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With war in the Middle East pushing oil and gas prices back into the spotlight, you might not be thinking a ton about your electric bill.

But U.S. electricity prices have been rising twice as fast as inflation since 2022 — in some states more than four times as fast, according to research by Goldman Sachs economists.

Last year alone rates on the whole rose 6.9%, and more increases are expected. Goldman is forecasting prices to climb at least another 6% annually over the next two years.

What’s behind these increases? There’s no single cause — but a few big factors stand out.

First, utilities are spending heavily to repair and upgrade an aging electrical grid, and those costs are being passed on to customers. Electricity prices are also closely tied to natural gas, so when fuel markets tighten, power gets more expensive too. And in places like California, wildfire mitigation has added to costs.

But the 1,000-pound elephant in the room is artificial intelligence. Tech companies are investing billions of dollars in data centers to help train and run AI models. Utilities are having to build more capacity because these centers need power to not only compute, but avoid overheating.

So far data centers account for a relatively small share of U.S. power demand — about 7%, according to the Goldman economists. But over the next five years, growing demand will be a key driver of rate inflation, impacting center-rich states in the Midwest, California, Texas, and Mid-Atlantic more than the U.S. as a whole, the economists predict.

If you’re thinking data center operators should pay for their own power, that’s the goal of new policy initiatives in a number of states. And President Trump recently had executives from AI giants including Amazon, Google, Meta and Microsoft sign his “Ratepayer Protection Pledge,” agreeing to cover the cost of all power infrastructure upgrades required for their data centers. But critics question how realistic this is — and how their pledge will be enforced.

One other important point: Electricity was regional well before AI data centers existed. A state’s rates are heavily influenced by access to power sources. Hawaii’s rates, for instance, are the highest in the nation because most of its electricity is generated with fuels that must be imported into the state. The Northeast has a similar vulnerability, though to a lesser degree.

This is one reason the national average is just over 18 cents per kilowatt-hour, but people in California pay 29.5 cents, while New Yorkers pay 27 cents and folks in Louisiana pay 11 cents, according to government data compiled by ElectricChoice.com.

So what?

Electricity prices aren’t likely to ease anytime soon, giving the aging grid, AI and the volatility of fuel prices. In the meantime, being proactive about your bill and your energy use is the best defense. Here are a few of our favorite money-saving strategies:

•   In deregulated states, switching providers could potentially save 15–30% with no change in lifestyle, according to ElectricChoice. Check this list to see if you live in one.

•   Install a programmable thermostat so you can cut back on heating and cooling when you’re sleeping or at work. This could save you as much as 10%.

•   Use a home energy monitor to gauge how much each of your household electronics costs you — and then make sure they’re worth it.

•   If you haven’t already, switch to LED lighbulbs, which use 90% less energy and last up to 25 times longer than incandescents.

•   Check this list of low-cost EnergyStar tips for more inspo.

Related Reading

What We Know about Energy Use at U.S. Data Centers Amid the AI Boom (Pew Research Center)

How Much Are Electricity Prices Rising – and Why? (American Action Forum)

An Energy Expert Explains Why Electricity Prices Keep Climbing (NPR)

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