Release Date: May 9, 2023

STEO Between the Lines: Typical U.S. household electricity bills this summer to be similar to last year's

This summer—June, July, and August—we expect that higher retail prices and consumption that is similar to last summer will lead to U.S. residential customers paying slightly more, about 2% on average, for their monthly electricity bills. Residential electricity customers’ monthly electricity bills are based on both the amount of electricity consumed and their retail electricity price.

Summer electricity consumption depends on the weather

With nearly 90% of U.S. households using air conditioning, monthly residential electricity consumption across many regions of the United States is greatest during June, July, and August. Customers in the southern states along the Gulf Coast generally consume the most electricity per household 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.

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

We expect that the typical U.S. residential customer will use about 1,100 kilowatthours (kWh) of electricity each month in June, July, and August 2023, which is about the same amount as last summer. In Arkansas, Louisiana, Oklahoma, and Texas (the West South Central Census Division), we expect residential customers will use 1,490 kWh per month, or 6% less than during the relatively hot summer of 2022.

In the Midwest states (East North Central and West North Central Census Divisions), we forecast the average customer will use about 3% more electricity than last summer. In most other regions, forecast summer electricity consumption is relatively unchanged from last summer.

Higher forecast summer electricity prices reflect increased costs from previous years

In many areas of the country, state regulators approve the rates that electric utilities may charge their customers based on recently incurred costs. 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 allowing them flexibility to shop around for lower rates.

The amount of time between when costs are incurred and when those costs are reflected in retail electricity prices can vary from a few months to several years. Average wholesale power prices, which are an indicator of generation costs, were trending higher in 2021 and in 2022 in response to rising natural gas prices. We expect these increased electricity supply costs to be reflected in higher retail prices in the coming months.

We currently expect wholesale electricity prices in the second and third quarter of 2023 to be more than 50% lower in most regions compared with the same period in 2022 because of lower natural gas prices. Although wholesale power prices have come down significantly so far in 2023, those lower costs may not be apparent in retail prices until later this year or in 2024.

In most states, customer charges for transmission and distribution on electricity bills are set by state regulators and typically reflect costs incurred over many years. Costs for delivering electricity to end-use customers have also risen as new infrastructure is added to the grid or existing wires are replaced, and these costs have been one of the major drivers for increases in retail electricity prices in recent years.

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 with utility regulation, 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.

In some states, customers can choose a retail power marketer who will supply their electricity and manage the generation component of their bill. The retail rates that power marketers charge can be more responsive to changes in costs than regulated rates, depending on the structure of the purchase agreement.

We forecast the U.S. average residential retail electricity price this summer will be 16 cents/kwh, which is a 2% increase from last summer. This increase in nominal electricity prices is slightly lower than the expected 3% summer-over-summer rate of inflation as reflected in the Consumer Price Index.

Retail electricity prices in the New England states are some of the highest in the country, and we expect that summer 2023 retail prices in that region will average 27 cents/kWh, about 11% higher than last summer. Much of this expected increase in retail prices reflects regional natural gas prices that have been higher than in other parts of the country. The New England power market experienced record-breaking cold weather this past winter and, combined with limited natural gas pipeline capacity, added upward pressure to natural gas prices, which ultimately affects regional electricity prices.

The impact of electricity prices on residential summer electricity bills varies by region

On average, we forecast that typical U.S. residential electricity customers will pay about $4 more this summer on their electricity bills. However, customers in the East South Central states (Alabama, Kentucky, Mississippi, and Tennessee) could pay an average of $8 less on their bills than last summer because of electricity prices that fall slightly after a significant rise in 2022. Customers in New England may pay about $13 more on their summer electricity bills as a result of higher electricity prices.