Summer temperatures and electricity rates go up together

We’ve reported several times how groups believe electricity prices will increase this summer and now the Biden administration’s own Energy Information Administration is making the same prediction.

“This summer—June through August—we expect that residential customers’ monthly electricity bills will average $173 in the United States, slightly higher than last summer’s average of $168,” stated the EIA in a report released Thursday.

“We expect that more electricity consumption, resulting from our assumption that summer temperatures will be warmer this year, will be partially offset by lower residential electricity prices in most areas of the country.”


monthly U.S. average residential electricity metrics

Because of the summer heat, and it’s definitely arrived this week in Oklahoma, consumers typically use more electricity as they attempt to cool their homes with air conditioning. The EIA stated that nearly 90% of households in the U.S. use it.

Households located in the southern states along the Gulf Coast generally consume the most electricity because of hot and humid summer weather. Customers in states with milder weather along the Pacific Coast and in New England, regions where air conditioning is less common or used less often, generally consume less electricity in the summer compared with other regions.

monthly U.S. average residential electricity usage per customer and U.S. population-weighted cooling degree days

Data source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO), June 2024
Data values: U.S. Regional Electricity Sales to Ultimate Customers and U.S. Regional Weather Data

Cooling degree days measure the effect of temperature as it relates to the need for air conditioning.

“We expect that temperatures will be slightly warmer this summer and that our assumed 5% increase in cooling degree days will lead the average U.S. household to use about 3% more electricity during June, July, and August compared with the same months last year.”

Weather remains the main source of uncertainty in the forecasts for residential electricity bills. If temperatures end up much hotter than expected, households are likely to face higher electricity bills, especially in the southern states.

“We forecast the U.S. average residential retail electricity price this summer will be 16 cents per kilowatthour (kWh), which would be about the same price as last summer. Compared with the weather, less uncertainty surrounds retail electricity rates in the near-term forecast,” continued the EIA.

Average U.S. wholesale power prices, which are an indicator of generation costs, were relatively high in 2021 and 2022, but they declined 30% to 50% in 2023, largely because of falling natural gas prices.

“We expect these lower electricity supply costs will reduce retail prices in the coming months. Utilities are generating more power from renewable energy sources or purchasing renewable generation from independent power producers. These sources generally have more stable costs than traditional fossil sources, which could help to reduce volatility in retail rates.”

As supply costs are decreasing, another portion of retail electricity prices, the cost for transmission and distribution, has risen as companies have developed new infrastructure or have replaced existing infrastructure to help integrate expanding renewable generation. Transmission and distribution costs have been one of the major drivers for increases in retail electricity prices in recent years.

summer average residential retail electricity prices