May 31, 2023
Data source: U.S. Energy Information Administration, Monthly Electric Power Industry Report and Annual Electric Power Industry Report
Note: Real prices are adjusted for inflation.
In nominal terms, the average monthly electricity bill for residential customers in the United States increased 13% from 2021 to 2022, rising from $121 a month to $137 a month. After adjusting for inflation—which reached 8% in 2022, a 40-year high—electricity bills increased 5%. Last year had the largest annual increase in average residential electricity spending since we began calculating it in 1984. The increase was driven by a combination of more extreme temperatures, which increased U.S. consumption of electricity for both heating and cooling, and higher fuel costs for power plants, which drove up retail electricity prices.
Residential electricity customers’ monthly electricity bills are based on the amount of electricity consumed and the retail electricity price. Average U.S. monthly electricity consumption per residential customer increased from 886 kilowatthours (kWh) in 2021 to 907 kWh in 2022. Both a colder winter and a hotter summer contributed to the 2% increase in average monthly electricity consumption per residential customer in 2022 because customers used more space heating during the winter and more air conditioning during the summer.
Although we don’t directly collect retail electricity prices, we do collect revenues from electricity providers that allow us to determine prices by dividing by consumption. In 2022, the average U.S. residential retail electricity price was 15.12 cents/kWh, an 11% increase from 13.66 cents/kWh in 2021. After adjusting for inflation, U.S. residential electricity prices went up by 2.5%.
Higher fuel costs for power plants drove the increase in residential retail electricity prices. The cost of fossil fuels—natural gas, coal, and petroleum—delivered to U.S. power plants increased 34%, from $3.82 per million British thermal units (MMBtu) in 2021 to $5.13/MMBtu in 2022. The higher fuel costs were passed along to residential customers and contributed to higher retail electricity prices.
In the first three months of 2023, the average U.S. residential monthly electricity bill was $133, or 5% higher than for the same time last year, according to data from our Electric Power Monthly. The increase was driven by a 13% increase in the average U.S. residential retail electricity price, which was partly offset by a 7% decrease in average monthly electricity consumption per residential customer. This summer, we expect that typical household electricity bills will be similar to last year’s, with customers paying about 2% more on average. The slight increase in electricity costs forecast for this summer stems from higher retail electricity prices but similar consumption levels as last summer.
Principal contributor: Jonathan DeVilbiss
As an energy analyst with a comprehensive understanding of the U.S. electricity market and a focus on data-driven insights, I bring a wealth of expertise to dissect the intricacies of the information provided in the article dated May 31, 2023. My background involves an in-depth exploration of energy-related reports, including those from the U.S. Energy Information Administration (EIA), and a keen interest in trends affecting residential electricity consumption and pricing.
The article discusses the dynamics of the U.S. residential electricity landscape, drawing on data primarily sourced from the U.S. Energy Information Administration's Monthly Electric Power Industry Report and Annual Electric Power Industry Report. The key findings reveal a noteworthy increase in the average monthly electricity bill for residential customers in the United States, particularly between 2021 and 2022.
Let's break down the significant concepts addressed in the article:
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Nominal vs. Real Prices:
- Nominal terms refer to unadjusted values, whereas real prices take inflation into account. The article mentions a 13% increase in the nominal average monthly electricity bill from 2021 to 2022, but when adjusted for the 8% inflation rate in 2022, the real increase is 5%.
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Factors Driving Increased Spending:
- Extreme temperatures played a crucial role in the surge in electricity consumption, with both heating and cooling demands contributing. The article attributes the rise in residential electricity spending to a combination of more extreme temperatures and higher fuel costs for power plants.
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Electricity Consumption Patterns:
- Average U.S. monthly electricity consumption per residential customer increased by 2%, from 886 kWh in 2021 to 907 kWh in 2022. This increase is attributed to a colder winter and a hotter summer, leading to heightened use of space heating and air conditioning.
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Retail Electricity Prices:
- The average U.S. residential retail electricity price rose by 11%, from 13.66 cents/kWh in 2021 to 15.12 cents/kWh in 2022. Adjusted for inflation, the increase in residential electricity prices was 2.5%. Higher fuel costs for power plants, driven by a 34% increase in the cost of fossil fuels, contributed to this price surge.
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Fuel Cost Impact on Prices:
- The cost of fossil fuels (natural gas, coal, and petroleum) delivered to U.S. power plants increased by 34% from $3.82 per million British thermal units (MMBtu) in 2021 to $5.13/MMBtu in 2022. These higher fuel costs were passed on to residential customers, influencing retail electricity prices.
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2023 Projections:
- The article provides insights into the first three months of 2023, indicating a 5% increase in the average U.S. residential monthly electricity bill compared to the same period in the previous year. This increase is attributed to a 13% rise in the average U.S. residential retail electricity price, partially offset by a 7% decrease in average monthly electricity consumption per residential customer.
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Summer 2023 Expectations:
- A forecast for the summer of 2023 anticipates household electricity bills to be similar to the previous year, with a projected 2% increase on average. This modest increase is attributed to higher retail electricity prices, though consumption levels are expected to remain similar to the previous summer.
In conclusion, the article provides a comprehensive overview of the factors influencing residential electricity bills in the U.S., backed by data from authoritative sources like the U.S. Energy Information Administration. The analysis encompasses consumption patterns, pricing dynamics, and the impact of external factors, offering a nuanced understanding of the evolving landscape of residential electricity usage and costs.
