How much electricity prices increase per year in the U.S.

Updated

three energy meters on the side of a wall
Every year, utility companies across the country request rate increases. How much is average?

If you’re considering solar panels for your home, one of the biggest uncertainties is the future price of electricity from your utility company. Solar panels will make electricity for 25 years or more, so having a good estimate of the costs they will offset is vitally important in deciding whether home solar is a good investment for you. 

According to the U.S. Energy Information Administration (EIA), electricity prices have increased 1.8% per year in the United States for the past 25 years, from a national average price of 8.38 cents per kilowatt-hour (kWh) in 1994 to 13.01 cents/kWh in 2019 (the most recent year for which annual data is available). If you go back to 1960, the average annual rate increases to about 2.8%. 

Even when you take those numbers into account, there are differences in states and utility companies that impact average annual rate increases.

State-by-state increases in electricity rates from 1994-2019 

During the past 25 years, the 5 states with the largest electricity price increases were Hawaii, Oregon, Alaska, Wisconsin, and Massachusetts, with rates between 2.76% and 3.86%. 

The bottom 5 were Arkansas, Louisiana, Illinois, Arizona, and New Mexico, with rates of annual increase between 0.78% and 1.26%. 

See a list of all the states ordered from highest to lowest rate of increase, below. 

State Annual increase 1994 Rate (cents/kWh) 2019 Rate (cents/kWh)

Hawaii

3.86%

12.45

32.06

Oregon

2.94%

5.33

11.01

Alaska

2.86%

11.32

22.92

Wisconsin

2.82%

7.08

14.18

Massachusetts

2.76%

11.09

21.92

Washington

2.72%

4.97

9.71

Idaho

2.69%

5.09

9.89

Rhode Island

2.68%

11.23

21.73

New York

2.66%

9.31

17.94

Connecticut

2.62%

11.47

21.87

Michigan

2.60%

8.28

15.74

Alabama

2.54%

6.69

12.53

Kentucky

2.54%

5.77

10.8

Montana

2.53%

5.96

11.13

Indiana

2.50%

6.78

12.58

Tennessee

2.49%

5.88

10.87

Wyoming

2.49%

6.04

11.18

Minnesota

2.43%

7.16

13.04

Vermont

2.33%

9.96

17.71

West Virginia

2.31%

6.36

11.25

District of Columbia

2.23%

7.47

12.98

South Carolina

2.23%

7.49

12.99

Nebraska

2.16%

6.31

10.77

California

2.09%

11.43

19.15

Nevada

2.09%

7.16

12

Colorado

2.04%

7.36

12.18

South Dakota

1.99%

7.06

11.55

North Dakota

1.94%

6.37

10.3

Kansas

1.93%

7.89

12.71

Mississippi

1.89%

7.06

11.27

New Jersey

1.84%

10.06

15.85

Maryland

1.80%

8.39

13.12

Virginia

1.79%

7.75

12.07

Iowa

1.74%

8.09

12.46

Missouri

1.71%

7.29

11.14

Georgia

1.70%

7.72

11.76

Florida

1.65%

7.78

11.7

Utah

1.65%

6.91

10.4

New Hampshire

1.64%

13.36

20.05

Texas

1.51%

8.08

11.76

Maine

1.50%

12.32

17.89

Oklahoma

1.50%

7.03

10.21

Ohio

1.49%

8.56

12.38

Pennsylvania

1.48%

9.55

13.8

Delaware

1.38%

8.91

12.55

North Carolina

1.35%

8.17

11.42

New Mexico

1.26%

9.14

12.51

Arizona

1.17%

9.3

12.43

Illinois

1.07%

9.98

13.03

Louisiana

1.02%

7.61

9.8

Arkansas

0.78%

8.07

9.8

Data on residential electricity rates from U.S. EIA Electric Power Annual for latest-available 25-year period.

Factors that could affect future electricity prices 

As they say in the investing industry, “Past performance is no guarantee of future results.” When it comes to the cost of electricity, many people think the historical rate of increase is too low, given the current challenge of climate change and fluctuations in fossil fuel pricing.

In 2020, oil and natural gas prices dipped due to the pandemic, but are forecasted to rise quickly over the next couple of years. Inflation is also a risk, and the nascent post-pandemic economy is showing signs of overheating, which could cause energy costs to rise more quickly over the next few years.

Increases in renewable energy sources will likely have a moderating effect in the long term, but grid upgrades made necessary by them could also increase prices in the short term.

Finally, addressing climate change may result in new steps taken by the government to reduce fossil fuel use, likely by making it more expensive through a price on carbon emissions. Those steps may ultimately prove to decrease our use of fossil fuels, but will likely have the short-term consequence of driving electric rates up faster than the historical average until energy efficiency and reductions in electricity consumption can catch up. 

Final word on electricity price increases 

People go solar to save money on their electricity bills, and the good news is as long as your solar panels are making electricity, you’ll be saving money. 

How much money you will save has a lot to do with how much electricity prices go up over time, and given historical rates of increase, it looks like most folks can expect that to be around 2% per year

However, energy prices in some states have historically risen by more than 2%, so be sure to check your state in the list above to be sure. 

Find out how much money you can save annually by installing solar panels on your roof

Key takeaways

  • When thinking about installing solar panels on your home, one of the biggest uncertainties is the future price of electricity.
  • In the U.S., electricity prices have increased by 1.8% per year for the past 25 years. Most homeowners can expect electricity prices to increase by 2% each year.
  • The 5 states with the highest electricity price increases have historically been Hawaii, Oregon, Alaska, Wisconsin, and Massachusetts.
  • The rate of increase in electricity prices may go up because of climate change and grid upgrades, but there is no way to know for sure.
  • Installing solar panels may be the best way to reduce uncertainty about future electricity prices, because estimates of long-term solar production are much more predictable.
 - Author of Solar Reviews

Ben Zientara

Solar Policy Analyst and Researcher

Ben is a writer, researcher, and data analysis expert who has worked for clients in the sustainability, public administration, and clean energy sectors.

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