“Unpacking the Surge: Exploring the Rising Electricity Costs for American Families”

Electricity costs are quickly increasing for American households, despite a general decrease in inflation.

As reported by the Consumer Price Index for May 2025, electricity prices have jumped 4.5% over the past year, nearly twice the overall inflation rate for all products and services.

The U.S. Energy Information Administration (EIA) projected in May that retail electricity costs will surpass inflation rates until at least 2026. Since 2022, these prices have already risen more quickly than the general inflation rate.

“It’s a straightforward situation: It revolves around supply and demand,” explained David Hill, executive vice president of energy at the Bipartisan Policy Center and former general counsel of the U.S. Energy Department.

According to economists and energy experts, several factors are at play.

In broad terms, the rising demand for electricity and the shutdown of power-generating plants are outpacing the growth of new electricity sources added to the grid, according to Hill.

In 2023, U.S. consumers spent an average of about $1,760 on electricity, based on federal data from the Bureau of Labor Statistics cited by the EIA.

Electricity costs can vary significantly depending on location and usage. For instance, the average U.S. household paid around 17 cents per kilowatt-hour in March 2025, but prices ranged from roughly 11 cents per kWh in North Dakota to about 41 cents per kWh in Hawaii, per EIA data.

Some areas will experience steeper increases in electric bills than others, according to experts.

In regions like the Pacific, Middle Atlantic, and New England, where consumers already pay higher rates per kilowatt-hour, residential electricity prices may rise faster than the national average, according to EIA forecasts.

“Electricity pricing is determined regionally, unlike oil prices which are global,” stated Joe Seydl, a senior markets economist at J.P. Morgan Private Bank.

The EIA anticipates average retail electricity prices to increase by 13% from 2022 to 2025.

Consequently, the average household’s annual electricity bill could rise by about $219 in 2025 compared to 2022, from around $1,683 to approximately $1,902, based on a CNBC analysis of federal data—assuming no change in usage.

Households in the Pacific region, however, are expected to see a 26% rise during this timeframe, reaching more than 21 cents per kilowatt-hour, according to EIA estimates. In contrast, households in the West North Central region might experience an 8% increase, bringing prices to nearly 11 cents per kWh.

Nonetheless, some trends in electricity demand are becoming apparent on a national scale, not just at a regional level, experts noted.

According to Jennifer Curran, senior vice president of planning and operations at Midcontinent Independent System Operator, electricity demand growth has been “minimal” in the past years due to advancements in energy efficiency. MISO serves 45 million people across 15 states.

However, U.S. electrification surged with the adoption of electronic devices, smart home technologies, and electric vehicles, Curran stated.

Future demand is expected to skyrocket, particularly due to data centers, which experts believe are significant contributors.

Data centers house extensive networks of computer servers and other IT equipment that support cloud computing, artificial intelligence, and various technology applications.

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Electricity usage in data centers tripled to 176 Terawatt-hours over the decade ending in 2023, according to the U.S. Energy Department, with projections indicating that this could double or even triple by 2028.

By 2028, data centers could consume up to 12% of the total electricity in the U.S., up from 4.4% in 2023, the Energy Department stated.

Curran described them as “energy hungry,” noting that the demand growth has been “unexpected” and largely driven by support for artificial intelligence.

By 2030, the U.S. economy may require more electricity for data processing than for manufacturing all energy-intensive goods combined, like aluminum, steel, cement, and chemicals, according to the International Energy Agency.

Experts predict that continued electrification among households and businesses will further raise electricity demand.

The U.S. is shifting from fossil fuels like coal, oil, and natural gas to cut greenhouse gas emissions.

This means more homes might opt for electric vehicles over gasoline cars, and electric heat pumps instead of gas furnaces—technologies that are more efficient but increase overall demand on the electric grid, experts noted.

Population growth and the energy-intensive nature of cryptocurrency mining are other factors contributing to rising demand, as noted by Hill from the Bipartisan Policy Center.

As electricity demand grows, the U.S. also faces challenges with power transmission and distribution, according to Seydl from J.P. Morgan.

He emphasized that rising electricity prices are fundamentally about improving infrastructure. “The grid is aging,” he stated.

Michael Cembalest, chairman of market and investment strategy at J.P. Morgan Asset & Wealth Management, noted in a March energy report that the growth of transmission lines has stalled and is significantly below Energy Department targets for 2030 and 2035.

Furthermore, a shortage of transformers—equipment used to regulate voltage across the grid—adds to the challenges. According to Cembalest, delivery times for transformers have increased from about four to six weeks in 2019 to two to three years now.

Cembalest pointed out that “half of all U.S. transformers are approaching the end of their useful life and will need replacement, along with those in areas affected by hurricanes, floods, and wildfires.” He also mentioned that transformers and other transmission equipment have seen some of the highest inflation rates among all wholesale goods in the U.S. since 2018.

Additionally, many older fossil-fuel-based power plants have been decommissioned, and the pace of bringing new energy capacity online has been relatively slow, according to Hill. Rising costs for equipment and labor have made building new facilities more expensive, he noted.