Electricity prices are rising most in states where demand fell
The states that saw the largest increase in electricity prices over the past five years were not states booming with new demand from industrial customers, such as Texas, but states where demand fell. Electricity prices rose 4.2% over the last year, outpacing broader inflation. The popular explanation for the rise in residential electricity prices is the growth of data centers, but state-level data say otherwise.
TL;DR
- Electricity prices have risen 4.2% over the last year, outpacing broader inflation.
- States with falling electricity demand, not booming industrial demand, saw the largest price increases.
- Lower-income households are most affected, spending a higher percentage of their income on energy.
- Utilities' fixed infrastructure costs are spread over fewer kilowatt-hours when demand falls, increasing prices.
- Data centers can contribute to rising household bills if policy is not managed correctly, with their demand inflating costs in capacity auctions.