U.S. Retail Electricity Prices to Rise in 2022, 2023

By Christian Roselund

The latest short-term outlook from the U.S. Department of Energy (DOE) estimates that electricity prices are rising in 2022, driven by higher natural gas prices, and will rise again in 2023. A second  report published by DOE on winter fuels shows that prices for the fossil fuels burned in homes are rising even faster.

DOE forecasts an average 48% increase in the cost of gas-fired generation in 2022, which sets the clearing price in wholesale markets across much of the United States. However, as retail electricity prices reflect both wholesale power purchases and the transmission and distribution infrastructure needed to deliver power, consumers will not see this increase directly. DOE expects the average retail price of electricity in the United States will rise only 8% over the full year 2022 to $0.1486/kWh. However, it expects higher prices in New England due to the limited availability of fossil fuel supply.

Consumers who rely directly on fossil fuels will pay more. DOE is predicting a 27% increase in expenditures for heating oil and a 28% increase in payments for natural gas in the winter of 2022-2023 versus last winter (2021-2022). This will be the second winter of price increases for these commodities. 46% of US households are heated by natural gas, versus 41% by electricity and only 4% by heating oil. However, heating oil is the most prevalent form of home heating fuel in four states in New England.

While these prices are a fraction of what is being paid in Europe, rising energy prices put economic pressure on low-income families and political pressure on the party in power in the U.S. government. On 8 November, 2022, Americans will vote in federal elections and the opposition Republican Party is seeking to blame the Democratic Party, which holds majorities in both houses of Congress and the presidency, for high energy prices.

Source: Short-Term Energy Outlook (Energy Information Administration, DOE)

Source: Winter Fuels Outlook (Energy Information Administration, DOE)