If your electricity bill looks higher this year, you are not imagining it. U.S. residential power prices are on track to average 18.2 cents per kilowatt-hour in 2026, up 5.3% from last year, according to the U.S. Energy Information Administration (EIA). 

‍

What's driving high prices?

‍

Demand is outrunning supply.

PJM, which runs the grid for all or parts of 13 states and Washington, D.C., holds auctions to lock in power supply years in advance. Its latest auction cleared at the highest price allowed for the third time in a row and still came up 6.8 gigawatts short of what the grid needs.

‍

Wholesale costs are up. 

Wholesale power, what utilities pay before electricity reaches customers, is expected to average $52 per megawatt-hour this year, up 11%. In PJM, the increase is closer to 41%.

‍

Grid upgrades are reaching customer bills.

Utilities are passing the cost of new transmission lines, local distribution, and capacity into retail rates.

‍

Tech companies are buying power directly.

In October, Google contracted 3,590 megawatts from Constellation, including 890 megawatts of new nuclear capacity from upgrades to existing plants. Energy, technology and commerce are now competing for the same supply.

‍

What this means for energy companies

‍

Budgets are already stale.

A 2027 plan built on last year's energy prices is wrong before it is approved. EIA expects residential power prices to rise another 2.6% next year. Budgets need today's prices plus headroom.

‍

Cheap-era contracts are squeezing margins.

Supply deals and power purchase agreements were priced for a cheaper market. When costs rise and contract revenue does not, margins erode with every bill. Escalators, pass-through clauses and renewal dates deserve scrutiny now.

‍

Scarcity strengthens the case for new supply, at a price. 

Without the cap, most of PJM would have cleared at about $555 per megawatt-day, roughly 70% above the limit. Markets rarely signal unmet demand so plainly. Yet the same prices lift construction and operating costs, and the Federal Reserve's September rate rise has made borrowing dearer. Models built a year ago are wrong on both sides of the ledger.

‍

Cheap, predictable energy was a convenient assumption, but it is no longer a safe one.

Rising energy costs touch nearly every line of an energy company's plan. The companies that revisit those assumptions now will have more options in 2027 than the ones that wait.

‍

Explore PhiCap's Strategic Advisory Services

‍

‍