Retail electricity prices have increased faster than the rate of inflation since 2022, and the U.S. Energy Information Administration expects them to continue increasing through 2026, based on forecasts in its Short-Term Energy Outlook.
Parts of the country with relatively high electricity prices may experience greater price increases than those with relatively low electricity prices, EIA said on May 14.
Overall, U.S. energy prices rapidly increased from 2020 to 2022 as economic activity recovered after the worst of the pandemic and Russia’s invasion of Ukraine interrupted energy supply chains. Since 2022, nominal prices for many fuels have declined, particularly for those such as gasoline and heating oil that are tied more closely to crude oil prices, which are affected by international markets. Electricity prices, though, have continued a steady increase, EIA said.
"Although we expect the nominal U.S. average electricity price to increase by 13% from 2022 to 2025, our forecasts for retail electricity price increases differ across the country. Residential electricity prices in the Pacific, Middle Atlantic, and New England census divisions—regions where consumers already pay much more per kilowatthour for electricity—could increase more than the national average."
By comparison, residential electricity prices in areas with relatively low electricity prices may not increase as much, EIA said.
Retail electricity prices include the cost of generating, transmitting, and delivering electricity to ultimate customers, as well as taxes and other fee, the agency noted.
"In recent years, electric utilities have increased capital investment to replace or upgrade aging generation and delivery infrastructure, among other factors. Between 2013 and 2023, electricity prices closely tracked inflation, but we expect increases in electricity prices to outpace inflation through 2026."
Utility spending on electricity distribution has surpassed spending on electricity transmission and production, according to EIA's analysis of utilities’ financial reports to the Federal Energy Regulatory Commission.
The generation-related portions of retail electricity typically lag changes in wholesale spot prices of electricity generation fuels such as natural gas and coal depending on the customer contract agreements.
