Will Electricity Prices Go Down in 2024?

After the largest one-year spike in electricity prices in 40 years, many homeowners are feeling the impact of high electricity bills and wondering if utility rates will go down in 2024.

We’ll put it this way: Don’t hold your breath for electricity prices to drop.

While we don’t have a crystal ball, in this article we’ll look at trends, forecasts, and economic forces to get a sense of what to expect from electricity prices in 2024 and beyond.

Will utility electricity prices go down in 2024?

In general, utility electricity prices are expected to continue rising in 2024 — albeit at a lower rate than we experienced in 2022 and 2023. How do we know this? Well, many utility regulators have already approved rate increases — and decreases — for 2024 and made them publicly available. We’ve listed some of the notable ones below.

Notable utility rate increases approved for 2024

The big takeaway from this list is that utility electric rates vary greatly from region to region. For example, in Connecticut, customers will see their winter electric rates decrease 20-40% due to falling natural gas prices that fuel much of the region’s winter electricity generation. Meanwhile, customers of Oregon’s PGE, California’s PG&E, and North Carolina’s Duke Energy are facing double-digit increases, largely to pay for much-needed infrastructure upgrades.

It’s worth noting that annual electricity price increases are the norm — not the exception to the norm. Over the last 20 years, electric utility rates have increased by roughly 3% per year on average. However, in an era of rapidly increasing electricity demand, extreme weather, and aging infrastructure, it’s reasonable to expect utility rates to rise at a faster rate in the future.

What causes electricity prices to increase?

Electricity – at least when it comes from a utility company – is a commodity and is therefore subject to the forces of supply and demand. At the most basic level, electricity prices are rising because demand is outpacing supply.

On the demand side, people are using more electricity than ever for climate control, water heating, home appliances, electric vehicles, and devices. Much of this is due to heating and cooling as the average home size gets larger and extreme weather events increase in frequency and intensity.

On the supply side, well, there’s a lot going on…

The rapid electricity price increase in 2022 is largely attributed to some combination of:

• Supply chain tangles created during Covid-19 lockdowns
• The Russian war in Ukraine upending the global energy ecosystem
• Profiteering (aka “greedflation”) by major oil companies that supply fuel for power plants

While these are all (hopefully) short-term supply issues, there are serious issues at the core of the electricity supply chain. For example, the central grid system itself is outdated and inefficient, and the cost of trying to upgrade or rebuild grid infrastructure is passed onto utility ratepayers.

As a commodity in a capitalist economy, grid electricity is subject to the same inflationary forces as food, housing, and other types of fuel.

Related reading: What’s The Average Electric Bill in Each State?

When will electricity prices go down?

Given the market forces explained above, and a 40+ year trend of rising electricity prices, it’s hard to imagine electricity prices coming down significantly in the near future.

The chart below shows the average electricity price in the US from 1979 to 2022. In that 43-year period, prices have increased at an average annual rate of 2.8% and have only decreased year-over-year nine times.

Based on this history, electricity prices may fall year-over-year once or twice every decade, but in the big picture, they will continue climbing at a steady rate. The only question is at what rate will they climb?

Electricity price forecasts

After the rapid and unexpected increases of 2022, forecasting electricity prices feels like a fool’s game. But, we can use historical data to provide a baseline for what to expect in 2024, 2025, and beyond.

Since 2003, monthly electricity prices have increased at an average rate of 3.1% year-over-year. So, if the average price in January 2018 was 13.5 cents per kWh, we could expect the average price in January 2019 to be 13.9 cents per kWh. 

We applied that growth rate to current electricity prices to create the electricity price forecasts for 2024 and 2025 shown below. It’s important to note that electricity prices and rate hikes vary from state to state and utility to utility. Some homeowners may experience 10% rate hikes in 2024 while others see their rates ease.

Electricity price forecast 2024

If electricity prices return to the average growth rate of the last 20 years, utility electric rates nationwide will average 17.4 cents per kWh and peak at 17.63 cents per kWh in the summer.

Electricity price forecast 2025

Assuming prices grow year-over-year at the 20-year average, the national average electricity price will peak at 18.2 cents per kWh in August 2025 and average 17.9 cents per kWh throughout the year.

Longterm electricity price forecast

If we apply the 2.8% average annual growth rate of the last 40 years to today’s prices, the national average electricity price will reach:

• 20 cents per kWh by 2030
• 26 cents per kWh in 2040
• 35 cents per kWh in 2050

Just the 3 cent per kWh increase from 2023 to 2030 would add $315 per year to the average electricity bill of a home using 880 kWh per month. 

By 2040, the average homeowner would be paying nearly $950 more per year and by 2050 their annual electricity costs would be $1,900 more than today.

Again, these are forecasts based on averages, and electricity price growth will vary from utility to utility.

Set a flat rate for your electricity

Even if electricity prices go down in 2023 or the coming years, they are all but guaranteed to continue rising in the long term based on market forces. Home solar allows you to set a flat rate for your electricity and hedge against energy inflation.

Connect with an Energy Advisor to learn more about hedging against energy inflation with solar.