Like most Americans this month, your most recent power bill may have given you a shock. Residential electricity rates have risen fast across the US — more than 30 percent on average since 2020 and almost double the rate of inflation in the past year — with no end in sight.
Your expensive power bill is part of an alarming trend
Here’s why you shouldn’t panic. Yet.
Umair Irfan was a correspondent at Vox writing about climate change, energy policy, and science. He is a regular contributor to the radio program Science Friday. Prior to Vox, he was a reporter for ClimateWire at E&E News.
It’s not great for anyone’s budget, whether you’re a renter or an industrialist. High electricity prices ripple beyond consumers and throughout the whole economy, disrupting manufacturing, construction, transportation, and more.
And of course, electricity prices are a huge political issue. President Donald Trump campaigned on cutting energy prices in half, and now that they’re moving in the wrong direction, he has taken to blaming renewables, the cheapest sources of new generation, and promised $625 million to the ailing US coal industry. Power bills are becoming a hot button in local politics, too, like the New Jersey governor’s race, and you’ll likely see them featured in more political ads.
Given how fast and how high electricity prices have jumped, just how worried should we be? Is this a crisis, something that’s going to put more households in danger of getting their power shut off while driving up inflation and slowing growth? Or is this a return to normal after an era of unusually low prices?
There are several dynamics driving the current power price spike. Rising electricity demand, volatile fuel prices, inflation, tariffs, a slowdown in transmission line construction, and long delays in adding new generators to the power grid are all conspiring to create more expensive utility bills. And these variables aren’t changing direction anytime soon, so unfortunately, your bills will likely rise further.
“All of those factors are combining to create a scenario in which there could be long-lived year-over-year increases in electricity prices,” said John Quigley, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania.
High electricity prices hit the poorest households the hardest since they spend a larger share of their money on their power bills. Power shutoffs due to nonpayment were already rising at the beginning of the year. Close to 80 million Americans have to trade off between paying their electricity bills and other expenses like health care and housing, and utilities are asking their regulators to raise rates further. “To a big segment of households — lower income-, even moderate-income households — it’s already a crisis,” Quigley said.
But there is some important context you have to consider, and some of the big picture trends are actually working to help us spend less on energy and reduce our impact on the environment. How quickly this happens, though, will depend on policy decisions in the near term.
One thing to keep in mind is that electricity is just one form of energy that you use. You may also have to pay for natural gas for heating and cooking, as well as gasoline for your sedan or pickup truck. But many American homes are electrifying, trading gas furnaces for more efficient heat pumps, gas burners for induction stoves, and V8 engines for electric motors. Electric Power Research Institute, a nonprofit think tank, dubbed this combined basket of household electricity and fuel spending the “energy wallet,” using it as a way to track how these trends are changing over time while accounting for fuel switching.
Last month, EPRI released a report calculating that in 2024, the average annual US energy wallet spending was $5,530 per household. Gasoline was the largest slice of that pie, at $2,930 per household, while electricity was $1,850. Adjusting for inflation, overall energy spending has actually held fairly steady since 2000. And prior to 2024, electricity spending was mostly level as well. Perhaps it’s more remarkable that overall energy spending was so stable for so long.
Now, electricity prices are surging in addition to all of the uncorked demand from the Covid-19 pandemic, when the global economic slowdown and pressure from policymakers kept a lid on utility bills.
“I think if we were to repeat this analysis for next year, there would probably be a little bit of an uptick this year, but the data that I’m looking at doesn’t suggest a really significant increase in the historical context,” said Geoffrey Blanford, the lead author of EPRI’s report.
But there isn’t just one story unfolding across the country.
The US has a particularly chaotic energy system. How much people pay to light their homes, stay warm, and get around varies a lot from state to state, and even among neighbors. For example, Texas households tend to spend a larger share of their budgets on keeping their pickup trucks running, while families in Massachusetts spend a greater portion on staying warm.
So, no — we’re not in an energy crisis, but it’s unlikely that your power bills will come down anytime soon. There is some good news though: In the years ahead, Americans are actually poised to spend a smaller share of their incomes on energy overall as technology makes it more cost-effective to shift away from fossil fuels.
“In our forward-looking scenarios, one of the key drivers for change is electrification, particularly light-duty vehicles,” Blanford said. “This tends to actually reduce the energy wallet in real terms per household over time even as you’re spending more on electricity.” Though electric car sales have slowed down in the US, they are still rolling into more driveways. And as homes and appliances become more efficient, that will help reduce energy bills as well. Based on current trends, the average US household energy wallet will shrink by 36 percent by 2050, with state-level declines anywhere from 10 to 50 percent, according to the report.
Looking ahead to the upcoming winter, there are also things that policymakers can do to soften the blow of higher electricity rates for the most vulnerable families. One is to bolster initiatives like the Low Income Home Energy Assistance Program, an initiative Trump wanted to eliminate. Another is to impose generation requirements on major new power users like data centers to run AI models so they aren’t competing with households for existing electrons on the grid. “These data centers, which are kind of ground zero of all of the angst about increasing costs, they should be, without question, required to bring their own power,” Quigley said.
And there needs to be a major push to deploy more generation and upgrades to the power grid, particularly energy storage. Grid-scale batteries have seen breathtaking growth in the past few years, but they’re still a small segment of the energy mix. “There needs to be a huge push to foster battery deployment,” Quigley said. “The quickest way to bring on new generation is to look at solar and storage.”
We’re still facing chaos in the energy industry, and the Trump administration isn’t making things easy for utilities, power providers, and even the fossil fuel industry. But we have many of the tools we need to manage higher utility prices, if we’re willing to invest in them. For us normal people, the US Department of Energy recommends tactics like conducting a home energy audit, using energy-efficient appliances, installing double-pane windows, and sealing gaps in doors.
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