Data centers, outdated grids, and rising demand push prices up
Electricity prices are outpacing overall inflation in the U.S., with households paying 4.5% more for electricity over the past year, nearly twice the rate of general inflation, according to May 2025 Consumer Price Index data.
The U.S. Energy Information Administration (EIA) expects retail electricity prices to rise faster than inflation through 2026, continuing a trend that began in 2022. Experts cite a classic supply-demand imbalance, as aging infrastructure and slow rollout of new capacity collide with soaring demand.
Where rates are rising fastest
Electricity costs remain highly regional. In March 2025, U.S. households paid an average of 17 cents per kilowatt-hour, but rates ranged from 11 cents in North Dakota to 41 cents in Hawaii. According to the EIA:
- Pacific households will see a 26% price increase from 2022 to 2025
- New England and Mid-Atlantic states are also projected to exceed the national average
- West North Central region rates will rise only 8% in the same period
In dollar terms, the average household could see their annual electric bill rise $219 by the end of 2025, to $1,902 from $1,683 in 2022 — assuming usage remains constant.
Data centers fuel demand spike
Electricity demand had been flat for years due to gains in energy efficiency, but that’s changing rapidly. Data centers — the backbone of AI and cloud computing — are now a major driver of demand:
- Electricity use by data centers tripled from 2013 to 2023
- They could consume up to 12% of all U.S. electricity by 2028, up from 4.4% in 2023
At the same time, the U.S. is electrifying everything from heat pumps to EVs, increasing load on an already strained grid. Population growth and power-intensive crypto mining also add pressure.
Infrastructure bottlenecks drive up costs
Experts say infrastructure is the bottleneck. “The grid is aged,” said Joe Seydl of J.P. Morgan. Transmission line expansion is well below Department of Energy targets, and transformer delivery times have ballooned from weeks to years.
Half of U.S. transformers are nearing the end of their usable life. Meanwhile, inflation in equipment and labor costs is making it more expensive to build new power generation facilities, according to energy analysts at JPMorgan and the Bipartisan Policy Center.
With old fossil-fuel plants being decommissioned and renewable energy deployment lagging, the gap between supply and demand continues to widen — a setup for persistently higher electricity bills.