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Despite the overall cooling of inflation, electricity prices are rising rapidly for US households.
According to the May 2025 Consumer Price Index, electricity prices have risen 4.5% over the past year. This is almost twice the inflation rate for all products and services.
The U.S. Energy Information Administration estimated retail electricity prices would exceed inflation until 2026. He says prices have already risen faster than broad inflation since 2022.
“It’s a very simple story, it’s a supply and demand story,” said David Hill, executive vice president of energy at the Center for Bipartisan Policy and a former advisor to the U.S. Energy.
Economists and energy experts said there are many contributing factors.
At high levels, increased electricity demand and deactivation of power generation facilities have surpassed the pace at which new generations are being added to the electric grid, Hill said.
Prices are local
According to the EIA, which cited federal data from the Bureau of Labor Statistics, U.S. consumers spent an average of around $1,760 on electricity in 2023.
Of course, costs vary greatly depending on where the consumer lives and the amount of electricity they consume. According to EIA data, the average US household paid about 17 cents of electricity per kilowatt-hour electricity in March 2025, ranging from about 11 cents per kWh in North Dakota to about 41 cents in Hawaii.
Experts say households in certain regions will likely rise faster than others.
According to the EIA, home prices in areas where consumers already pay more electricity per kilowatt-hour (where consumers already pay more electricity per kilowatt-hour), the Pacific, Midwest and New England regions are
“Electricity prices are regionally determined, not globally determined like oil prices,” said Joe Seydl, senior market economist at JP Morgan Private Bank.
The EIA expects average retail electricity prices to rise 13% from 2022 to 2025.
That is, according to CNBC analysis of federal data, the average household’s annual electricity bill could rise by about $219 in 2022, potentially increasing from $1,683 to about $1,902. It assumes their use remains the same.
However, prices for households in the Pacific region rose 26% over that period, up to more than 21 cents per kilowatt-hour, the EIA estimates. Meanwhile, households in the Northwest Central region have seen prices rise by 8% for that period, reaching around 11 cents per kWh.
However, certain electricity trends are occurring not only in the region but across the country, experts said.
Data centers are “energy hungry”
The QTS Data Center Complex is currently under development in Fayetteville, Georgia on October 17, 2024.
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Increased energy efficiency has led to a “minimum growth in electricity demand growth in recent decades, according to Jennifer Curran, senior vice president of planning and operations for the Midcontinent Independent System Operator, who testified at the home’s energy hearing in March. (Miso, a local electric grid operator, serves 45 million people in 15 states.)
Meanwhile, “electrification” in the US has been inflated by the use of electronic devices, smart home products and electric vehicles, Curran said.
Demand is currently poised to surge in the coming years, with data centers being a major contributor, experts say.
A data center is a vast warehouse of computer servers and other IT equipment with power cloud computing, artificial intelligence and other technical applications.
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According to the U.S. Energy Administration, data centers’ electricity usage tripled to 176 terawatt hours from 2023 to 2023. Use is projected to double or triple by 2028, the agency said.
Data centers are expected to consume up to 12% of the total US electricity by 2028, up from 4.4% in 2023, the Energy sector said.
They “hunger for energy,” Curran said. The growth in demand was “unexpected” and primarily due to support from artificial intelligence, she said.
According to the International Energy Agency, the US economy is set to consume more electricity in 2030 to process data than it would be manufactured by combining all energy-intensive products, including aluminum, steel, cement and chemicals.
Experts say that ongoing electrification of businesses and households is also expected to raise electricity demand.
The US has reduced its greenhouse gas emissions that warm the planet, away from fossil fuels like coal, oil and natural gas.
For example, more households may use electric vehicles rather than gas-powered vehicles or electric heat pumps rather than gas furnaces and gas furnaces. These are more efficient technologies, but they increase the overall demand for electric grids.
According to BPC’s Oka, he is also a contributor, saying that population growth and cryptocurrency mining are also separate power generation activities.
“All about infrastructure”
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According to Seydl of JP Morgan, the US is facing problems related to the transmission and distribution of electricity due to rising electricity demand.
The rise in electricity prices “is about all the infrastructure at this point,” he said. “The grid is aged.”
For example, the growth of power lines is written in a March energy report, Michael Cembalest, chairman of the market and investment strategy at JP Morgan Asset & Wealth Management, a target for the “rut” and “go ahead” energy sector in 2030 and 2035.
A shortage of transformer equipment above and below step voltage across the US grid, written by Cembalest, causes another obstacle. Delivery times were about 2-3 years and rose to about 4-6 weeks in 2019, he wrote.
“Half of all US transformers are nearing the end of their useful life and will need to be replaced along with replacements of areas affected by hurricanes, floods and wildfires,” Cembalest writes.
Transformers and other transmission equipment have experienced the second highest inflation rate of all US wholesale items since 2018, he wrote.
Meanwhile, certain facilities, such as old fossil fuel fuel plants, have been abolished, and new energy capacity to replace them is relatively slow to come online, BPC Hill said. He said there was also inflation in the prices of equipment and labor, which would cost money to build the facility.
