Electricity prices are escalating rapidly for U.S. households, despite a general cooling in overall inflation. The consumer price index for May 2025 indicated a 4.5% increase in electricity prices over the past year, nearly double the inflation rate for all goods and services. The U.S. Energy Information Administration (EIA) projects that retail electricity prices will continue to outpace inflation through 2026, having already risen faster than the broad inflation rate since 2022.
The primary driver behind this trend is a classic case of supply and demand imbalance. Electricity demand is increasing, while the decommissioning of power-generating facilities is outpacing new additions to the grid. This discrepancy is expected to persist, leading to regional variations in electricity pricing.
In 2023, U.S. consumers spent an average of approximately $1,760 on electricity, according to EIA data. However, electricity costs vary significantly based on geographic location and consumption habits. In March 2025, the average cost was about 17 cents per kilowatt-hour, with regional differences ranging from roughly 11 cents per kWh in North Dakota to about 41 cents per kWh in Hawaii.
Regions such as the Pacific, Middle Atlantic, and New England, where electricity costs are already higher, are likely to experience above-average price increases. The EIA forecasts a 13% rise in average retail electricity prices from 2022 to 2025. For the average household, this means an annual electricity bill increase of about $219 by 2025, assuming usage remains constant. Specifically, households in the Pacific area could see a 26% rise in prices, reaching over 21 cents per kilowatt-hour, while those in the West North Central region may face an 8% increase to nearly 11 cents per kWh.
Nationwide trends also contribute to rising electricity demand. The minimal growth in demand over recent decades, attributed to energy efficiency gains, is now being offset by increasing electrification. The proliferation of electronic devices, smart-home products, and electric vehicles is driving demand higher, with data centers being significant contributors.
Data centers, which are essential for cloud computing and artificial intelligence applications, have seen their electricity usage triple to 176 terawatt-hours over the decade leading to 2023. The U.S. Energy Department projects this usage could double or triple again by 2028, potentially consuming up to 12% of total U.S. electricity, up from 4.4% in 2023. This shift indicates that by 2030, more electricity will be used for data processing than for manufacturing energy-intensive goods such as aluminum, steel, and cement.
The move towards electrification across businesses and households is anticipated to further increase electricity demand. As the U.S. transitions away from fossil fuels to reduce greenhouse gas emissions, more households are expected to adopt electric vehicles and heat pumps, which, while more efficient, add to the load on the electric grid. Population growth and cryptocurrency mining, another energy-intensive activity, also contribute to rising demand.
Infrastructure challenges exacerbate the situation. The aging U.S. power grid is a critical factor in rising electricity prices. Transmission line growth is insufficient, lagging behind the Energy Department’s targets for 2030 and 2035. Transformer equipment shortages, with delivery times now extending to two to three years from a mere four to six weeks in 2019, further complicate the issue. Approximately half of all U.S. transformers are nearing the end of their operational life, necessitating replacements, particularly in areas prone to natural disasters.
Inflation in equipment and labor costs has impeded the swift replacement of decommissioned power plants with new energy capacity. The construction of new facilities is more expensive due to these rising costs, which further delays the introduction of additional power generation capabilities.
Overall, the rising electricity prices underscore the necessity for strategic infrastructure investments and efficient energy management. Investors and financial planners should consider these trends when evaluating energy-related investments and the broader implications for portfolios reliant on stable utility costs.
