U.S. electricity rates are rising, and utilities are making more money than ever
U.S. electricity costs are soaring. The average price of electricity hit 18 cents per kilowatt-hour in April 2025, up 35% from five years ago. It's significantly outpacing inflation.
According to a recent PowerLines report, nearly 80 million Americans struggle to pay their utility bills, yet prices are expected to increase. In early 2025, U.S. gas and electric utilities either requested or were approved for rate hikes totaling roughly $20 billion.
Utility companies say the price increases are necessary to upgrade our aging grid. Some also point to clean energy, specifically solar homeowners, as the reason electric bills are rising. But researchers have looked into the numbers and say they don't add up.
'Utility spending has been out of control for years and years and years,' said Brad Heavner, Executive Director of the California Solar and Storage Association (CALSSA).
Stay informed on the latest industry news—delivered to your inbox each month. Sign up for EnergySage's newsletter.
Your electric bill is divided into two sections: Supply and delivery. The supply part covers the cost of generating the electricity you use, while delivery is the cost of delivering the electricity to your home.
Price fluctuations will always surround energy generation, whether it's coal, gas, or renewables. But when we asked Jigar Shah—an entrepreneur and podcaster who was formerly the Director of the Loans Program at the Department of Energy—he said it's not generation but the distribution part of our electric bills that has 'been going haywire.'
'Distribution used to be 20%, today, it's 50% of your bill,' said Jigar.
Below is an example of an electric bill from a Massachusetts home. The electricity supply is about $220, which is still high, but the delivery charges are nearly $315, or 60% of the bill.
So the question becomes, why are energy delivery costs rising? Jigar says our electricity demands are too great for the current grid infrastructure.
'People are buying all sorts of things that use electricity, whether hair dryers, electric vehicles, heat pumps, electric water heaters, or whatever it is. And every time you do that, the utility says, 'We need to be able to upgrade the distribution grid so that you can do whatever you want. You can turn everything on in your house simultaneously, and we have to be able to serve you.' That bargain is getting way too expensive,' said Jigar.
He's right—Americans are using electricity like never before. This isn't necessarily bad because home electrification is excellent for our planet and health. The problem is that much of our power grid was built in the 1960s and 1970s, when people had one TV, no computers or internet, and only 12% of homes had air conditioning.
Jesse Buchsbaum, energy economist and fellow at Resources of the Future (REF), said our electric bills are directly tied to utilities' investments to upgrade transmission and distribution infrastructure. (FYI—transmission lines are the high voltage wires that carry electricity from a power plant to your city or town.)
'In many places, the grid is aging, and so there are necessary upgrades that are needed, especially as climate risk and natural disaster risk are rising,' Jesse said.
He also raises the valid argument of a changing climate. Over the last decade, we've seen record-hot summers and historic freezes, which only put a bigger strain on the grid. For example, in 2024, Hurricane Helene shut off power to more than two million North Carolinians. In 2021, the ice storm in Texas left millions of people powerless in freezing temperatures for days.
To prevent these events from happening, utilities need to strengthen and expand our current power grid—and we're the ones paying for it.
'[Rate increases] are needed to expand the grid, both in the generation sense, but also to build the poles and wires that will transport the power to those new sources of demand, " Jesse said. 'A lot of those costs end up being borne by both residential and commercial industrial rate payers.'
While our electricity needs have increased and our grid needs upgrades, some experts argue that utilities are hiking our rates more than they need to. In a report published earlier this year, Brad and his team at CALSSA said the real reason rates are rising in California is 'out of control utility spending.'
CALSSA hired an independent economist to investigate 20 years of utility rate case filings in the state. Brad said that when utilities claim they need more money to fix and expand the distribution grid, regulators are 'unable to say no' and approve rate hikes that may not be necessary.
'And the utilities get away with it—they're laughing year after year,' Brad said. 'Now, after two decades of effectively playing this game, their profits have soared and so have electric rates.'
While the CALSSA report is specific to California, utility mismanagement of funds is a nationwide issue. RMI released a report in November 2024 highlighting how utilities have invested money into small transmission projects within their territories. The report says these small, local projects have very little oversight from state and federal regulators, earn the utilities guaranteed profits, and cost us ratepayers way more than if they were to invest in bigger, regional projects—ones that would require more overhead and planning.
Report co-author Claire Wayner told Canary Media that transmission planning is like 'two cars being driven on two different roads in parallel. The regional road is like a toll road with all these checkpoints: identify regional needs, open competitive bidding windows, identify the costs and benefits…The local road has no speed limits. [Utilities] can build as much as they want.'
Here's some proof in the pudding: A 2024 analysis by Grid Strategies found that transmission project spending hit an all-time high in 2023, but only 55 miles of new transmission lines were added that year, compared to a record 4,000 miles added in 2013. Yet, our electricity rates were about 20% less in 2013.
'We've authorized the utilities to spend a lot of money, and they haven't spent most of that money yet,' Brad said. 'It's really criminal—in some cases, we've paid them to make upgrades and fix transmission towers, and they haven't done it.'
While millions of Americans are unable to pay their monthly bills, an analysis by the Energy and Policy Institute shows the country's largest publicly owned utilities pay their CEOs between $17 and $33 million a year. The CEOs earned a collective $647 million in 2023, a 9% increase from 2022.
The 2025 analysis shows that the collective payout dropped to $530 million in 2024. However, it states that most of the 54 utilities examined increased their executive payouts year over year.
Some utilities also claim that homes with solar panels are increasing your bills—a theory called 'the solar cost shift.'
The idea is that if solar homeowners generate their own power, utilities make less money. But because solar homeowners still have to use the grid sometimes, the utility raises everyone else's rates to compensate. It sort of paints solar panel owners as freeloaders.
Jigar says there is some cost shift involved when people go solar, but it's 'far smaller than what people are suggesting.'
'I think the bigger problem is that it feels bad when your bills are going up. And a bunch of people that have the means to put solar on their roof are getting a good deal, and all of your neighbors are not getting a good deal,' Jigar said.
Most of us—whether we have solar panels or not—can look at our utility bill and clearly see charges related to solar panels. So, utilities are making us all pay extra while our neighbors with solar enjoy lower electric bills? It doesn't sound fair, but Brad and the CALLSSA team crunched the numbers and said the solar cost shift is extremely inflated and created with 'faulty math.'
'It's really very creative how [utilities] have built this methodology and storyline that has sunk in with a lot of policymakers. And they push it so hard and in such a widespread fashion that it's difficult to counter,' Brad said.
It's not just California; the nonprofit Solar United Neighbors compiled numerous studies from Mississippi to Maine to Nevada and 'found little or no evidence for a 'cost shift' from rooftop solar customers.' Similarly, a report from Brookings found that the economic benefits of solar homeowners not only outweigh the costs but, in most cases, provide a 'net benefit' for the utility and non-solar ratepayers.
'People are catching on to that fact, and the data is pretty clear how much they've increased their spending,' said Brad. 'To deflect attention away from them, they've come up with this elaborate 'cost shift' story saying solar customers are to blame.'
Utilities say they have to increase our rates to bring more electricity onto the grid during moments of high demand, like on a hot summer day when everyone is cranking their AC. But Brad explained that one of the biggest holes in the cost shift theory is that when homes generate their own electricity, they actually help offset this peak power demand.
'Normally, you expand the grid in order to serve a higher peak load. We've kept peak load constant, yet they're spending three times as much money as they did 15 years ago,' Brad said.
Utilities are painting solar owners as the scapegoat for high rates, but really, it's the opposite. Research shows rooftop solar saved California ratepayers $1.5 billion in 2024 alone. Home solar supplies much-needed electricity to the grid, but Brad claims that throws a wrench in the utility's profits.
'Utilities feel threatened by customer solar and storage because it reduces their profit motive, their ability to rate base grid expansion, which is what drives their profits,' Brad explains. 'In California, there's enough solar that they feel like we're really taking weight off the grid and causing them to build less infrastructure, hurting their profits. So they've gone after us in a very strong way here, and that is spilling over into other states, sadly, where you don't have nearly as much solar. And yet this utility playbook is playing out across the country.'
It comes down to simple supply and demand: Utilities are in the business of generating electricity and selling it to us. When you produce your own electricity with solar, that threatens their business model and their large paychecks.
To try and simply answer the question of why your electric bill is so high, it's because our power grid is old and overloaded. And the way most utilities are fixing it is akin to slapping a very expensive band-aid on a gaping wound. Oh, and we're paying for that band-aid.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Miami Herald
2 hours ago
- Miami Herald
Trump's Iran strike could boost — or ruin — his troubled presidency
President Trump's decision to bomb Iran's nuclear sites is a high-stakes gamble that could either breathe new life into or irreparably damage his troubled second term in the White House. Yet for the world at large, it may well prove to be a welcome development. Before we get into why Trump's decision aligns with the consensus among the world's biggest democracies — that Iran should not be allowed to obtain nuclear weapons — let's remember that Trump's popularity was falling fast before the strike. Only 42% of Americans approve of Trump's job performance, while 54% disapprove of it, according to a large-sample Reuters-IPSOS poll conducted June 11-16. Most Americans view Trump negatively, not only on the economy, which was once his strong point, but also on immigration, according to polls. The U.S. economy has slowed dramatically since Trump took office and launched his erratic tariff wars. According to the latest World Bank projections, the U.S. economy will only grow by 1.4% this year, which would be half of its 2.8% growth last year, in part because of the uncertainty created by Trump's on-and-off threats to impose huge import taxes on foreign goods. Likewise, many Trump voters in states with large immigrant communities, like Florida, are disappointed by Trump's decision to deport hundreds of thousands of immigrants without criminal records, including more than 350,000 Venezuelan Temporary Protected Status (TPS) holders who entered the country legally. During the 2024 campaign, Republicans claimed that Trump would focus on deporting violent criminals. Before his Iran strike, Trump was also haunted by his growing image as a wavering leader. His repeated reversals of his own tariff ultimatums — first vowing to impose 145% tariffs on China, then reducing them to 30% — made him an object of mockery in European capitals and among U.S. critics. A Financial Times columnist popularized the acronym TACO — Trump Always Chickens out — to describe the U.S. president's trade strategy. Trump got visibly upset when he was asked about the TACO reference at a recent press conference. His fear of being perceived as an indecisive leader may have pushed him — after weeks of reportedly telling Israel's Prime Minister Benjamin Netanyahu he would not get dragged into the conflict — to join Israel's military offensive against Iran's nuclear sites. But if Trump's Iran gamble turns out well and Iran's theocratic dictatorship either crumbles or gives up its uranium enrichment program through diplomatic negotiations — a big if — Trump will be credited with having done something four previous presidents contemplated but ultimately failed to do. Internationally, virtually all major Western democracies agrees that Iran is a threat to Israel, and to the world. In a statement at the end of the June 16 summit of the G-7 group of Western democracies in Alberta, Canada, the leaders of the United States, the United Kingdom, France, Germany, Japan, Italy and Canada said that 'We have been consistently clear that Iran can never have a nuclear weapon.' The G-7 bloc's statement added that 'Iran is the principal source of regional instability and terror in the Middle East,' and that 'We affirm that Israel has a right to defend itself.' Days earlier, on June 12, the International Atomic Energy Agency (IAEA) for the first time in 20 years issued a statement warning that Iran was not complying with its nuclear nonproliferation agreements. Translation: Iran was enriching uranium at levels only justified to build nuclear weapons. Skeptics who don't follow Iran's political history may ask themselves why the world doesn't allow Iran to have nuclear weapons like India, Pakistan and other countries. The answer is simple: Unlike other countries, Iran has a state policy of trying to 'eliminate' a nearby sovereign country — Israel— that has been recognized by the United Nations since 1948. This is not about Western countries being against Iran's Jurassic theocracy for imprisoning women for failing to cover their heads with a hijab, or for executing gays, or any of its other abhorrent internal policies. The reason is that if we allow a country that calls for the destruction of another nation to have a nuclear bomb, it will set a precedent that makes the world even more dangerous. In Iran's case, it's not just Iranian Supreme Leader Ayatollah Ali Khamenei's crazy rhetoric, but his actions. Iran has long provided financial aid to terrorist groups like Hezbollah in Lebanon and Hamas in Gaza. Iran's proxies have carried out terrorist attacks as far away as Argentina, where Hezbollah was found responsible for the bombing that killed 85 people and wounded hundreds at the AMIA Jewish Community Center in Buenos Aires in 1994. There are many ways in which Trump's political gamble may go wrong, especially if Iran moved some of its enriched uranium into a secret location outside Fordo, or if it unifies Iranians behind their decrepit regime. But if Iran's regime falls, or agrees to a serious international nuclear monitoring agreement, Trump's faltering second term will get a second wind. Don't miss the 'Oppenheimer Presenta' TV show on Sundays at 9 pm E.T. on CNN en Español. Blog:
Boston Globe
3 hours ago
- Boston Globe
What the US strikes on Iran could mean for world oil prices
Advertisement Secretary of State Marco Rubio told Fox News on Sunday that it would be 'economic suicide' and a 'terrible mistake' for Iran to disrupt movement through the strait. He urged China, which depends heavily on oil and gas from the region, to pressure Iran to avoid that move. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up 'It would be, I think, a massive escalation that would merit a response, not just by us, but by others,' Rubio said. After the U.S. bombing of three of Iran's nuclear facilities Saturday, Iran's Foreign Minister Abbas Araghchi said on Sunday there would be 'everlasting consequences' for an attack that he called 'extremely dangerous, lawless and criminal behavior.' It remains unclear whether Iran will attempt such a blockade or use mines or missiles to interrupt the flow of commerce through the region. Advertisement Before the United States bombed Iran, analysts were already warning that a closure of the strait could push oil prices well past $100 per barrel. That would be more than a 30 percent increase from where they stand today. Such a change could quickly push the average price of a gallon of regular gasoline, now $3.22 according to AAA, toward $4. Analysts caution, however, that Iran is unlikely to deliver on the threat and note that the nation has vowed to close the strait in the past and never successfully done so. Most of the oil that goes through the strait is delivered to Asia, and Iran is wary of alienating its ally China, in particular. Iran may also lack the firepower to successfully block the strait. Regardless of what happens at the Strait of Hormuz, the instability in the region following the strikes is likely to send oil prices surging - at least temporarily - as soon as international energy trading resumes late Sunday night. 'It's likely there will be panic buying at the open,' said Denton Cinquegrana, chief oil analyst at OPIS, a Dow Jones company. Meanwhile, Iran has been taking actions to interfere with energy shipments through the strait by other means, including jamming GPS signals of tankers in the area. The maritime intelligence firm Windward reports that 23 percent of vessels in the area - some 1,600 ships - experienced signal jamming on Sunday, up sharply from Friday, when 970 ships were impacted. Such actions, however, are generally already factored into current oil prices, which remain in the mid-$70s per barrel of oil. Advertisement A Windward spokesman said it was too early to say if shipping patterns through the strait have already changed after the U.S. strikes. As market watchers remains skeptical of Iran's ability to shut down the strait, some are predicting that any price spikes for Americans will be short-lived. 'Crude oil will rise, but absent some decisive Iranian response, I would think prices will not hold their gains,' said Simon Lack, portfolio manager at the Catalyst Energy Infrastructure fund. 'The U.S. is energy independent so [it's] less exposed to higher oil prices than most other countries.' American officials have worried for decades about the vulnerability of the Strait of Hormuz. Over the years, the U.S. has wound down its long-running reliance on Middle East oil and grown into the world's largest oil producer, now buying just a small percentage of its oil from the region. Still, disruption of such a key shipping lane would reverberate throughout the world economy. If Iran defies expectations and manages to impose a blockade, prices could rise quickly. JP Morgan analysts warned earlier this month that a full-blown military conflict and a closure of the strait could hike prices as high as $130 per barrel. That would likely push prices at the pump in the U.S. up by more than $1 from where they are now.
Miami Herald
7 hours ago
- Miami Herald
Another Fed official reveals when you might expect interest rate cuts
There's been a bit of a kerfuffle among Federal Reserve Board officials over the forecast for interest rate cuts. These are the same rate cuts that rattle and roll every aspect of the U.S. economy right down to your household. Don't miss the move: Subscribe to TheStreet's free daily newsletter These interest rates are having a moment from consumer wallets and price increases to mortgage rates and housing starts to Treasury bonds and investments. Related: Fed official sends shocking message on interest rate cuts Millions of Americans – including President Donald Trump – want immediate relief. Federal Reserve Board Chair Jerome Powell urges patience as the full impact of Trump's tariffs and trade wars pass through inflation and employment numbers over the next three months. Hours after a Fed governor called for more immediate action in a move that gobsmacked Fed and market watchers, another Fed official chimed in with an the sixth month in a row, the central bank opted to hold the Federal Funds Rate steady at 4.25%-4.50% at its June meeting last week. Fed Chair Jerome Powell said the expected lagging impact of tariff inflation on the economy's supply chain, while likely short term, led to the prudent waiting period. Trump's proposed tariffs – essentially an external sales tax to U.S. trading partners that we pay one way or another – face a July 9 deadline. Data shows the overall U.S. economy is "solid,'' Powell said at the June meeting. The Fed's biannual Monetary Policy Report to Congress, released June 20, supports this assertion. "Growth in private domestic final demand was moderate, reflecting a modest increase in consumer spending and a jump in capital spending,'' the report said. "However, measures of household and business sentiment have declined this year amid concerns about the effects of higher tariffs on inflation and employment as well as heightened uncertainty about the economic outlook.'' The Fed's dual mandate: prudent monetary policy that keeps both inflation and unemployment relatively stable to avoid a recession or worse. The Federal Open Meeting Committee controls the Federal Funds Rate, which banks charge each other overnight to borrow money. The funds rate is tied to the cost of borrowing money for consumers, investors and businesses. Related: Forget tariffs, Fed interest rate cuts may hinge on another problem The Federal Open Meeting Committee said July 18 it would keep the Federal Funds Rate at 4.25% to 4.50% for June. Data over the next few months will indicate if the Fed will decide on two or fewer rate cuts in 2025, portfolio manager Chris Versace said in a TheStreet Pro post after the FOMC released its quarterly "dot plot" on July 18. The Fed continues "to telegraph that two 25-basis point rate cuts remain on the table for this year,'' Versace wrote. Both Fed and market watchers forecast the next probable rate cut could appear at the September FOMC meeting. San Francisco Federal Reserve Bank President Mary Daly concurred with the FOMC and Powell. In a July 20 interview with CNBC, Daly said monetary policy is in "a good place." Inflation is coming down, which is "great news for American families." Daly took the long walk with Powell's slower stance. "Rate cuts might be necessary in the fall,'' Daly said. The FOMC meets in September. In a contrarian viewpoint, Fed Governor Christopher Waller, a Trump appointee, said the same day that a cut could come as early as July. The current economic data "has been fine" and the tariff inflation bump may follow historical trends to prove transitory in the short term, Waller said in a CNBC interview. "I don't think it's going to be very big," Waller said. His July forecast shocked Fed and market watchers. Both he and Daly agreed attention must be paid to the tariff impact on the jobs market. More Federal Reserve: Fed interest rate cut decision resets forecasts for the rest of this yearFederal Reserve prepares strong message on long-term interest ratesFed official revamps interest-rate cut forecast for this year "Additional softening could turn into weakening. We don't want to see that," Daly said. If it does, Waller said the Fed could pause the rate cut process. "We'll be very interested in the inflation commentary contained in Monday's Flash June PMI data from S&P Global,'' Versace wrote in his TheStreet Weekly Roundup. "Should those comments for input and output prices show rising pressures compared to April and May, they would support Powell's assertion for what's to come.'' The widely watched CME FedWatch tool puts the likelihood of a July cut in the Federal Funds Rate at 10.3% The Fed last cut the Federal Funds Rate in December 2024. The FOMC's next meeting is July 29-30, 2025. Related: Fed official revamps interest-rate cut forecast for rest of this year The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
