Electricity rates rising in Democrat-led states, steady nationwide, study finds 

Electricity rate increases in the U.S. are concentrated in a small number of Democrat-led states, according to a new analysis that challenges claims of skyrocketing prices nationwide. 

The report found that higher rates are driven largely by local regulatory and market factors rather than national trends. 

“This is a classic problem with averages. A small number of large outliers can distort the picture,” said Matthew DeCourcey, a researcher at Charles River Associates, which published the analysis. “What we found is that a relatively small group of utilities experienced significant rate increases, while most utilities in most states did not.” 

The report, prepared for the Edison Electric Institute, examined residential retail electricity rates using U.S. Energy Information Administration data and utility cost filings. 

National averages, the study found, are skewed by large increases in California, New York and New England, while most states recorded rate increases at or below inflation. 

“In fact, roughly 35 of the 50 states experienced rate increases below the national average, and over a five-year period about half the states saw rate changes consistent with inflation,” DeCourcey said. 

Because states with the largest increases also have large populations, average national prices appear higher than what most consumers actually experience, the report said. 

Utilities generally passed through costs rather than expanding profit margins, based on Federal Energy Regulatory Commission data, the analysis found. 

“In most places, rates have been quite stable, which reflects effective cost management by utilities and constructive regulatory frameworks,” DeCourcey said. 

U.S. coasts, Europe paying more

In California, higher rates were attributed to wildfire mitigation, rising insurance costs and rooftop solar compensation rules that shift costs among customers, the report said. 

The Pacific Research Institute has estimated California households will absorb between $17,398 and $20,182 per household to fund the state’s transition to alternative energy sources between 2025 and 2050. 

In New York and New England, rates rose because utilities rely heavily on wholesale markets and pass higher wholesale prices directly to consumers, the report said. 

“Owning generation can also help utilities hedge against market volatility, which is why divested regions, such as New York and New England, feel price shocks more acutely,” DeCourcey said. 

The analysis also rejected claims that data centers are driving recent rate increases. 

Most large data centers cited as contributors to higher costs have not yet been built or placed into service, and newer AI-focused hyperscale facilities remain largely in the planning stage, CRA said. 

“When we look historically, rates have increased in California and the Northeast – regions where data centers are not being built at scale,” DeCourcey said. “The locations don’t line up.” 

While higher wholesale capacity prices linked to anticipated data center demand exist in some regions, the report found little evidence of a nationwide electricity affordability crisis. 

Retail electricity rates have generally tracked inflation, while household energy use has become more efficient, CRA said. Electricity typically accounts for about 1% to 3% of household spending, a share that has declined over the past two decades. 

That contrasts with Europe, where electricity prices have risen far faster due to fuel supply shocks, carbon pricing and policy-driven market exposure, leaving households devoting a larger and more volatile share of income to power costs. 

Electricity prices in Europe are two to four times higher than in the U.S., according to the Institute for Energy Research. Industrial electricity prices in the U.K. are about four times higher than in the U.S., while residential prices in Germany are roughly 2½ times higher. 

“Before intervening, policymakers need to understand the specific problem they’re trying to solve,” DeCourcey said. “In California, the focus might be wildfire costs and rooftop solar cost shifts. In the Northeast, it might be wholesale market exposure.”