Escalating electricity costs have become a hot political issue, with officials blaming factors like utility profits, data centers, and clean energy policies. This has left voters uncertain about the reasons behind rates rising more than double the inflation rate over the past year.
The Lawrence Berkeley National Laboratory recently released a study providing insights into retail electricity rate trends from 2019 to 2024.
Researchers, who couldn’t discuss the study due to the government shutdown, examined U.S. utility rates in the lower 48 states to identify patterns. National electric rates mostly aligned with inflation, but 17 states saw inflation-adjusted increases, notably California, Hawaii, Connecticut, Massachusetts, Maine, Rhode Island, and New York. The study linked rising rates to increased utility distribution and transmission spending, consistent with previous findings from LBNL showing a 50% rise in distribution-related expenses between 2019 and 2023.
In some states, increased utility spending on disaster recovery was tied to higher rates, especially in California, where wildfire-related costs from 2019 to 2024 added 4 cents per kWh, raising bills by $30 monthly.
Renewable portfolio standards, which mandate cleaner grids, were linked to smaller rate hikes, particularly in the mid-Atlantic and New England, where these policies added up to 1 cent per kWh.
President Donald Trump’s claims about renewable energy raising rates aren’t entirely accurate. While standards require utilities to buy clean power, they only account for 25% of wind and solar growth from 2019 to 2024. The remaining 75% was market-driven and may have reduced retail prices.
The study found rising electricity sales correlated with lower prices in states like North Dakota, where increased commercial demand distributed grid maintenance costs among more customers.
This trend is noteworthy for those observing the surge in electricity demand driven by data centers. However, the savings mainly benefited corporate customers, and future data center demand could exceed infrastructure, increasing prices.
Eric Gimon, from Energy Innovation, noted that in Maryland and Virginia, data center growth is already raising wholesale electricity prices and transmission charges, impacting residential rates. PJM grid operator fears a potential 30-gigawatt shortage in coming years.
The study used a statistical model to identify drivers of state-level retail price changes. Long Lam, an energy analyst at the Brattle Group, who worked on a series of presentations analyzing the paper, noted that while the study identified patterns, it didn’t explain price increase causes.
Lam highlighted that fluctuations in natural gas prices, which powered about 43% of U.S. electricity in 2024, influenced rates, especially in states heavily reliant on natural gas. The Ukraine-Russia war contributed to a 1 cent per kWh price increase in 10 states from 2021 to 2023, with notable impacts in New Hampshire, Louisiana, and Maine.
The study also examined net metering, where utilities pay rooftop solar owners, finding an association with a 1 cent per kWh rate increase in states like California, Maine, and Rhode Island.
This aligns with the California Public Advocates Office’s claim that the state’s rooftop solar program shifted $8.5 billion in costs to non-solar customers in 2024. Richard McCann, who authored a white paper for a solar trade group, argued the study overlooked cost savings from not serving rooftop solar customers.
The study omitted factors like utility ownership and profit margins, which are key in debates about rising rates. Investor-owned utilities, comprising 70% of California’s market, seek profits from capital investments, driving rates. Former utility executive Mark Ellis advocates capping profit margins to reduce rates.
Investor-owned utilities’ prices are higher and rise faster than publicly owned utilities. The study focused on state level trends, leaving this issue for future analysis.
Original Story at insideclimatenews.org