked about some pretty basic stuff, but as I said at the beginning of this article, many factors contribute to a significantly higher electric bill.
Beyond demand, transmission costs are a significant contributor to rising electricity prices.
Utility Dive reported that electricity transmission costs continue to rise faster than the general inflation rate, further driving up bills.
The U.S. Energy Information Administration (EIA) predicts that residential customers will pay about 16.23 cents per kilowatt-hour (kWh) by 2025, the highest level in nearly 30 years.
Federal policies aimed at expanding the grid and electrifying transportation, along with efforts to reduce emissions, are placing additional strain on the system. As a result, transmission costs—the costs of maintaining the grid and ensuring there is always enough power on hand to meet the highest potential demand at any given time—go up.
With more electric vehicles on the road and a shift toward renewable energy, the cost of maintaining and expanding the grid is expected to keep rising.
Earlier, I mentioned that trying to reduce carbon emissions is a major contributing factor, but I want to explain that a bit better because the shift to more renewable energy sources is a bit of a mixed bag.
While renewable energy sources like wind and solar are key to reducing greenhouse gas emissions, the transition has been far from smooth and is very costly.
What many customers adon’t realize is that as of a few years ago many customers are paying additional “renewable energy fees” on their electric bill, in addition to the energy they use and transmission fees, to help the utility companies invest in renewable energy.
Many traditional power plants, such as coal and natural gas, that provide consistent energy are being retired in favor of cleaner alternatives.
But renewables are still in the process of scaling up, and the infrastructure to store and transmit renewable energy isn’t fully in place.
This imbalance between retiring traditional plants and ramping up renewable energy sources has created reliability issues, especially during extreme weather events.
As a result, prices are increasing because power companies need to invest heavily in building new transmission lines and infrastructure to support the growing share of renewable energy.
Even though natural gas prices have fallen in recent months, analysts warn that this may be short-lived. Historically, natural gas prices have been as low as today for the last four times, followed by 36 months of surging prices.
Since natural gas is still the largest source of electricity generation in the U.S., fluctuations in its price have a direct impact on electricity bills.
There are two main reasons supporting an increase in Natural Gas rates in the future: The first is that the number of operational gas rigs has been significantly decreasing, creating a less-than-average total amount of natural gas on hand. Second, there has been a significant increase in LNG exports overseas and to Mexico, further depleting our supply.
And what happens when supply is low, and demand is high?
While lower gas prices might offer some temporary relief, most experts agree that it won’t lead to significant long-term reductions in electricity costs. Instead, we’re likely to see continued volatility as global demand for natural gas remains high.
The short answer is probably yes—electricity prices are expected to continue rising. Several factors contribute to this outlook:
The bottom line?
We’re heading into a future where electricity will be more expensive, and businesses and consumers alike will need to plan accordingly.
While it’s clear that electricity rates are on the rise, there are steps you can take to protect your business from the worst of the increases:
Electricity prices are increasing and are expected to keep rising as demand grows, infrastructure ages, and the energy landscape shifts.
While this might sound like bad news, there are ways to mitigate these rising costs, especially if you take proactive steps now. Whether it’s working with an energy consultant, improving efficiency, or investing in renewables, you can stay ahead of the curve and protect your business from the brunt of these price hikes.
If you’ve been surprised by your electric bill lately, you’re not alone. The good news is, there are solutions out there to help you manage these rising costs and plan for a more energy-efficient future.
James Lightning
Senior Editor, Energy Professionals
(844) 674-5465
info@energyprofessionals.com
Energy Professionals is committed to finding its customers the best possible rates on electricity and natural gas. Tell us your location and service type and our energy manager will connect you to the most competitive offers.
Switching to an alternate supplier is easy. There is no chance of service disruption, and you'll continue with your current utility for energy delivery and emergency service. Take a few minutes to discover your best offers, and enjoy the benefits of retail energy in your home or business.
1. Energy Type
2. Service Type
3. Zip Code
We believe that knowledge is power. Here’s a free e-book that provides business solutions to reducing energy costs.
Download E-Book Free Energy Audit
