Wholesale Power and Retail Electricity Prices Forecast to Increase During 2025: EIA
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U.S. wholesale power prices are forecast to average marginally higher during 2025 in the majority of the U.S. regions compared to 2024, except in the Northwest and Texas, according to an Jan. 27 report published by the U.S. Energy Information Administration. The agency projects wholesale prices to average $40 per megawatthour (MWh) during 2025, up seven percent compared to 2024. Average U.S. wholesale electricity prices were lower and less volatile during 2024 compared to 2023 due largely to reduced natural gas prices, increased renewable generation, and expanded battery storage capacity. The agency expects U.S. residential electricity prices to be two percent higher during 2025 compared to the 2024 average.
Wholesale power prices are an indicator of the cost of generating electricity, and reflect the operating and fuel costs of the most expensive unit that is required for meeting electricity demand at a given point in time at a defined pricing point location within the electricity network, along with any costs related with transmission congestion into that area. Natural gas prices are a key driver of wholesale power prices in many regions, since the marginal generator is often one which utilizes natural gas. The agency projects the cost of natural gas delivered to U.S. power generators to average $3.37 per million British thermal units during 2025, up 24 percent from 2024’s average. The U.S. benchmark Henry Hub natural gas spot price averaged $2.21 per million British thermal units (MMBtu) during 2024, the lowest yearly average price on record. The downward price trend evident in the U.S. natural gas spot price can be attributed to robust natural gas supply fundamentals and constraints in demand for the majority of 2024.
The agency projects the average wholesale power prices will range from around $30/MWh in Texas, where the grid is managed by ERCOT to $55/MWh in the Northwest region. These two regions are expected to have the lowest wholesale prices during 2025. Other regions in the U.S. are expected to see higher wholesale prices during 2025, due to higher costs for natural gas. The agency projects U.S. retail electricity prices for residential customers to average 16.8 cents per kilowatthour, up two percent compared to 2024.
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