June 13, 2024

Typical residential electricity bills could be slightly higher this summer

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This summer—June through August—we expect that residential customers’ monthly electricity bills will average $173 in the United States, slightly higher than last summer’s average of $168. We expect that more electricity consumption, resulting from our assumption that summer temperatures will be warmer this year, will be partially offset by lower residential electricity prices in most areas of the country.

Summer electricity consumption largely depends on the weather

Households in most regions of the United States consume more electricity in the summer than in other months because nearly 90% of U.S. households cool their homes with air conditioning. Households located in the southern states along the Gulf Coast generally consume the most electricity because of hot and humid summer weather. Customers in states with milder weather along the Pacific Coast and in New England, regions where air conditioning is less common or used less often, generally consume less electricity in the summer compared with other regions.

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Cooling degree days measure the effect of temperature as it relates to the need for air conditioning. We expect that temperatures will be slightly warmer this summer and that our assumed 5% increase in cooling degree days will lead the average U.S. household to use about 3% more electricity during June, July, and August compared with the same months last year. Because of energy efficiency gains in air-conditioning equipment, our forecast of average U.S. summer electricity use by households in 2024 is 6% less than was used in 2010, even though we expect summer temperatures to be similar.

Weather remains the main source of uncertainty in our forecasts for residential electricity bills. If temperatures end up much hotter than expected, households are likely to face higher electricity bills, especially in the southern states.

Electricity generation costs are declining, but transmission and distribution costs continue to increase

We forecast the U.S. average residential retail electricity price this summer will be 16 cents per kilowatthour (kWh), which would be about the same price as last summer. Compared with the weather, less uncertainty surrounds retail electricity rates in the near-term forecast.

In many areas of the country, state regulators approve the rates that electric utilities may charge their customers based on recently incurred costs. These changes in costs can take time to be incorporated into retail electricity rates. In other areas of the country, residential households can choose their electricity suppliers, which allows flexibility to find lower rates.

The generation component of retail electricity prices represents the cost of producing the electricity supplied to end-use customers, either by generating electricity directly or by purchasing electricity in wholesale power markets or from independent power producers. In states where all components of electricity bills are regulated, changes in generation costs are often passed through more quickly to customer bills than other types of costs through mechanisms such as fuel cost adjustments.

Average U.S. wholesale power prices, which are an indicator of generation costs, were relatively high in 2021 and 2022, but they declined 30% to 50% in 2023, largely because of falling natural gas prices. We expect these lower electricity supply costs will reduce retail prices in the coming months. Utilities are generating more power from renewable energy sources or purchasing renewable generation from independent power producers. These sources generally have more stable costs than traditional fossil sources, which could help to reduce volatility in retail rates.

As supply costs are decreasing, another portion of retail electricity prices, the cost for transmission and distribution, has risen as companies have developed new infrastructure or have replaced existing infrastructure to help integrate expanding renewable generation. Transmission and distribution costs have been one of the major drivers for increases in retail electricity prices in recent years.

Retail electricity prices are likely to be similar to last summer across the United States except along the Pacific Coast and in New England

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We expect most U.S. residential electricity prices to be similar to last year, except along the Pacific Coast and in New England. Residential customers in Pacific Coast states will likely see the biggest increase in electricity prices, which we forecast will increase by 7% during the summer months of 2024. This increase would bring that region’s retail price up to 25 cents/kWh, the second highest in the nation.

Utilities in the Pacific Coast region faced high wholesale costs to supply their electricity needs in 2022 and 2023. This region faced natural gas prices that were higher than national averages along with lower-than-normal hydroelectric generation. California wholesale prices averaged $60 per megawatthour (MWh) in 2023, and Northwest prices averaged $82/MWh, compared with wholesale prices averaging about $30/MWh to $40/MWh in the eastern part of the country.

In contrast, residential customers in New England should experience lower electricity prices this summer after significant increases the past two years. We forecast the New England retail prices will fall by 7% in summer of 2024 compared with last summer because of declining natural gas and wholesale power prices. New England’s average forecast summer retail electricity price of 26 cents/kWh is still the highest in the nation because fuel costs tend to be higher in that region.

Average summer electricity bills in Middle Atlantic states could increase by $14 per month

The net effect of electricity usage patterns and changing electricity prices on summer electricity bills will be mixed. We expect residential electricity customers in the Middle Atlantic states (New Jersey, New York, and Pennsylvania) will see the largest increase in typical summer bills (up $14/month) because of increased electricity use and higher electricity prices.

In the Pacific region, we expect residential bills will go up by an average of $11 per month this summer because of higher prices and similar levels of electricity consumption. In New England, the typical electricity bill should be about the same as last summer because the expected increase in residential use is offset by a lower average electricity price.

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Principal contributor: Tyler Hodge
Data visualization: Tyler Hodge, Owen Comstock