Residential Electricity Costs Surge Ahead of Business Rates
Residential electricity prices have increased more rapidly than commercial and industrial rates over the past five years, according to reports from Lawrence Berkeley National Laboratory. Nationwide average residential prices jumped 27% to 16.5 cents/kWh between 2019 and 2024, while commercial and industrial prices both increased 19% to 12.8 cents/kWh and 8.1 cents/kWh respectively, the laboratory’s analysis found.
Regional Variations and Policy Impacts
While overall retail electricity prices fell in 37 states when adjusting for inflation, California saw the largest increase at 6.2% driven primarily by wildfire-related costs, according to the research. The Northeast also experienced real price increases during the five-year period. Price disparities remained substantial, ranging from less than 8 cents/kWh in North Dakota to more than 27 cents/kWh in California last year.
The laboratory’s researchers identified state energy policies as significant contributors to rising electricity costs. “States with the largest price increases in recent years typically featured shrinking customer loads — partially linked to growth in net metered behind-the-meter solar — and had renewable portfolio standard programs in concert with relatively costly incremental renewable energy supplies,” the report states. The complete findings are detailed in their published research.
Renewable Energy Policy Effects
States with renewable portfolio standard programs that required new supplies in the last five years increased retail electricity prices by approximately 0.4 cents/kWh, according to the analysis. However, electricity prices appeared unaffected by “market-based” utility-scale renewable energy projects developed outside of RPS mandates.
Behind-the-meter solar installations, while reducing net electricity load in states like California, Maine and Rhode Island by more than 5%, were associated with higher electricity prices for remaining customers. Researchers noted that “given the disconnect between rate structures and cost structures under many net metering programs, and the financial cost of policy support, these load reductions were associated with increased retail prices for the broader customer base.”
Utility Ownership and Infrastructure Spending
The analysis also revealed that electricity prices charged by investor-owned utilities are higher and have risen faster than those charged by public power utilities. From 2019 to 2024, inflation-adjusted spending on distribution and transmission by IOUs increased while generation costs declined, according to the report. Additional insights are available in their presentation materials.
Generally, load growth helped depress electricity prices over the past five years, though researchers cautioned that “it remains unclear whether broader, sustained load growth will increase long-run average costs and prices.” They noted that in some cases, “spikes in load growth can result in significant, near-term retail price increases.”
Growing Demand from Data Centers and Manufacturing
Separate analysis from Bank of America indicates that growing electricity demand from data centers and manufacturing growth is already affecting residential rates. “Rising demand for electricity from both data center development and manufacturing growth is already being reflected in residential customer rates,” said David Michael Tinsley, Bank of America Institute senior economist, in their recent report.
The rate increases are reportedly driven by transmission and distribution system upgrades needed for data centers that are paid by all ratepayers, along with higher energy and capacity pricing. Through July this year, nationwide retail electricity prices increased 4.4% compared to the same period in 2024, measured in U.S. dollars.
Future Price Pressures
Pending rate hike requests—mainly from investor-owned utilities—are at their highest level since the 1980s, suggesting electricity price increases will continue, according to researchers. Extreme weather events including hurricanes, storms and wildfires can also raise retail electricity prices through both short-term recovery and rebuilding efforts and longer-term costs such as infrastructure hardening and increased operational expenditures.
These energy sector developments coincide with broader industry developments and recent technology advancements affecting multiple sectors. The findings also emerge alongside market trends in other industries and related innovations in global markets.
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