U.S. Residential Electricity Prices Have Been Rising and In Many Places Are Expected to Keep Rising: The Cases of Louisiana and Ohio: and Electricity Expenditures vs. Other Fuel Expenditures

    I recently posted about U.S. electricity prices by state and the reasons behind some of the differences. There are many more reasons why power prices change. I will show this with the cases of two states, Louisiana and Ohio. Only recently, since about 2023, has power consumption begun to rise after being more or less stagnant since around 2005, as shown below.

 

U.S. Residential Electricity Prices Keep Rising

     The EIA recently reported that U.S. residential electricity prices have increased faster than inflation and are expected to continue to increase through 2026. Commodities like natural gas and crude oil have declined since the disruption due to the beginning of the Russia-Ukraine war in 2022. Electricity prices, however, have continued to rise since 2022, rising 13-18% since then. These prices have risen a little faster than post-COVID inflation, as the graph below shows.

     Average annual expenditures for U.S. consumers for electricity have been rising since 2020. U.S. consumer average annual expenditures for gasoline are highest at nearly $2500, followed by electricity at about $1750, and natural gas at about $500.

     EIA notes that electricity prices include the costs to generate, transmit, and distribute electricity and that all of those costs need to be considered.

“Utility spending on electricity distribution has surpassed spending on electricity transmission and production, according to our 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.”

     The graph below showing regional variations in electricity prices is a good one and shows that areas with already high electricity prices, like the Pacific, Middle Atlantic, and New England regions, have also experienced the highest increases from 2022 to 2025. These regions are saddled with various issues like strong pushes for renewables that necessitate more transmission upgrades, inadequate natural gas pipeline infrastructure, and increasing power demand.

Louisiana Power Prices Set for Big Rise Due to IOU Monopolies Charging Ratepayers: Customer-Centered Options are an Alternative, According to Op Ed

     A recent op ed in the Center Square by Daniel J. Erspamer of the Pelican Institute for Public Policy notes increasing power bills and energy demand in the state of Louisiana. However, Louisiana currently has the fourth-lowest electricity costs among the 50 states. He notes that the biggest utility in the state “is seeking approval to spend billions on new infrastructure projects to replace aging fleets and meet escalating electricity needs.” He says investors, not ratepayers, should finance those upgrade projects. He complains that these vertically integrated monopoly investor-owned utilities, or IOUs, control both generation and distribution. He cites recent analysis that suggests power prices could rise by as much as 90% to 2030 from today’s rates. That could put Louisiana’s 2030 rates as high as Maine's or New York's rates are today. He writes that there are other options, but he is a bit vague:

“Customer-Centered Options offer a smarter, more sustainable alternative. These proposals could modernize the state’s energy framework, expand consumer choice, and reduce the financial burden placed on ratepayers. By evaluating proposals to allow large energy users to procure or generate their own electricity – when doing so benefits the entire grid – the LPSC {Louisiana Public Service Commission} may discover new solutions that improve reliability and contain costs. This shift could not only speed up the deployment of new energy technologies, but also alleviate pressure on regulators and public utilities. It would empower consumers by aligning energy development with real market needs rather than arbitrary regulatory constraints.”

“The benefits are clear: faster innovation, greater grid resilience, expanded energy diversity and, ultimately, lower long-term costs for households and businesses alike.”

     The idea of large energy users procuring and generating their own energy certainly suggests facilities like data centers, but could also include industrial power consumers. These are not bad ideas. One might ask why all ratepayers should be charged for upgrades needed to provide energy for AI data centers and industrial power users. It is a legitimate question. However, I am sure some of those needed upgrades are not a result of these heavy power users.

 

Ohio Power Prices Rising Due to PJM’s Capacity Auction Revealing Generation Shortfalls

     While I sympathize with Louisiana’s future power price concerns, here in Ohio, where I live, we pay the 18^th highest power prices, and on June 1, those prices are expected to rise by 10-15% for average consumers in the state. That might move us to the 12th-highest costs. I am not looking forward to higher power bills since they have already gone up in recent years, and I am currently unemployed. However, I am a frugal power consumer since I have to be.

     The reason for the current rise in Ohio is the recent PJM capacity auction, where future capacity prices skyrocketed. The main issue is inadequate power generation to meet future demand. An article in the Toledo Regional Chamber of Commerce explains capacity prices:

“Capacity costs are what you pay to make sure enough electricity is available — especially during peak times like summer heat waves.”

The article also addresses the reasons that capacity prices rise:

They can be seen as power reliability costs. Again, large power users like AI data centers and industrial users are a factor since they use lots of power. PJM recently warned that power shortages could occur in Ohio and West Virginia if conditions are extreme enough. They are concerned that the lack of new generation and the retirement of other generation can lead to a potential shortfall in a heatwave scenario. PJM noted that in such a scenario, they would rely on “contracted demand response programs,” presumably from large power consumers. Those customers are paid to reduce power consumption during an emergency. AEP Ohio, my power provider, noted that the PJM auction is why Ohio rates are set to rise on June 1.

“In a recent auction, the entire PJM region saw significant increases in the price of electricity generation capacity compared with previous auctions,” AEP Ohio stated. “This cost is always passed to customers dollar-for-dollar, with no markup or profit for AEP Ohio.”

     The Toledo Regional Chamber of Commerce article also notes that businesses will have higher power cost increases, up to 29%! That is quite an increase, and I would expect that those businesses, in turn, will raise product prices for consumers to help alleviate the costs. According to another article, these price increases are expected to last for 3-5 years, until more generation is built and turned online.

 

References:

 

U.S. electricity prices continue steady increase. EIA. Today In Energy. May 14, 2025. U.S. electricity prices continue steady increase - U.S. Energy Information Administration (EIA)

Op-Ed: Louisiana’s energy future depends on empowering consumers, not protecting monopolies. Opinion by Daniel J. Erspamer | Pelican Institute for Public Policy. The Center Square. May 14, 2025. Op-Ed: Louisiana’s energy future depends on empowering consumers, not protecting monopolies

Watt’s-Up: Why Ohio’s Electricity Capacity Costs Are Rising June 1, 2025. Toledo Regional Chamber of Commerce. May 13, 2025. Watt’s-Up: Why Ohio’s Electricity Capacity Costs Are Rising June 1, 2025 - Toledo Regional Chamber of Commerce | Toledo, OH

Ohio Residents to Face 10-15% Increase in Electricity Bills Post PJM Auction from June 2025. Sienna Brooks. Hoodline. Cleveland. February 10, 2025. Ohio Residents to Face 10-15% Increase in Electricity Bills Post PJM

West Virginia and Ohio’s power grid operator warns of potential power shortages this summer. Kevin Accettulla. WTRF Wheeling. West Virginia and Ohio’s power grid operator warns of potential power shortages this summer