Pipeline Bottlenecks, Increasing Demand Driving Up Electricity Prices

Reliable electricity is essential for our homes and businesses, making its cost a concern for everyone. As we electrify more aspects of our lives and continue to grow our economy, higher costs will impact our wallets even more. We track these prices annually with the latest government data in our Electricity Price Map.  

As has been the case in previous years, a major takeaway from this year’s data is that misguided policy decisions have real-world consequences on individuals and communities. In an uncertain economic climate, this data reinforces that policymakers at the state and federal levels must prioritize pro-growth policies that will increase supply and keep prices low. Continue reading for a snapshot of 2024’s electricity costs.  

A New Nationwide High 

In the twelfth edition of our annual map, the 2024 nationwide average electricity price reached a new high of 12.99 cents per kilowatt hour (¢/kWh). While this constitutes a 2.44% increase as compared to 2023’s nationwide average, it amounts to a much higher 22.55% increase over the nationwide average price just five years ago.

Some States Enjoy Lower Costs 

There were some bright spots in states that have seen a reduction in average cost: 

• North Dakota: 5.55% decrease over 3 years, 11.89% over 5 years 
• Nebraska: 0.22% decrease over 5 years 
• Louisiana: 1.59% decrease over 3 years 
• New Mexico: 5.49% decrease over 3 years 

In addition to these four states, others such as Utah, Oklahoma, Wyoming, Iowa, Idaho, and Arkansas enjoy the nation’s lowest prices, all landing under 10¢/kWh.  

Prolonged Price Stability in Energy Producing States 

Looking back five years, some states have held their longer-term price trends well below the nation’s overall average increase during that period. New Mexico, Iowa, Alaska, and Utah have shown remarkable stability in electricity prices, all holding 5-year increases under 9%. Each of these states rank within the top 20 energy producing states, helping to insulate them from the scarcity that can result from rising demand. This consistency is a positive sign for consumers in these states, providing a buffer against the broader trend of rising costs. 

Northeast and California Face Elevated Rates 

Electricity prices are highest in Hawaii, California, Alaska, New York, and across New England, with rates in each exceeding 18¢/kWh. California is closing in on the 30¢/kWh threshold, a dubious placement considering that only Hawaii comes in with higher electricity rates. 

Longer term trends for California, New York, and most New England states also illustrate significant electricity price increases. Over the past five years, California experienced a meteoric 58.45% increase, New York went up 36.62%, and New England residents saw anything from 20% to nearly 40% increases in their electricity bills. Combined with state policies that put upward pressure on energy prices, these increases are enhanced by a confluence of increasing energy demand and artificially tightened energy supplies, often driven by infrastructure pressures. 

Northeast Prices Soar Due to Limited Infrastructure 

State policies that constrain the supply of natural gas to New York and New England continue to force electricity prices higher. Moreover, the ongoing electrification of heating systems is shifting peak electricity demand to winter, when already limited natural gas availability is sought for both space heating and electricity generation. This growing imbalance between supply and demand drives up consumer costs.  

By the numbers: Natural gas prices in cities like Boston and New York are 160% higher than the national average during peak months.  

Did you know? 55% of New England’s electricity last year came from natural gas. A study released this year by S&P Global sponsored by the Chamber showed that expanding gas pipeline capacity into New York and New England would reduce consumers’ natural gas prices by 27% and 17% respectively, with even greater savings gained during winter. Lower gas prices = lower costs for electricity. 

Our take: “Residents in New York and New England are paying the highest energy prices in the country due to the choices of elected officials to stop the kind of pipeline projects that exist almost everywhere else in the country,” said Marty Durbin, president of the U.S. Chamber’s Global Energy Institute. 

“If built,” Durbin added, “businesses and families would see immediate and lasting price relief instead of escalating prices that will only get worse.”

The bottom line: Addressing these pipeline bottlenecks – through improved permitting processes at both the state and federal levels – is crucial for bringing more low-cost resources to consumers. 

Our Recommendations 

As U.S. power demand is set to soar, maintaining a reliable and affordable electricity supply is truly an “all hands-on deck” exercise. 

Permit America to Build: Modernizing broken permitting processes and a sensible timeline for legal challenges to projects could accelerate the construction of new renewable, natural gas, and nuclear generation resources, while also unleashing the construction of the linear pipeline and transmission infrastructure necessary for their operation. Meanwhile, existing generation resources must not be prematurely shuttered due to unrealistic regulatory standards or aspirational state goals that primarily serve to reduce our energy options.

Looking ahead: While increasing electricity prices have generally been the rule as of late, a coordinated effort to support new infrastructure while also respecting the contributions of what powers today’s grid can help moderate the imbalance of supply and demand while tempering the prices we pay for the electricity essential to power our lives. 

About the author

Heath Knakmuhs

Knakmuhs studies, develops, and communicates strategic energy policies and initiatives with a focus on the electric power sector. He also examines the impact of regulatory action, market-based factors, and emerging threats on the American electric grid.

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