EIA: Electricity prices to rise faster than inflation through 2026
The Energy Information Administration published a brief article today forecasting a steady increase in residential electricity prices. The EIA expects electricity prices to rise through 2026, as prices have outpaced inflation beginning in 2022.
However, the prices of residential natural gas, regular gasoline, and heating oil have declined relative to 2022 and are likely to continue dropping through 2026. Gas prices are likely to decline 23 percent by 2026.
The EIA shows that U.S. consumers average annual expenditures, not adjusted for inflation, have risen steadily for electricity. In 2023, U.S. consumers spent an average of $1,760 on electricity and averaged $2,450 on gasoline.
The EIA explains why “electricity prices include more than the cost of generating electricity”:
Retail electricity prices include the cost of generating, transmitting, and delivering electricity to ultimate customers, as well as taxes and other fees. In recent years, electric utilities have increased capital investment to replace or upgrade aging generation and delivery infrastructure, among other factors. Between 2013 and 2023, electricity prices closely tracked inflation, but we expect increases in electricity prices to outpace inflation through 2026.
Utility spending on electricity distribution has surpassed spending on electricity transmission and production, according to our analysis of utilities’ financial reports to the Federal Energy Regulatory Commission. The generation-related portions of retail electricity typically lag changes in wholesale spot prices of electricity generation fuels such as natural gas and coal depending on the customer contract agreements.
What the EIA doesn’t mention among the “other factors” is the systemwide costs of replacing reliable baseload power sources like coal with weather-dependent, intermittent wind and solar infrastructure. There are large upfront capital costs to building wind and solar infrastructure, as well as the costs of load balancing (providing electricity when there is not enough wind and solar) and curtailment (shutting down some wind and solar when there is too much electricity generated). Transmission is another major consideration, as transmission lines are needed to connect wind turbines and solar panels in often-rural areas to the population centers needing electricity.
Minnesota is part of the Census Bureau’s “West North Central,” which also includes North Dakota, South Dakota, Nebraska, Kansas, Iowa, and Missouri. Residential retail electricity prices in the West North Central region have grown overall by eight percent since 2022.
However, Minnesota’s average residential electricity price in February 2025 was 14.62 cents per kilowatt-hour (kWh) and the state trends to have the highest prices in the region. The bright blue line that rises above the others is Minnesota’s residential electricity price.
It’s one more way in which Minnesota proves itself exceptional — high prices for electricity.