- High energy costs burden much of the US, with Hawaii and Connecticut having the highest average bills.
- Extreme weather, volatile gas markets, and infrastructure investments are driving up utility costs.
- Renewable energy expansion in states like Colorado helped moderate cost increases.
Where you live can impact how much you pay for utilities.
That’s because the price of electricity depends on more than just the price of oil and gas. It is also affected by local utilities’ investment in infrastructure, whether the state is vulnerable to extreme weather, and the amount of renewable energy that powers the grid.
The most recent data published by the Energy Information Administration, a US government agency, showed that residents of Hawaii, Connecticut, and Alabama had the highest average monthly electricity bills in 2024. Utah, New Mexico, and Colorado had the lowest average bills.
As energy bills have risen even faster than overall inflation in recent years, the greatest burden falls on the lowest earners, who tend to spend a larger share of their budgets on utilities. While President Donald Trump has promised to slash energy prices in half by pursuing a “drill, baby, drill” agenda on oil and gas, energy analysts and economists told Business Insider it’s not that simple.
Extreme weather combined with exploding costs to upgrade the infrastructure that delivers electricity across the country are fueling higher prices. Renewable energy has helped moderate prices in some states, but looming tariffs on Canada and Mexico combined with skyrocketing energy demand from data centers may only increase costs.
Energy experts shared some of the biggest factors driving energy costs and explained why there are disparities among states.
The cost of extreme weather and volatile gas markets hit low earners the hardest
Since January 2020, consumer energy services costs have risen about 34%, compared to a 23% increase in overall prices, Bureau of Labor Statistics data showed. Additionally, the Bank of America Institute found that the median utility bill payment for electricity, gas, and water rose 6% in January compared to a year earlier, double the 3% rise in overall inflation during this period.
These cost increases have hit people with the lowest incomes the hardest. A Bank of America Institute note said that in 2023, US households with annual incomes below $50,000 spent 6.8% of their earnings on natural gas and electricity costs, compared to 1.2% for households with annual incomes more than $150,000.
While it’s no surprise that using more fuel or electricity can spike customers’ energy bills, analysts told Business Insider that extreme weather, volatile oil and gas prices, and utilities’ growing investments in the poles, wires, and big transmission lines that deliver power to homes are all contributing to increased costs.
Freezing winters — like the subzero temperatures that blanketed the US this year — and scorching summers can spike the demand for heat and air conditioning and hike costs. Utilities are investing in aging infrastructure that carries electricity from power plants to communities and can recover those costs from their customers. Oil and gas, which still supplies the majority of US electricity, is a volatile market vulnerable to global shocks like Russia’s war in Ukraine.
Those shocks hit New England hard. The region, which includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, gets more than 50% of its power from natural gas. And unlike states such as Pennsylvania or Texas — where natural gas is underground in the region — a lot of the fuel for New England states is imported. This partly explains why energy costs are higher compared to the rest of the country, said Dan Dolan, president of the New England Power Generators Association, a trade group.
Dolan said wholesale electricity prices have fallen over the last two decades, but that’s been offset by transmission costs soaring 800% between 2004 and 2023, data from New England’s regional transmission organization showed.
“We’ve also seen a dramatic increase in the spending at the distribution level as we build out more substations, poles, and wires to highly electrified homes and businesses,” Dolan said. “Those combined elements — transmission and distribution — now make up the largest single segment of the vast majority of electricity rates across New England.”
Dolan added that New England states have more aggressive climate policies, including participation in a regional cooperative that caps carbon emissions from power plants and requires them to pay for every ton they emit — another cost that’s passed on to customers.
On the opposite coast in California, extreme weather is driving higher utility bills, which averaged $159 a month in 2024. Utilities have spent billions of dollars on wildfire-related costs that are partially being passed on to consumers, said Brendan Pierpont, director of electricity modeling at Energy Innovation, a non-partisan energy and climate policy think tank.
Those costs include investments in preventing wildfires, like managing vegetation that can catch fire and burying power lines underground, as well as legal liabilities for blazes caused by their infrastructure.
Renewables can slow rising costs
Pierpont added that some states, including Colorado and New Mexico, have been able to moderate rising electricity costs in part by expanding solar and wind power.
“Many of the states with the cheapest power and lowest rate of increases have easy access to high-quality wind and solar resources,” he said, citing a paper he authored last year.
Johanna Neumann, senior director of Environment America’s Campaign for 100% Renewable Energy, said states that generate the highest percentage of their electricity from renewable energy sources have electricity rates that are below the national average, pointing to Iowa, South Dakota, and Oklahoma as examples.
“Renewables actually reduce wholesale electricity costs and reduce our dependence on notoriously volatile natural gas,” she said.
However, not all states that have heavily invested in renewables have electricity rates lower than the national average. Neumann pointed to Hawaii as one example, where she said benefits from renewables investments are being offset by continued reliance on imported oil.
“These fuels have to be shipped to the island across long distances, leading to higher electricity costs,” she said.
Texas is in a category of its own because the state’s power grid is isolated from other regional ones. A deadly winter storm in 2021 that knocked out power and sent electricity prices soaring prompted state regulators to direct power plants to better prepare for extreme weather.
While Texas has abundant natural gas resources and is a leader in solar and wind development, the state aims to build more fossil fuel and small nuclear power plants to meet growing demand, said Michele Richmond, executive director of the Texas Competitive Power Advocates, which represents companies that produce power, including natural gas, wind, and nuclear.
Richmond added that Texas has a competitive, deregulated energy market that dispatches the cheapest power first to help offset some of the cost pressures. But it isn’t immune from rising prices.
“We believe that having a diversified fuel mix is good for reliability because the wind doesn’t blow all the time, and the sun doesn’t shine all the time,” Richmond said.
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