Will Electricity Prices Go Down in 2025?

After a rapid increase in utility rates in 2022, many homeowners are feeling the pain of several years of high electricity bills and wondering if utility rates will go down in 2025.

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 2025 and beyond.

Will utility electricity prices go down in 2025?

In general, utility electricity prices are expected to continue rising in 2025 — albeit at a lower rate than we experienced in 2022 and 2023. How do we know this? Well, many utilities have proposed rate increases — and decreases — for 2025 and filed for approval by local authorities. We’ve listed some of the notable ones below.

Notable utility rate increases proposed for 2025

State/Area	Utility	Proposed 2025 rate hike
Southern California	Southern California Edison (SCE)	10.3%
California	Pacific Gas & Electric (PG&E)	1.6%
San Deigo, CA	San Diego Gas & Electric (SDG&E)	2.7%
Western Washington	Puget Sounds Energy (PSE)I	6.74%
Massachusetts	Unitil	23%
New York	ConEdison	1.4%
Florida	Duke Energy	4%
Minnesota	Xcel Energy	9.6%

The big takeaway from this list is that utility electric rates vary greatly from utility to utility and 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.

Electricity demand is increasing from home electrification, electric vehicle charging, and new power-hungry AI data centers coming online. 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 45 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 2024. In that 45-year period, prices have increased at an average annual rate of 2.9% and have only decreased year-over-year nine times.

Historical Electricity Prices Chart

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

Since utility rates are unpredictable, 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.

Update: Electricity prices averaged 17.6 cents per kWh and peaked at 17.8 cents per kWh in 2024. Our forecast was just a little low!

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 2.9% 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 2025 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.