How Trump's Big Beautiful Bill will raise household energy costs

Yahoo

a day ago

Energy policy analysts are in broad agreement about one consequence of major legislation that Republicans are currently pushing through Congress: It will raise energy prices for the average American household by hundreds of dollars, once all is said and done.
That's because the legislation, which President Donald Trump has dubbed the Big Beautiful Bill, will repeal the vast majority of clean energy provisions contained in the Inflation Reduction Act, or IRA, which a Democrat-controlled Congress passed in 2022. That earlier law provided a wide array of financial incentives for the deployment of electricity sources like solar, wind, battery storage, and nuclear power, as well as support for consumers looking to buy zero- and low-emissions products like electric vehicles. Choking off support for those measures not only hobbles U.S. efforts to fight climate change — the IRA, if left intact, could single-handedly reduce the country's carbon emissions by 40 percent — but it also means there are fewer new sources of energy for a country that has started to need more and more of it. And reduced supply coupled with increased demand means higher prices.
That's the virtually unanimous conclusion of the academics and policy experts who have been trying to understand the likely effects of the rollback for the past few months, though each group of experts used different assumptions about the full extent of IRA repeal, given that the legislation is still currently being revised by the Senate. Part of the reason for this unanimity is that, once constructed, many newer energy sources like wind and solar don't have substantial operating costs, compared to traditional power plants that must be continuously supplied with fuel.
'Clean electricity has zero generation cost,' said Robbie Orvis, a senior director for modeling and analysis at Energy Innovation, a nonpartisan think tank. 'One of the dynamics is that less clean electricity gets built, and that makes power generation more expensive, because we're relying more frequently on fossil fuels with higher generation costs.'
Orvis' group calculated that those higher power generation costs from using coal or natural gas, along with other price increases stemming from IRA repeal, would result in household energy costs rising by more than $33 billion annually by 2035, compared to a scenario in which the IRA were left intact. That works out to roughly $250 more per year per household. Other analysts came to similar conclusions: The Rhodium Group, an independent policy analysis firm, estimates that average household costs could be as much as $290 higher per year by the same date. Princeton University's ZERO Lab projects that energy costs could grow even higher: Their estimates show that, in a decade, annual household prices will be $270 to $415 higher under the GOP plan.
Energy Innovation's analysis calculated the effects of repealing the IRA on energy bills and transportation costs across the nation. They found that, if the tax credits for clean energy are taken away, utilities will increasingly rely on natural gas and coal, which have higher generation costs. These costs would then be passed on to customers. Additionally, as electric utilities' demand for natural gas increases, the cost of the fossil fuel in the market will also rise, further raising household energy bills.
'Gas suppliers can't respond immediately to large changes in the demand for gas,' said Orvis. 'The change in gas demand is pretty large without the tax credits. So you're really increasing the reliance on gas, and therefore, gas demand and gas prices.'
On the transportation front, the legislation passed by the House of Representatives eliminates IRA tax credits for electric vehicles and undoes the nation's latest tailpipe standards, which limit the amount of pollution that new vehicles are allowed to emit. The result is a greater reliance on gasoline than would happen under the status quo — and more demand for gasoline means higher prices at the pump, per Orvis' modeling.
These price spikes — and the electricity spikes in particular — won't be felt uniformly across the nation. One key factor is how utilities in a state are regulated. Many states have just one utility that both generates power and provides it to electricity customers. But in so-called deregulated markets such as Texas and Pennsylvania, electricity providers compete on an open market to sell their power.
The rules around how utilities calculate and pass on the costs of generating electricity vary significantly between these two models. In regulated markets with just one provider, the cost of generating electricity and getting it to homes is averaged out and passed on to customers. But the competitive nature of deregulated markets means that customers can see wild fluctuations in price. During peak winter and summer, when demand for power is high, prices can be double or triple normal rates. As a result, customers in deregulated markets see more variation in their bills — because those bills closely track changes in the marginal cost of electricity. If those costs rise in a dramatic and systematic way because IRA repeal leads to fewer sources of energy, customers in deregulated markets will feel the full force of it. Customers in regulated markets like much of the Southeast, on the other hand, will be somewhat cushioned from the increase, because their costs reflect the average of all generation and transmission costs incurred by their utility.
'That helps minimize the impact of repealing IRA tax credits — though it also runs the opposite way and helps reduce savings when market prices go down,' said Jesse Jenkins, an associate professor at Princeton University who led the modeling conducted by the ZERO Lab, in an email.
These rising costs will come on top of U.S. energy bills that are already ticking upward. Electricity prices have been steadily rising since 2020, and the federal Energy Information Administration recently forecasted that that trend is likely to continue through 2026. Prices have increased for a variety of reasons, including Russia's invasion of Ukraine disrupting global oil and gas supply chains, extreme heat and other weather shocks, costly maintenance needed to protected the grid from wildfires, and the buildout of additional capacity to meet growing demand. U.S. electricity demand is beginning to rise for the first time in decades, thanks to the construction of new manufacturing facilities and data centers, which support operations like cloud computing and artificial intelligence, as well as the growing adoption of electric vehicles.
Orvis said that the IRA has been helping meet that demand and maintain the country's competitive advantage with China, one of the Trump administration's stated goals. The so-called Big Beautiful Bill would undermine that progress by reducing the amount of energy available for new manufacturing and AI development — and making the electricity that's left more expensive for everyone.
'The ironic thing is that what's in the bill, the net results of it will be completely contradictory to what the [Trump] administration's stated policy priorities are and will cede a lot of the AI development and the manufacturing to China specifically,' said Orvis. 'That's the important macro context for everything that's happening now — and some of the un-modelable implications in the long run.'
This story was originally published by Grist with the headline How Trump's Big Beautiful Bill will raise household energy costs on Jun 6, 2025.