High electricity rates a regional, not national, trend – study

As bill affordability and data center demand continue to impact the utilities sector, a new study argues that rising electricity rates are more of a local or regional issue than a national trend.

Boston-based consulting firm Charles River Associates conducted an analysis of retail rates, published Feb. 2, on behalf of the Edison Electric Institute Inc., that shows rate increases have been concentrated in specific regions and "most areas have experienced stable rates" despite concerns over surging electricity demand.

"A widely reported increase in average retail rates in the US has been interpreted as indicative of a broader, national trend. This is not the case," Charles River Associates, or CRA, said in the report.

"Rather, in a few states and regions, rates have increased rapidly, putting upward pressure on the national average. Retail electric rates have generally been stable in other regions," the firm said.

The average annual rate was 14.8 cents per kilowatt-hour in 2021–2022, rising to 17.1 cents/kWh in 2024–2025, the report said, citing US Energy Information Administration data.

Where rates are rising

CRA found that rates are higher in the Northeast and California, primarily due to wholesale electricity prices and wildfire-related costs.

These higher rates in turn drive "big increases" in the national average, Matthew DeCourcey, a vice president at CRA and one of the authors of the report, said in a Feb. 4 interview with Platts, part of S&P Global Energy.

"But in lots and lots of places, the changes in rates have been much smaller, much less impactful in ways that I don't know are well-reflected or well-understood in that public discourse," DeCourcey said. "By digging into really detailed financial information for the utilities that are in those places ... we were able to figure out why the rates are going up, where they're going up, and what's happening when they're not."

The authors found that wildfire and wildfire mitigation costs did drive a surge in retail rates in California within the last five years, while increasing wholesale prices in New York and New England contributed to large rate increases in the Northeast.

"When we put those two things together, we were able to explain most of the rate increase in both places and also validate that these things don't apply to utilities and customers in other states," DeCourcey said.

Data centers not to blame

CRA does not view energy-intensive data centers as a major culprit impacting retail rates in most parts of the country.

"Few hyperscale data centers have started operations, making it unlikely that they could have contributed to rate increases, and the markets where rates have increased are not those where most data centers are being built," the firm said in the report.

In regions with high concentrations of data center development, regulations and best practices are evolving toward "requiring data centers to pay their own way" and cover all infrastructure and operating costs, DeCourcey noted.

CRA did acknowledge that certain parts of the PJM Interconnection LLC region are an exception to the rule, given high capacity prices "driven partly by data center demand" and a tightening supply-demand balance.

"The [capacity auction] clearing price went up for parts of the system quite a bit, and that's already started to flow through to customers' bills," DeCourcey said.

PJM's capacity market auction for the 2027/2028 delivery year cleared at the price cap of $333.44/megawatt-day, and analysts cited a capacity crunch tied to forecast power demand from data centers.

The capacity auction for the 2026/2027 delivery year, held in July 2025, cleared at $329.17/MW-day for the entire PJM footprint, coming in at the federally approved cap and up from the previous record high of $269.92/MW-day for the 2025/2026 auction.

"The largest retail rate impacts in PJM are felt by customers of the utilities most exposed to PJM's wholesale capacity market, such as in states that do not permit utilities to own generation," CRA said in its report.

In response, governors in Maryland and New Jersey have issued executive orders and proposed legislation to freeze utility rate hikes, incentivize new generation and provide bill relief for customers.

The Trump administration and a bipartisan coalition of governors have called for an emergency auction to attract new generation and help shield ratepayers from future data center-related costs.

Utility-owned generation

In a separate analysis performed for Chicago-headquartered utility Exelon Corp., CRA found that utility-owned generation in the 2028/2029 delivery year for PJM could save customers between $10 billion and $20 billion.

"Consistent with recent auction outcomes and projected reserve margins, the [business-as-usual] case reflects a system with capacity shortages, and thus insufficient supply relative to PJM's reliability requirement," the authors wrote in the Feb. 6 report.

Their analysis shows that if the current price collar remains in place, utility-owned generation could provide cost savings of $9.9 billion, increasing to $20.3 billion if the cap is lifted.

"In the current environment of rapid demand growth and the inability of market signals to deliver adequate new generation, expanding the role of utility-owned generation with state regulatory oversight has the potential to reduce electric supply costs and improve reliability," the authors said.

"Electric utilities are offering a solution that we show has clear benefits over business as usual in PJM," the report's co-author, Michael Kline, said in a news release issued by Exelon. Exelon serves 10.9 million electric customers through six transmission and distribution utilities in the PJM region.