Electricity Price Analysis - May 2025
Summary
Key Findings: Electricity prices in the United States reached $0.182 per kWh in May 2025, representing a 4.0% annual increase and continuing the upward trajectory that has characterized the sector since 2022. The current price reflects steady month-over-month growth and aligns with industry forecasts predicting sustained price increases through 2026.
Current Price Trends
May 2025 Data:
- Current price: $0.182 per kWh
- Monthly change: +0.6% (from $0.181 in April)
- Annual growth: +4.0% (from $0.175 in May 2024)
- 6-month trend: +3.4% increase
The data shows consistent upward momentum, with electricity prices continuing to ascend in 2025, driven by a range of factors including rising demand, transmission and distribution cost increases, and an anticipated rise in the price of natural gas.
Historical Context and Patterns
Multi-Year Trend Analysis
| Period | Price ($/kWh) | Annual Change |
|---|---|---|
| May 2025 | 0.182 | +4.0% |
| May 2024 | 0.175 | +6.1% |
| May 2023 | 0.165 | +7.1% |
| May 2022 | 0.154 | +10.0% |
The data reveals that while annual growth rates have moderated from the peak increases of 2022-2023, retail electricity prices have increased faster than the rate of inflation since 2022, and are expected to continue increasing through 2026.
Recent Monthly Performance (2025)
- January: $0.179 (+3.5% annually)
- February: $0.179 (+3.5% annually)
- March: $0.181 (+4.0% annually)
- April: $0.181 (+4.6% annually)
- May: $0.182 (+4.0% annually)
Key Market Drivers
1. Surging Electricity Demand
After nearly two decades of stagnant electricity demand growth, the United States is seeing data centers and electrification drive consumption higher, with data centers potentially accounting for 44% of U.S. electricity load growth from 2023 to 2028.
2. Infrastructure Investment Requirements
Electric utilities have increased capital investment to replace or upgrade aging generation and delivery infrastructure, contributing to upward pressure on consumer rates.
3. Natural Gas Price Correlation
Electricity prices are highly connected to natural gas prices, and as the commodity is exposed to international markets that pay a higher rate, U.S. prices are also expected to rise.
4. Grid Reliability Concerns
NERC published an assessment concluding more than half of the U.S. electric grid could see energy shortfalls in the next five to 10 years, with peak summer demand forecast to rise by more than 122 GW in the next decade.
Regional Variations
Residential electricity prices in the Pacific, Middle Atlantic, and New England census divisions—regions where consumers already pay much more per kilowatthour for electricity—could increase more than the national average.
Recent state-level impacts include:
- Maine: 20% year-over-year increase in 2023
- Nevada: 19% price jump
- California, Connecticut, Rhode Island: Significant increases
Market Outlook and Forecasts
Short-term Projections (2025-2026)
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, suggesting continued upward momentum beyond the current May level.
Long-term Trends
In the 45-year period from 1979 to 2024, prices have increased at an average annual rate of 2.9% and have only decreased year-over-year nine times. Electricity prices may fall year-over-year once or twice every decade, but will continue climbing at a steady rate.
External Factors and Policy Impacts
Nuclear Energy Renaissance
Momentum for nuclear energy gathered amid rapidly rising projections of future load growth due to electrification and AI proliferation, with 2024 being "the year that we all woke up to the need for nuclear".
Capacity Market Pressures
Capacity prices will rise nearly 10x for the 2025/2026 delivery year due to growing demand, a lack of supply due to retiring power plants, and constraints on electric grid infrastructure.
Climate and Weather Impacts
Electricity demand is expected to increase, especially in regions that will likely require more heating or cooling as climate change impacts progress, driving up electricity prices.
Investment and Infrastructure Response
Expected electricity demand growth is spurring expansion in generating capacity and electricity storage, with much of this additional capacity coming from solar and battery storage facilities.
Conclusion
The May 2025 electricity price of $0.182 per kWh represents a continuation of the sustained upward trend that began accelerating in 2022. While annual growth rates have moderated from peak levels, multiple structural factors—including unprecedented demand growth from data centers, aging infrastructure replacement needs, and grid reliability challenges—suggest that utility electricity prices are expected to continue rising in 2025, albeit at a lower rate than experienced in 2022 and 2023.
The current 4.0% annual growth rate reflects a "new normal" for the electricity sector, driven by fundamental shifts in demand patterns and infrastructure requirements that are likely to persist through the remainder of the decade.