Energy costs in the United States have been on a tumultuous ride in recent years. For those working in the commercial property space, understanding these price movements is crucial. Electricity rates have crept upward, recently outpacing inflation, while fuel costs like natural gas have seen extreme volatility. This article dives into national energy price trends, with examples of regional highs and lows – and examines the drivers behind these shifts. The goal is to equip professionals with data-backed insights into where energy costs have been, and where they may be headed next.
Electricity prices: a steady climb accelerates
For much of the last decade, U.S. electricity prices rose modestly. In 2013, the average residential electricity rate was just over 12 cents per kilowatt-hour, and by 2023 it reached about 16 cents – an increase of roughly 33% in nominal terms (less than 1% in inflation-adjusted terms over 10 years) (U.S. Energy Information Administration, or US EIA).
However, since 2021 the upward trend has accelerated. The national average retail electricity price jumped by about 11% in 2022 alone, rising from approximately 11.1¢ in 2021 to 12.36¢ in 2022 (US EIA). The average price in 2023 reached 12.68¢/kWh. Forecasts suggest electricity prices could rise another 13% between 2022 and 2025 (US EIA).
Some regions already paying high rates may see even steeper increases. For example, New England and the Pacific coast often report the highest retail prices, driven by policy choices, generation fuel mix, and grid upgrade costs.
Natural gas: extreme volatility in fuel costs
Natural gas prices have experienced significant swings in recent years. In 2022, the Henry Hub benchmark averaged $6.45 per million BTU, up 53% from 2021 and the highest since 2008 (US EIA). This surge was due to constrained supply, strong export demand, and weather-related demand spikes.
Prices reversed sharply in 2023, falling to $2.57/MMBtu, a 62% drop, as production hit record levels and demand softened (US EIA). This decline has started to stabilize wholesale electricity prices, particularly in markets heavily reliant on gas-fired generation.
Short-term volatility remains a risk. For example, local gas prices in California surged above $50/MMBtu in late 2022 due to weather events and pipeline constraints (US EIA).
Regional variations
Energy costs vary significantly across regions. In 2023, the national average retail electricity price was about 12.7¢/kWh, but in California it averaged around 24.9¢ and in Massachusetts about 23.2¢ (US EIA). These high prices reflect a mix of policy decisions, grid investments, and limited fuel supply options.
New England saw some of the fastest-growing prices in the past decade. Dependence on natural gas, constrained pipeline capacity, and exposure to fuel price shocks have amplified costs.
By contrast, states like Louisiana, North Dakota, and Utah reported average prices under 10¢/kWh. These regions benefit from local generation resources, lower infrastructure costs, and excess capacity.
Key cost drivers
Recent energy price trends are shaped by several key factors:
- Fuel markets: Volatility in global fossil fuel prices has significantly influenced U.S. energy prices. The 2021–2022 period saw fuel spikes from post-pandemic recovery and geopolitical tensions, with subsequent declines as supply outpaced demand (US EIA).
- Grid investment: Utilities have ramped up capital expenditures on generation and transmission. Annual utility investment in power delivery more than doubled from 2003 to 2023, contributing to rate increases (US EIA). Renewable Energy World noted that grid modernization efforts are a key driver behind rising utility spending, often passed through in consumer rates (Renewable Energy World).
- Policy decisions: States with aggressive clean energy targets often see higher rates due to upfront infrastructure costs. However, these may offer long-term benefits through fuel diversification and resilience. As reported by The Cool Down, rising electricity costs in some regions are also tied to increasing demand from energy-intensive sectors like AI data centers and transportation electrification (The Cool Down).
- Demand growth: In fast-growing markets like Texas, investment in renewables has helped keep rates relatively stable despite rising usage. NY Engineers highlighted how diverse fuel mixes and regional infrastructure differences moderated electricity price changes in some deregulated states in 2022 (NY Engineers).
Conclusion
The cost of energy in the U.S. is rising overall, with electricity prices trending steadily upward and gas prices remaining volatile. Regional variations, policy dynamics, and infrastructure investments all contribute to a complex landscape.For those working in the commercial property space, staying informed about these trends is essential for developing effective energy performance strategies, managing operational risks, and identifying opportunities for efficiency and resilience.
Sources:
