Why your energy bill is suddenly so much more expensive

Vox

3 days ago

is a correspondent at Vox writing about climate change, energy policy, and science. He is also a regular contributor to the radio program Science Friday. Prior to Vox, he was a reporter for ClimateWire at E&E News.
Americans are paying more for electricity, and those prices are set to rise even further.
In almost all parts of the country, the amount people pay for electricity on their power bills — the retail price — has risen faster than the rate of inflation since 2022, and that will likely continue through 2026, according to the Energy Information Administration (EIA).
Energy Information Administration
Just about everything costs more these days, but electricity prices are especially concerning because they're an input for so much of the economy — powering factories, data centers, and a growing fleet of electric vehicles. It's not just the big industries; we all feel the pinch firsthand when we pay our utility bills. According to PowerLines, a nonprofit working to reduce electricity prices, about 80 million Americans have to sacrifice other basic expenses like food or medicine to afford to keep the lights on. And it's about to get even worse: Utilities in markets across the country have asked regulators for almost $29 billion in electricity rate increases for consumers for the first half of the year.
Related The hidden reason why your power bill is so high
Why are prices rising so much all of a sudden? Right now, there are the usual factors driving the rise in electricity rates: high demand, not enough supply, and inflation. But there are problems that have been building up for decades as well, and now the bills are due: Aging and inadequate infrastructure needs replacement, while outdated business models and regulations are slowing the deployment of urgently needed upgrades.
On the campaign trail, President Donald Trump promised to bring energy prices down by increasing fossil fuel extraction. 'My goal will be to cut your energy costs in half within 12 months after taking office,' Trump said last August in a speech in Michigan.
But electricity prices are still going up, and Trump's signature legislative accomplishment, the One Big Beautiful Bill Act, is likely to raise prices further. Without better management and investment, the result will be more expensive and less reliable power for most Americans.
The variables baked into your power bill, explained
There are several key factors that shape how much you pay for electricity.
There's the cost of building, operating, and maintaining power plants. Higher interest rates, inflation, tariffs, and longer interconnection queues — power generators waiting for approval to connect to the grid — are making the process of building a new electricity generator slower and more expensive. PJM, the largest power market in the US, said this week that soaring demand for electricity and delays in building new generators will raise power bills 1 to 5 percent for customers in its service area across 13 states and the District of Columbia.
Then there's the fuel itself, whether that's coal, oil, natural gas, or uranium. For renewables, the cost of wind, water, and sunlight are close to zero, but intermittent generators need conventional power plants or energy storage systems to back them up. Still, wind and solar power have been some of the cheapest sources of electricity in recent years, forming the dominant share of new power generation connecting to the grid.
That electricity then has to be routed from power plants over transmission lines that can span hundreds of miles and into distribution networks that send electrons into homes, offices, stores, and factories.
'It is the poles and wires that make up our electric infrastructure that's increasing in cost particularly rapidly.' — Charles Hua, founder and executive director of PowerLines
Then you have to think about demand, over the course of hours, days, months, and years. Some utilities offer time-of-use billing that raises rates during peak demand periods like hot summer afternoons and lowers them in evenings. Cooling needs are a big reason why overall electricity use tends to be higher in summer months than in the winter. And for the first time in a decade, the US is experiencing a sustained increase in electricity use driven in part by a rapid buildout of power-hungry data centers, more EVs, more electric appliances, and more air conditioning to stay cool in hotter summers.
More users for the same amount of electricity means higher prices. The Trump administration's rollback of key incentives for renewables and slowdown of approvals for new projects is likely to slow the rate of new generation coming online.
And the process of bridging electricity supplies with demand is becoming a bottleneck, thus comprising a larger share of the overall bill. 'If you actually look at the cost breakdowns of what's significantly increasing, it's really the grid,' said Charles Hua, founder and executive director of PowerLines. 'It is the poles and wires that make up our electric infrastructure that's increasing in cost particularly rapidly.'
According to the EIA, just under two-thirds of the average price of electricity is due to generation costs, with the remainder coming from transmission and distribution. However, energy utilities are now putting more than half of their expenditures into transmission and distribution through the end of the decade. 'It used to be the case maybe a decade ago where generation was the largest share of utility investments, and therefore customer bills,' Hua said. 'But it has now been inverted where really it's the grid expense that is rising and doesn't show any signs of relief.'
There are several reasons for this. One is that the existing power grid is old, and many components like conductors and switchgear are reaching the ends of their service lives. Replacing 1960s hardware at 2025 prices raises operating costs even for the same level of service. But the grid now needs to provide higher levels of service as populations grow and as technologies like intermittent renewables and energy storage proliferate.
Power outages driven by extreme weather are becoming more frequent and longer, but hardening the grid against disasters like floods and fires is expensive too. Putting a powerline underground can add up to double or more the price of stringing conductors along utility poles, which is why power companies have been slow to make the change, even in disaster-prone regions.
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While utilities are pouring money into distribution networks, they are having a harder time building new long-distance transmission lines as they run into permitting and regulatory delays. The US used to build an average of 2,000 miles of high-voltage transmission per year between 2012 and 2016. The construction rate dropped to 700 miles per year between 2017 and 2021, and dipped to just 55 miles in 2023. There were 125 miles of new high-voltage transmission installed in the first half of 2024, but it was all for one project. The Department of Energy this week canceled a loan guarantee for the Grain Belt Express, a transmission project that would stretch 800 miles across four states.
There are also shortages of critical parts of the grid like transformers while tariffs on materials like aluminum and steel are pushing up construction expenses.
One underrated driver of higher prices is the lack of coordination between utilities, grid operators, and states on how to spend their money. In utility jargon, this process is called Integrated Distribution System Planning, where everyone with a stake in the energy network puts together a comprehensive plan of what to buy, where to build it, and who should pay — but only a few states like Illinois, Maine, and New Hampshire have such a system set up.
'That's sort of a no-brainer,' Hua said. 'Anybody should understand the need to plan ahead, especially if you're talking about something that has such high economic implications, but that's not what we're doing.'