U.S. wholesale power prices are expected to rise modestly in 2025, with most regions seeing an increase compared to 2024, except for Texas and the Northwest. According to the January Short-Term Energy Outlook, the average wholesale price across 11 tracked regions is forecasted to reach $40 per megawatt-hour (MWh) in 2025, representing a 7% increase from the previous year. Residential electricity prices are also projected to increase by 2% on average. However, when adjusted for inflation, residential electricity prices are expected to remain relatively stable compared to 2024.
Wholesale power prices reflect the cost of generating electricity and are determined hourly or daily based on demand. These prices include operating and fuel costs for the most expensive units needed to meet demand at a specific location in the power grid. Additionally, transmission congestion costs are factored into these prices. Natural gas remains a key driver of wholesale power prices, as it is often the fuel source for the marginal generator. The cost of natural gas delivered to power plants is expected to average $3.37 per million British thermal units (MMBtu) in 2025. This is 24% higher than the 2024 average but consistent with prices seen in 2023.
Wholesale power prices are forecasted to range from approximately $30/MWh in Texas, managed by the Electric Reliability Council of Texas (ERCOT), to $55/MWh in the Northwest. These two regions are expected to experience lower prices in 2025. In the Northwest, improving hydropower generation due to slightly better drought conditions is contributing to lower prices. Hydropower output in the region is forecasted to increase by 20%. In Texas, the addition of new solar power generation is also playing a significant role in reducing wholesale prices.
In contrast, other regions are likely to see higher wholesale prices, largely due to increased natural gas costs. The largest price increases, ranging from 30% to 35%, are expected in the Southwest and California. In the ISO New England region, wholesale prices are forecasted to average $55/MWh, a 16% increase from 2024. Despite these regional increases, wholesale prices in 2025 are projected to remain below the 2022 levels, when the average reached $80/MWh.
Retail electricity prices for residential customers are expected to average 16.8 cents per kilowatt hour in 2025, reflecting a 2% rise from 2024. However, changes in wholesale power costs typically take time to impact retail electricity prices, as these rates are often reviewed and approved by utility regulators. After accounting for inflation, residential electricity prices in 2025 are expected to remain relatively unchanged compared to the previous year.
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