It’s not news that electricity rates are rising across the United States—and they’re doing so at more than twice the annual rate of inflation. In September, U.S. Energy Information Administration (EIA) data showed a 6.6% increase in U.S. residential electricity prices between June 2024 and June 2025. That national average masks regional cost increases that are significantly higher still.

Many reports point to rising electricity demand created by the growth of the data center market as the culprit for increases, and some politicians are targeting the rise in solar and wind energy. The reality, though, is more complicated. Stabilizing rates will take more than simply regulating tech development or choosing the right mix of generation technologies. 

Where we’re at

With overall U.S. inflation hovering around 3% as of August, the quicker ascension of energy costs means a greater proportion of consumer spending is going toward utility bills. The bite is especially big in New England—for example, Maine residents saw prices jump 36.3% between May 2024 and May 2025, according to the EIA—along with the Mid-Atlantic states and the District of Columbia.  

Today’s prices aren’t rising because of the promise of A.I. data centers yet to be built. Instead, the increases we’re seeing are due to conditions utilities and their customers are already experiencing. These include rising fuel costs for utilities highly dependent on natural gas and coal. In addition, many electric companies are playing catch-up in efforts to bring their aging infrastructure up to date. This is especially true in regions hit hard by severe weather events and where higher temperatures are adding stress to operations.

Your monthly electricity bill holds the key to understanding what factors are causing higher charges from your utility.

Fuel costs

This might sound contradictory, but electric utilities don’t make money from the electricity they sell you. Instead, their returns are related to building and maintaining the infrastructure required to transport that power from a generating plant to their customers’ meters. The amount shown under a line item that might be called “electric supply services” or “energy costs” reflects what your utility paid the generation provider for the kilowatt-hours (kWh) your home or business consumed that month. With a few exceptions, these costs are passed directly onto utility customers without an added markup.

With EIA figures showing that 40% of U.S. electricity is now produced by natural gas, rising supply costs are driven by rapidly increasing prices for this commodity. Gas prices are expected to average 81% higher in 2025 versus 2024, and could jump another 20% next year, according to the EIA. 

Exports are a big factor in these increases. Since the United States began exporting natural gas in significant quantities in 2016, the nation has become the world’s largest supplier. The Institute for Energy Economics and Financial Analysis found that liquefied natural gas exports in March and April equaled about half of all the natural gas used to produce U.S. electricity. And the group expects exports to grow by 84% in the next four years. As a result, U.S. gas prices are now affected by larger international markets.

Infrastructure costs

Building and maintaining infrastructure is where utilities earn their income. State public utility commissions (PUCs) establish rates of return (ROR) on the capital investments utilities make in the poles, lines, transformers, substations and other equipment required to deliver power to customers. In states where utilities own their own generating plants, that ROR also applies to them.

RORs are set to amortize equipment and plant investments over a defined useful service life—generally around 40 years. This is an important point for PUCs and consumers to remember: if, say, a new natural gas generation plant is approved, consumers will be paying for that plant for the next 40 years, regardless of how long it’s actually needed. 

RORs across the country average between 9% and 10.5%, guaranteeing utilities a profit on investments state PUCs agree are needed to keep grid operations reliable. These costs might be identified as delivery services, delivery charges or distribution services, and they’re often higher than supply charges. This is the line item that rises when a state PUC approves new transmission or distribution lines or a rollout of new smart meters. These charges are expected to climb nationally in the near future—even without the need to accommodate new data centers—because local distribution equipment is aging out of its useful life.

Unfortunately, costs aren’t expected to come down anytime soon. In the first half of this year alone, U.S. utilities requested rate hikes totaling $29 billion, according to Powerlines, a national utility regulator watchdog group. With the cost of running distribution systems climbing, planners need to determine the right combination of generation resources and grid investments that bring expenses under control and continue to support future economic growth.

stock.adobe.com / iQoncept