Why Electricity Costs Are Rising in 2025 and Where They Are Rising Fastest

What’s Causing Higher Electric Bills in 2025?

Electricity prices are rising faster than inflation due to a surge in demand from data centers, outdated energy infrastructure, and increased utility spending on grid upgrades and transmission. The average U.S. household saw its rate increase 6–7% in the past year, with further hikes expected in coming years. Fortunately, solar energy offers a way to lock in lower, predictable energy costs for the long term.

Jump to a section:

• How Much Have Electricity Rates Risen?
• What’s Driving the Spike in Electricity Costs?
• Can We Expect Electricity Rates to Keep Rising?
• How Solar Protects You from Rate Hikes
• FAQs About Rising Electricity Rates

 

How Much Have Electricity Rates Risen?

The average residential electricity rate in the U.S. increased 6.7% from June 2024 to June 2025, outpacing inflation for core commodities such as food, shelter, and services during the same time period. For the average U.S. household, that translates to an additional $13.50 per monthly electricity bill, or $162 per year, for using the same amount of electricity.

And this isn’t a one-year blip. From 2021 to 2025, the average U.S. electricity rate increased 34%, adding over $500 to the average household’s annual electricity costs.

Month/Year	Avg. Price (cents/kWh)	% Change from previous year
June 2021	14.2	+3.6%
June 2022	16	+12.7%
June 2023	17	+6.3%
June 2024	17.8	+4.7%
June 2025	19	+6.7%

Of course, electricity rates rise at different speeds throughout the country, and some states have been hit harder than others in recent years.

 

 

Which States Are Hit Hardest by Rising Electricity Costs?

Residents of Maine, Washington D.C., Maryland, Connecticut, and California have seen their electricity costs rise the fastest in recent years, with rates rising 29-39% from 2021 to 2025—much faster than the historical average.

From 1980 to 2020, electricity rates increased at a relatively steady rate of 2-3% per year on average—on or around the standard rate of inflation. Over a four-year period, it would be natural to expect your electricity rate to rise 12%. However, in the last four years, electricity rates have increased by more than 12% in all but 9 states.

 

 

With electricity costs increasing in virtually every state, it’s natural to wonder if your electricity costs will keep rising, flatten out, or fall in the coming years. To answer that, we’ll need a closer look at why electricity rates are rising.

 

What’s Driving the Spike in Electricity Costs?

Electricity prices aren’t just rising randomly—they’re being pushed upward by a perfect storm of technological, structural, and economic factors. Here are the key drivers fueling the surge in utility rates across the U.S.:

AI & Data Center Demand Is Exploding

The rise of artificial intelligence, cloud computing, and digital services is triggering unprecedented electricity demand from data centers—placing strain on local grids and driving up wholesale power costs. Consumers are at risk of “subsidizing” the power needs of Big Tech, as infrastructure upgrades are spread across all customer bills.

There’s also rising demand for electricity to power air conditioning and electric vehicles. In July 2025, peak electricity demand reached two new all-time highs as more Americans cranked their air conditioners to stay cool in the summer heat.

Aging Infrastructure and Underinvestment

The U.S. electric grid is decades old and increasingly fragile—especially in an era of extreme weather events. Utility companies are spending billions to modernize transmission lines, replace aging transformers, and meet reliability mandates, and the cost of updating the grid is passed on to ratepayers through higher rates.

Supply Chain Delays, Tariffs, and Inflation in Grid Components

Post-pandemic disruptions, global inflation, and recently enacted tariffs are making it more expensive and slower to upgrade the grid. For instance, prices for power transformers are up 75% since 2019 and cable costs have nearly doubled, according to the IEA. Labor shortages are compounding delays, pushing utility projects over budget and on longer timelines—again, with costs passed to customers.

 

Can We Expect Electricity Rates to Keep Rising?

Unfortunately, all signs point to yes—electricity rates are likely to keep rising over the next several years. Multiple expert forecasts, policy shifts, and technology trends suggest that energy bills will continue to grow, unless action is taken to stabilize the grid.

Wind and solar are perhaps the best tools to balance supply and demand on the power grid, given how quick and cost-effective they are to deploy. However, the One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025 is expected to drastically reduce clean energy deployment and further increase electricity costs.

In fact, a study by NERA suggests that residential electricity rates will be 6.7% higher on average in 2026 as a result of the OBBBA removing clean energy incentives, with over a dozen states poised for rates 10% higher than they would be with clean energy incentives in place.

State	Forecasted 2026 Rate pre-OBBBA	Forecasted 2026 Rate post-OBBBA	% Change
U.S. Average	16.06	17.13	6.7%
Wyoming	11.54	13.99	21.30%
New Mexico	14.56	16.97	16.50%
Illinois	14.77	16.77	13.50%
Washington D.C.	16.5	19.35	17.30%
Washington State	10.41	11.92	14.60%
North Carolina	12.74	14.46	13.50%
Missouri	11.59	13.06	12.70%
Kansas	13.69	15.33	12.00%
South Carolina	13.24	14.69	10.90%
Tennessee	11.33	12.75	12.50%
Delaware	15.35	16.99	10.70%
Maryland	16.6	18.35	10.60%
Arizona	14.06	15.54	10.60%

And the impacts of the OBBBA don’t end in 2026. In 2029, the average residential electricity rate is expected to be 7.3% higher without clean energy incentives than it would be with the incentives in place.

 

How Solar Protects You from Rate Hikes

Solar is the ultimate hedge against rising electricity costs because it allows you to set a flat, predictable cost for the electricity you need—without sacrificing the modern comforts of heating, air conditioning, and home EV charging. Home solar systems are typically designed to offset 100% of your average electricity usage, allowing homeowners to essentially swap in their ever-rising electricity bill for a low, steady cost for solar. Instead of dreading utility rate hikes, solar owners benefit from them by avoiding paying more and more each year for electricity.

How much can you save with solar? That depends on some key factors:

• Your utility rate and how much it will rise in the future
• How much electricity you use (and how much you can offset with solar)
• Availability of net metering, tax credits, and other incentives
• How you pay for your system (cash, loan, or lease)
• The irradiance of your roof (how much sun it gets)

While the savings potential for each home is unique, one thing remains constant: grid electricity prices have increased faster than average in the 2020’s and are expected to continue rising for the foreseeable future.

 

 

FAQs About Rising Electricity Rates

Why are electricity prices increasing?

Electricity prices are rising due to an imbalance in supply and demand on an aging and fragile U.S. power grid and new roadblocks to building clean energy generation. The grid needs more and more electricity for power-hungry data centers, electric vehicles, and home electrification, and the cost to deploy power generation and transmission is ultimately passed on to consumers.

How much more can I expect to pay next year?

On average, electricity prices are expected to be 6.7% higher in 2026 than they would have been before the One Big Beautiful Bill Act (OBBBA) removed incentives for clean energy generation.

Is solar worth it if my bill is already low?

Solar can provide long-term cost savings for households with low electricity bills, especially when the system benefits from net metering, tax credits, and other incentives. With a typical performance warranty of 25 years, solar provides a long-term hedge against rising utility rates.

Will electricity be cheaper in the future?

Grid electricity is not expected to get cheaper in the foreseeable future, especially as more power-hungry data centers come online and incentives for clean energy generation are removed by the One Big Beautiful Bill Act (OBBA). It is very expensive to build the power generation and transmission required to meet rising electricity demand, and those costs are typically passed on to utility customers through higher electricity rates.