Wholesale power prices will rise in most regions of the U.S. this year except the Northwest and parts of Texas, according to a Monday report from the Energy Information Administration.
“Other regions of the country are likely to see higher wholesale prices over the next year as a result of higher costs for natural gas,” EIA said in its January Short-Term Energy Outlook.
Wholesale prices had dropped on average from 2023 to 2024 and become less volatile, thanks in part to increases in generation, EIA said in a Jan. 16 report.
“We forecast that the 11 wholesale prices we track .... will average $40 per megawatt-hour in 2025 (weighted by demand), up 7% from 2024,” EIA said. “We expect the largest increases (about 30%–35%) will occur in the Southwest and California regions.”
The cost of natural gas is a primary driver of wholesale prices in many regions “because the marginal generator is often one fueled by natural gas,” EIA said. The agency expects that the cost of natural gas will “average $3.37 per million British thermal units in 2025, which is up 24% from last year’s average but is about the same price as in 2023.”
EIA forecasts that average wholesale power prices this year will range from “about $30/MWh in the part of Texas where the grid is managed by the Electric Reliability Council of Texas to $55/MWh in the Northwest region.”
The Northwest is still facing drought conditions, EIA said, “but we expect conditions to improve slightly this year with 20% more hydropower generation. Increasing generation from solar power projects is contributing to lower wholesale prices in ERCOT.”
The agency expects average prices to rise by as much as $10 in the Southwest and California, as well as the regions covered by ISO New England, NYISO, SPP, PJM, MISO, FRCC and SERC.
“Forecast wholesale prices in the ISO New England region average $55/MWh in 2025, up 16% from 2024,” EIA said. “Although we expect higher wholesale prices in 2025, they would still be lower than in 2022, when the composite average wholesale price reached $80/MWh.”
However, retail electricity prices for residential customers aren’t expected to increase much – EIA forecasts that they will average 16.8 cents/kWh, up 2% from last year.
“After accounting for inflation, forecast U.S. residential prices in 2025 are relatively unchanged from 2024,” EIA said.
