Since President Biden took office, residential electricity prices have surged by 23%, largely driven by the climate policies of the Biden-Harris administration. U.S. utility regulators are now considering further rate hikes as electric utilities seek to fund investments necessary for transitioning to wind and solar technologies. These technologies, often located far from demand centers, require additional transmission and distribution infrastructure, which adds to the cost. In California, utilities that prioritized building renewable energy facilities over maintaining existing infrastructure to meet state energy mandates are now facing the need to catch up on maintenance and bury power lines to mitigate wildfire risks. Additionally, these utilities are requesting rate increases to address the increased electrification driven by Biden-Harris climate policies and to purchase expensive batteries for storing energy from intermittent solar and wind sources.
In 2023, state utility regulators approved $9.7 billion in net rate increases, more than double the $4.4 billion authorized in 2022. This net increase, calculated as the difference between authorized rate increases and decreases, includes $10.3 billion in approved rate hikes and $0.6 billion in reductions. Notably, over one-third of the net rate increase was allocated to two California utilities working to make their grids more resilient to wildfires. From the beginning of 2023 through August 12, 2024, regulators nationwide approved 58% of the net rate increase requests submitted by electric utilities. If this trend continues, total rate increases for 2024 could reach $8.9 billion (adjusted for inflation to 2023 dollars).
The rate increases in the graph below clearly show that the major increases occurred during the Biden-Harris administration and that those rate increases are expected to continue.
The rate increases this year include:
- More than one-third of total authorized U.S. rate increases in 2023 went to two California utilities, Pacific Gas and Electric ($2.5 billion in rate increases) and Southern California Edison (almost $1 billion in rate increases), mostly for wildfire protection including undergrounding wires, vegetation management, and several other wildfire-related projects.
- The Illinois Commerce Commission authorized a $759 million rate increase to ComEd for grid infrastructure development necessary to comply with the Illinois Climate and Equitable Jobs Act (CEJA), Public Act 102-0662 goal to transition to 100 percent “clean energy” by 2050. The law is intended to encourage increased electrification and adoption of electric vehicles, which is expected to double electricity use by 2050, and is already increasing prices.
- The New York Public Service Commission authorized a $442 million rate increase to Consolidated Edison for investment to prepare the electric system for more frequent and severe weather events and meet the state’s goals of generating 70 percent of electricity from renewable sources by 2030 and reaching zero emissions from the statewide electrical demand system in 2040.
- Duke Energy Carolinas was granted a $436 million rate increase by the North Carolina Utilities Commission to cover current and planned system investments to enable it to achieve carbon neutrality by 2050. The increase also covers uncollected debts incurred during the COVID-19 pandemic, updates to depreciation rates for sub-critical coal plants, the implementation of customer service programs, storm costs, and costs of compliance with the requirements of the Democrat-passed Inflation Reduction Act of 2022, in which Vice President Harris provided the deciding vote. That legislation provides massive tax credits for politically correct technologies such as wind, solar and electric vehicles and their infrastructure in a push towards “net zero.”
Most states regulate residential electricity markets through public utilities commissions. Some states have deregulated electricity markets that allow customers to choose among competitive suppliers to provide their electricity. Charges to cover distribution and transmission costs, which make up nearly 40 percent of electric bills, however, are recovered through rate regulation in all states. Utility rate making is a complex process but generally involves a regulated electric utility establishing a revenue requirement to maintain operations and cover the cost of required capital improvements. The proposed rates must then be approved by a state public utilities commission. The approval process can range from an automatic increase to a years-long approval process. The submission and approval of these rate increases for retail electricity prices is very different than the markets for other energy commodities such as gasoline or wholesale natural gas.
Energy costs are regressive, taking a bigger share of income from low-income consumers than from wealthier consumers. To cut costs, those consumers who own homes can improve efficiency, but renters would not want to make those types of investments. The Inflation Reduction Act is expected to help fund energy efficiency improvements, but it is heavily tax incentive-focused, putting it out of reach of many consumers who may not pay taxes. Last year, CNN reported that 20 million households, or about one of six in the United States, were behind on their utility bills.
Biden-Harris Climate Agenda Increases Electricity Prices
Since President Biden’s administration began, residential electricity prices nationwide have surged by an average of 23%, largely due to his climate agenda. This includes increasing the share of weather-dependent wind and solar power on the grid and mandating the electrification of transportation, heating, and cooking through various standards and regulations. The Environmental Protection Agency (EPA) regulations are pushing for the retirement of existing coal and natural gas generators, which are being replaced by heavily taxpayer-subsidized wind and solar units that require costly battery storage. Additionally, the Biden-Harris administration is promoting expensive offshore wind projects along the Atlantic, Pacific, and Gulf coasts, which are more than three times as costly as onshore wind and over twice the price of natural gas combined cycle technology.
Electricity prices vary significantly across the U.S., with blue states that align more closely with the Biden-Harris climate agenda experiencing the highest costs. For instance, California, which has the second highest residential electricity prices in the country at 34.31 cents per kilowatt-hour—more than double the national average—has seen the most significant percentage increase in rates due to its anti-fossil fuel policies. In 2022, the California Public Utilities Commission approved a project to add over 25 gigawatts of renewables and 15 gigawatts of batteries to the state’s grid by 2032, costing an estimated $49.3 billion. The California Independent System Operator also released a plan to upgrade the state’s transmission grid at a cost of approximately $30.5 billion, bringing the total combined expense of these initiatives to around $80 billion. PG&E Corp., the state’s largest electricity provider, increased residential bills by 13% in January and anticipates further hikes this year.
The nationwide increase in electricity prices is driven by several massive expenditures utilities must undertake simultaneously. Electric grids across the country are undergoing a multibillion-dollar transition to replace fossil fuel plants with “green” technologies. Additionally, grids must expand their generation capacity to meet an unexpected surge in demand driven by artificial intelligence, data centers, federally subsidized manufacturing facilities, and the Biden-Harris administration’s electrification efforts.
Over the next two years, about 20 gigawatts of fossil-fuel power are set to retire, including a significant natural gas plant in Massachusetts crucial for providing electricity during extreme cold weather when demand peaks and renewables are unreliable. PJM’s external market monitor has warned that up to 30% of the region’s installed capacity might be at risk of retiring by 2030. Compounding the problem, the Biden-Harris EPA’s proposed “power plant rule” would require coal plants and most new natural gas plants to install expensive and unproven carbon capture technology, while new natural gas plants are needed to back up wind and solar and replace retiring coal facilities.
The Inflation Reduction Act’s substantial subsidies for renewables further disadvantage fossil-fuel and nuclear plants, as they can cover up to 50% of the costs for solar and wind power. This makes it challenging for baseload coal, gas, and nuclear plants to compete in wholesale power markets, leading to their closure. The consequences have already been seen in events like Texas’s week-long power outage in February 2021 and the eastern U.S.’s rolling blackouts during Christmas 2022. If the Biden-Harris administration’s energy transition, forced electrification, and stringent regulations persist, they will likely result in even higher electricity prices and a less reliable grid.
Conclusion
Electric rates are expected to go up this year by $8.9 billion—close to the $9.7 billion they increased last year. While inflation is lessening, the Biden-Harris regulations and standards are not, causing electric utilities to make substantial investments to add solar and wind technologies to the grid and to prepare for huge increases expected in demand from the forced electrification of the transportation sector and heating and cooking. Since energy costs are regressive, low-income families will have a harder time to pay electric utility bills than wealthier households.
