U.S. electricity rates are rising, and utilities are making more money than ever

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4 hours ago

U.S. electricity costs are soaring. The average price of electricity hit 18 cents per kilowatt-hour in April 2025, up 35% from five years ago. It's significantly outpacing inflation.
According to a recent PowerLines report, nearly 80 million Americans struggle to pay their utility bills, yet prices are expected to increase. In early 2025, U.S. gas and electric utilities either requested or were approved for rate hikes totaling roughly $20 billion.
Utility companies say the price increases are necessary to upgrade our aging grid. Some also point to clean energy, specifically solar homeowners, as the reason electric bills are rising. But researchers have looked into the numbers and say they don't add up.
'Utility spending has been out of control for years and years and years,' said Brad Heavner, Executive Director of the California Solar and Storage Association (CALSSA).
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Your electric bill is divided into two sections: Supply and delivery. The supply part covers the cost of generating the electricity you use, while delivery is the cost of delivering the electricity to your home.
Price fluctuations will always surround energy generation, whether it's coal, gas, or renewables. But when we asked Jigar Shah—an entrepreneur and podcaster who was formerly the Director of the Loans Program at the Department of Energy—he said it's not generation but the distribution part of our electric bills that has 'been going haywire.'
'Distribution used to be 20%, today, it's 50% of your bill,' said Jigar.
Below is an example of an electric bill from a Massachusetts home. The electricity supply is about $220, which is still high, but the delivery charges are nearly $315, or 60% of the bill.
So the question becomes, why are energy delivery costs rising? Jigar says our electricity demands are too great for the current grid infrastructure.
'People are buying all sorts of things that use electricity, whether hair dryers, electric vehicles, heat pumps, electric water heaters, or whatever it is. And every time you do that, the utility says, 'We need to be able to upgrade the distribution grid so that you can do whatever you want. You can turn everything on in your house simultaneously, and we have to be able to serve you.' That bargain is getting way too expensive,' said Jigar.
He's right—Americans are using electricity like never before. This isn't necessarily bad because home electrification is excellent for our planet and health. The problem is that much of our power grid was built in the 1960s and 1970s, when people had one TV, no computers or internet, and only 12% of homes had air conditioning.
Jesse Buchsbaum, energy economist and fellow at Resources of the Future (REF), said our electric bills are directly tied to utilities' investments to upgrade transmission and distribution infrastructure. (FYI—transmission lines are the high voltage wires that carry electricity from a power plant to your city or town.)
'In many places, the grid is aging, and so there are necessary upgrades that are needed, especially as climate risk and natural disaster risk are rising,' Jesse said.
He also raises the valid argument of a changing climate. Over the last decade, we've seen record-hot summers and historic freezes, which only put a bigger strain on the grid. For example, in 2024, Hurricane Helene shut off power to more than two million North Carolinians. In 2021, the ice storm in Texas left millions of people powerless in freezing temperatures for days.
To prevent these events from happening, utilities need to strengthen and expand our current power grid—and we're the ones paying for it.
'[Rate increases] are needed to expand the grid, both in the generation sense, but also to build the poles and wires that will transport the power to those new sources of demand, " Jesse said. 'A lot of those costs end up being borne by both residential and commercial industrial rate payers.'
While our electricity needs have increased and our grid needs upgrades, some experts argue that utilities are hiking our rates more than they need to. In a report published earlier this year, Brad and his team at CALSSA said the real reason rates are rising in California is 'out of control utility spending.'
CALSSA hired an independent economist to investigate 20 years of utility rate case filings in the state. Brad said that when utilities claim they need more money to fix and expand the distribution grid, regulators are 'unable to say no' and approve rate hikes that may not be necessary.
'And the utilities get away with it—they're laughing year after year,' Brad said. 'Now, after two decades of effectively playing this game, their profits have soared and so have electric rates.'
While the CALSSA report is specific to California, utility mismanagement of funds is a nationwide issue. RMI released a report in November 2024 highlighting how utilities have invested money into small transmission projects within their territories. The report says these small, local projects have very little oversight from state and federal regulators, earn the utilities guaranteed profits, and cost us ratepayers way more than if they were to invest in bigger, regional projects—ones that would require more overhead and planning.
Report co-author Claire Wayner told Canary Media that transmission planning is like 'two cars being driven on two different roads in parallel. The regional road is like a toll road with all these checkpoints: identify regional needs, open competitive bidding windows, identify the costs and benefits…​The local road has no speed limits. [Utilities] can build as much as they want.'
Here's some proof in the pudding: A 2024 analysis by Grid Strategies found that transmission project spending hit an all-time high in 2023, but only 55 miles of new transmission lines were added that year, compared to a record 4,000 miles added in 2013. Yet, our electricity rates were about 20% less in 2013.
'We've authorized the utilities to spend a lot of money, and they haven't spent most of that money yet,' Brad said. 'It's really criminal—in some cases, we've paid them to make upgrades and fix transmission towers, and they haven't done it.'
While millions of Americans are unable to pay their monthly bills, an analysis by the Energy and Policy Institute shows the country's largest publicly owned utilities pay their CEOs between $17 and $33 million a year. The CEOs earned a collective $647 million in 2023, a 9% increase from 2022.
The 2025 analysis shows that the collective payout dropped to $530 million in 2024. However, it states that most of the 54 utilities examined increased their executive payouts year over year.
Some utilities also claim that homes with solar panels are increasing your bills—a theory called 'the solar cost shift.'
The idea is that if solar homeowners generate their own power, utilities make less money. But because solar homeowners still have to use the grid sometimes, the utility raises everyone else's rates to compensate. It sort of paints solar panel owners as freeloaders.
Jigar says there is some cost shift involved when people go solar, but it's 'far smaller than what people are suggesting.'
'I think the bigger problem is that it feels bad when your bills are going up. And a bunch of people that have the means to put solar on their roof are getting a good deal, and all of your neighbors are not getting a good deal,' Jigar said.
Most of us—whether we have solar panels or not—can look at our utility bill and clearly see charges related to solar panels. So, utilities are making us all pay extra while our neighbors with solar enjoy lower electric bills? It doesn't sound fair, but Brad and the CALLSSA team crunched the numbers and said the solar cost shift is extremely inflated and created with 'faulty math.'
'It's really very creative how [utilities] have built this methodology and storyline that has sunk in with a lot of policymakers. And they push it so hard and in such a widespread fashion that it's difficult to counter,' Brad said.
It's not just California; the nonprofit Solar United Neighbors compiled numerous studies from Mississippi to Maine to Nevada and 'found little or no evidence for a 'cost shift' from rooftop solar customers.' Similarly, a report from Brookings found that the economic benefits of solar homeowners not only outweigh the costs but, in most cases, provide a 'net benefit' for the utility and non-solar ratepayers.
'People are catching on to that fact, and the data is pretty clear how much they've increased their spending,' said Brad. 'To deflect attention away from them, they've come up with this elaborate 'cost shift' story saying solar customers are to blame.'
Utilities say they have to increase our rates to bring more electricity onto the grid during moments of high demand, like on a hot summer day when everyone is cranking their AC. But Brad explained that one of the biggest holes in the cost shift theory is that when homes generate their own electricity, they actually help offset this peak power demand.
'Normally, you expand the grid in order to serve a higher peak load. We've kept peak load constant, yet they're spending three times as much money as they did 15 years ago,' Brad said.
Utilities are painting solar owners as the scapegoat for high rates, but really, it's the opposite. Research shows rooftop solar saved California ratepayers $1.5 billion in 2024 alone. Home solar supplies much-needed electricity to the grid, but Brad claims that throws a wrench in the utility's profits.
'Utilities feel threatened by customer solar and storage because it reduces their profit motive, their ability to rate base grid expansion, which is what drives their profits,' Brad explains. 'In California, there's enough solar that they feel like we're really taking weight off the grid and causing them to build less infrastructure, hurting their profits. So they've gone after us in a very strong way here, and that is spilling over into other states, sadly, where you don't have nearly as much solar. And yet this utility playbook is playing out across the country.'
It comes down to simple supply and demand: Utilities are in the business of generating electricity and selling it to us. When you produce your own electricity with solar, that threatens their business model and their large paychecks.
To try and simply answer the question of why your electric bill is so high, it's because our power grid is old and overloaded. And the way most utilities are fixing it is akin to slapping a very expensive band-aid on a gaping wound. Oh, and we're paying for that band-aid.