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US electricity prices are expected to fall


Key findings

  • The US Energy Information Administration projects the regional average wholesale electricity price in the US to fall 37% this year.
  • However, state regulations on utility rates, transmission restrictions and short-term spikes in demand mean consumers will see varying impacts on their electricity bills.
  • Texas, Northeast, is likely to see larger wholesale declines than Northwest, California.

U.S. wholesale electricity prices should fall significantly this year, the U.S. Energy Information Administration’s latest monthly report predicted, providing at least some relief for consumers whose electric bills increased in 2022.

The EIA projects that wholesale prices it tracks in 11 selected U.S. centers will average $51.36 per megawatt hour (MWh) in 2023, down 37% from their overall 2022 averages.

Electricity prices rose nationally last year as prices for natural gas, which accounts for about 40 percent of the fuel used to generate electricity in the U.S., rose globally following Russia’s invasion of Ukraine. Economic sanctions against Russia, the world’s top supplier of natural gas, fueled the increase.

US retail home prices rose 9% last year, with consumption up 2.6% despite rising costs to generate busy utilities.

However, the EIA predicts that the prices of natural gas supplied to electric generators in the US will fall by about half this year. In addition, US electricity consumption is projected to decline by 1.2%, helping to further ease upward price pressures in 2022.

A complex market

However, consumers may not immediately see the impact of falling wholesale prices on their bills.

For one thing, the majority of plants across the country rely on fuel other than natural gas—coal, nuclear, and increasingly renewables like solar and wind—to generate electricity, which affects plant costs in Varying degrees.

Coal prices, for example, have risen 41% since May 2021, and U.S. production is expected to decline 7% this year. Reliance on coal-fired plants is declining, but it still accounts for nearly a fifth of the nation’s electricity generation.

The vagaries of the aging U.S. power grid and transmission lines available to carry power from plants to homes are another complicating factor in retail pricing.

In addition, unpredictable weather-related changes in demand can have dramatic, volatile impacts on electricity markets for short periods in localized areas.

Likewise, widely varying state regulations greatly affect the rates that utilities charge their customers.

Regional differences

Still, the EIA’s latest forecast offers some hope for consumers facing inflation for a myriad of products and conveniences other than turning on the lights.

Regional differences can determine where prices fall the most:

  • In Texas, close to abundant supplies of natural gas and wind power, the EIA sees wholesale prices falling 61% to an average of $30 Mwh this year.
  • In the Northeast, where pipeline restrictions have pushed average wholesale prices above $90 Mwh in 2022, the EIA projects prices will drop to the mid-$50 Mwh range this year.
  • In the Northwest and California, however, EIA expects more moderate wholesale price declines of 18-22%. Regional natural gas prices in the West jumped late last year, pushing full-month prices to $250 Mwh; EIA expects average wholesale prices of $80 Mwh in the Northwest and $69 Mwh in California.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.