An Electricity Affordability Crisis: Unraveling the Truth
Electricity prices: a hot-button issue, but is it a real crisis? In the United States, the narrative surrounding electricity affordability has taken an interesting turn. Let's delve into this complex topic and uncover some surprising insights.
The year 2024 marked the beginning of a political debate centered around energy prices. Donald Trump, during his presidential campaign, made a bold promise to reduce electricity costs by 50% within a year. Kamala Harris, not wanting to be left behind, quickly followed suit, addressing a concern that resonated with many low- and middle-income families.
However, the data tells a different story. Nationally, electricity prices in 2024 were relatively stable, mirroring the overall inflation rate. In fact, excluding California's unique circumstances, the average price across the country was lower in 2024 compared to 2014, even after adjusting for inflation. So, why did this narrative gain so much traction?
One explanation is that electricity prices became a symbol of the broader inflationary pressures people were facing. Despite wage increases keeping pace with inflation, growing income inequality meant that for many, the struggle to pay bills was very real.
But here's where it gets controversial... Fast forward to 2026, and we find ourselves a year into Trump's second term. The promised 50% drop in electricity prices remains elusive. In fact, the opposite has occurred. Nationally, electricity rates have increased by 5.2% in the year ending October 2025, nearly twice the inflation rate.
While these increases are significant, they don't necessarily indicate a nationwide crisis. Gasoline prices, for instance, fluctuate much more dramatically and comprise a larger portion of household budgets.
Digging deeper, we uncover a geographic divide. Over the last decade, there has been a dramatic increase in price variation across states. Some states have experienced substantial rate increases, while others have seen decreases, even after adjusting for inflation. This variation has led to a focused concern in certain parts of the country.
For instance, Washington, DC, Maine, and California have seen significant rate increases, with California's rates rising by a staggering 46%. On the other hand, states like Idaho, South Carolina, and Nevada have experienced decreases in inflation-adjusted terms.
So, is the concern about recent increases or a long-term trend? Comparing rates since 2019, we find that 13 states have seen declines, while 37 have experienced increases. Only California and Washington, DC, have seen rates rise faster than national median weekly earnings.
The map below illustrates the average rate increases by state since 2019. Notably, most high-increase states are part of the Eastern and Northeast regional transmission organizations. PJM Interconnection, for example, has been in the news for its capacity price spikes, which have affected retail rates. However, even within these regions, the story is nuanced, with New York and New England not facing the same capacity cost increases as PJM.
And this is the part most people miss... There is no one-size-fits-all explanation for the electricity affordability crisis. In many parts of the country, it's not a crisis at all, beyond the broader issue of affordability due to income and wealth inequality.
National political campaigns often simplify complex issues, but good public policy requires a nuanced approach. Rate increases in different states have distinct drivers, and California's unique challenges are a world apart. A blanket solution would likely be an epic failure.
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