The U.S. Energy Information Administration has forecast higher wholesale power prices for 2025 across the country’s regional markets, except Texas and the Northwest.
Wholesale power prices could average $40 per megawatt hour (MWh) this year, rising 7% over 2024, the EIA said in a report on Monday. It forecast the average price of electricity for U.S. homes would grow by 2%, not accounting for inflation.
The biggest jumps in wholesale prices, with increases of between 30% to 35%, are expected for the Southwest and California, it said.
WHY IT MATTERS
As power demand from AI data centers, increased domestic manufacturing and the electrification of industries like transportation, rises faster than new supply is added to the grid, power bills are expected to grow.
The price of wholesale power is partially determined by power generator operating costs, the cost of fuel to run power plants and how much traffic there is on the transmission lines that transport electricity.
The cost of natural gas, which is the single biggest fuel source for U.S. power generation, delivered to power plants is expected to average $3.37 per million British thermal units this year, a 24% jump from last year, but roughly the same as in 2023, the EIA said.
OUTLIERS
The EIA forecasts Texas wholesale power prices will range from about $30/MWh in the ERCOT market, and $55/MWh in the part of the state that is managed by the Southwest Power Pool. Texas, which has seen a boom in solar power projects, is the only power market expected to see lower prices this year compared to last, the EIA said.
In the U.S. Northwest, an expected 20% increase in hydropower generation on the expectation of more rainfall in the area, is expected to grow power supply and keep prices from rising, the EIA said.
(Reporting by Laila Kearney Editing by Christina Fincher)