Electric Shock: How Bad Green Policy Sent Power Prices Soaring

Until shortly before the coronavirus pandemic, real electricity costs for most American families had been declining for a decade. [some emphasis, links added]

From 2009 to 2019, the fully loaded cost—that is, the total price per kilowatt-hour including generation, transmission, distribution, and surcharges—rose from 11.5 cents to 13 cents, an increase of 13 percent, well below the 19 percent growth in the Consumer Price Index.

Despite inflation, the average annual national rate even ticked down in a few of those years.

That changed in 2019.

From that year through 2024, residential rates jumped 27 percent (faster than inflation) to an average of 16.5 cents nationally.

These recent price shocks have not been evenly distributed. Most states still saw rates rise more slowly than CPI, meaning that they fell in real terms. The fully loaded cost of a kilowatt-hour today varies more than ever.

In 2024, it ranged from 11.5 cents in Nebraska, Idaho, and North Dakota to 29.4 cents in Massachusetts, 32 cents in California, and 42.9 cents in Hawaii.

Much of the rise in the national average stemmed from California’s eye-watering 67 percent increase, the nation’s biggest.

The next largest hikes, as a percentage of 2019 rates, were in the District of Columbia, New York, Maryland, and Maine—all at 36 percent, or roughly 50 percent above inflation.

Electric bills pose a special hazard for the political class because they serve as monthly reminders of policy failure. Public officials scramble to show that they’re “doing something.”

New Jersey governor-elect Mikie Sherrill, for instance, has called for rate freezes. Utilities remain a favorite scapegoat for state legislators, even as their rates (and profits) remain tightly regulated by those same states.

Some populists, meanwhile, blame data centers for consuming massive quantities of electricity.

Cindy O’Laughlin – state politician – told me to stop asking questions about data centers & higher electricity rates. Not a chance. These data centers are massive electricity hogs. That’s why Silicon Valley wants more transmission lines, solar farms and windmills. Somebody has…

— Josh Hawley (@HawleyMO) October 17, 2025

But today’s high prices stem from decisions made years ago by governments and the utilities they regulate. Much of the recent increase was purposeful—indeed, avoidable—and the worst is likely still to come.

Electric rates have two main components: the cost of generating power and what transmission and delivery companies—mostly utilities—are paid to deliver it.

For most of the past century, this boiled down to a single rate set by a local electric monopoly, with the blessing of state utility regulators.

Beginning in the late 1990s, deregulation swept the country as many states, including New York, Texas, and California, required utilities to sell off their power plants.

Generators would compete in newly created wholesale markets, while utilities focused on maintaining and operating their parts of the grid.

The new landscape attracted fresh capital, with high prices serving as a beacon for investment where the need was greatest. Much of the added capacity came from natural-gas plants, taking advantage of the vast new supply unlocked by the fracking boom.

Gas fueled a transformation in American power generation. In 2008, half of U.S. electricity still came from coal, while natural gas and nuclear each provided about 20 percent.

By 2024, gas was supplying 42 percent of the grid, and coal had fallen to just 16 percent.

The consumer benefits of cheap gas obscured the extent to which state governments, prodded by environmentalists, were deliberately making electricity more expensive.

One method was requiring power plants to pay for their carbon dioxide emissions through “cap-and-trade” programs. Ten Northeast and Mid-Atlantic states, including New York, participate in the Regional Greenhouse Gas Initiative (RGGI).

The cost of these allowances has surged in recent years.

In 2019, the four RGGI allowance auctions brought in $284 million. The four most recent rounds took in $1.4 billion, with costs passed on to ratepayers and the windfalls flowing to state governments to divvy up.

New England’s grid operator, ISO–NE, estimated that RGGI compliance pushed up prices from gas plants (the region’s main power source) by 0.7 cents to 1 cent per kilowatt-hour.

California and Washington also operate emissions-allowance systems for fossil-fuel power plants. California’s grid operator estimated that the requirement added roughly 1.6 cents per kilowatt-hour “for a relatively efficient gas unit” in 2024.

All nine mainland states where residential electric rates have risen by 4 cents or more since 2019 were either part of RGGI or California.

These gas-related up-charges weren’t the only factor, but they undeniably work at cross-purposes with the affordability concerns that many governors now voice.

Another driver of rising electricity costs is nuclear power subsidies. The low gas prices of the 2010s prompted five states—New York, Ohio, New Jersey, Illinois, and Connecticut—to craft subsidy deals for nuclear plants that had previously been profitable.

The cost of that assistance, about $500 million for New York in 2024, was passed along to customers.

More states have enacted renewable-energy mandates, requiring utilities and large customers to pay premiums for projects that often wouldn’t be built otherwise, even with separate federal subsidies.

The solar panels now tiled atop upstate New York farmland are a vivid example. Beyond closing that price gap, adding new renewables—especially in remote areas—imposes additional interconnection and transmission costs, which states expect utilities to absorb and then “recover” through rate cases.

Intermittent renewables have distorted electricity markets. Grid operators need additional plants connected and ready for times when wind lulls or clouds cut output.

That is capacity that must be paid for, which ultimately drives up costs.

Especially over the last decade, state governments have pushed for what can fairly be described as the biggest transformation of the grid since the last rural homes got electric lights after World War II.

Skyline-defining power plants sending high-voltage transmission lines to the horizon are no longer the grid’s defining image. The rise of “behind-the-meter” generation, particularly rooftop solar, means that electricity is now flowing both to and from homes.

That shift has changed how much energy utilities deliver from power plants and, with it, how the costs of running local distribution networks get allocated.

Ratepayers have gone from simply maintaining the grid to underwriting its transformation.

Read rest at City Journal