By Mike W. Ray
Southwest Ledger
The dramatic price increases in electricity across the country can be blamed on multiple factors.
One reason is the cost of natural gas.
The U.S. Energy Information Administration reports that the average natural gas price for electrical generation in the United States in August 2024 was $9.32 per thousand cubic feet. That was more than double the average price in August 2021, which was $4.45 per thousand cubic feet, and was nearly quadruple the price in August 2020, when the national average was $2.50, according to an official with Public Service Co. of Oklahoma.
Another cause is the panoply of machines, vehicles and devices that run on electricity.
Artificial intelligence data centers consume “huge amounts of power,” The Atlantic magazine noted. “Once they’re online, data centers require a lot of electricity, which is helping drive rates up around the country,” Inside Climate News wrote recently.
Also, millions of Americans are plugging their electric cars and hybrids into the grid; recharging their “smart” phones, “smart” watches, iPads and tablets; and powering their toasters, refrigerators, ovens, clocks, washers and dryers, lawn and garden irrigation systems, lawn mowers and weed whackers, and even electric toothbrushes.
Rising temperatures mean more air-conditioning use indoors and battery-powered fans outdoors. Failure to meet this rising demand with adequate supply “results in higher prices.”
Summer demands for electricity across the U.S. set records on two days in the last week of July, when temperatures rose and homeowners and business operators dialed in their thermostats to keep cool.
The U.S. Energy Information Administration reported last week that hot weather, combined with an underlying trend of demand increases, pushed coincident peak demand for the lower 48 states to a high of 758,053 megawatts on July 28 between 6 p.m. and 7 p.m. eastern time, according to the preliminary data in EIA’s Hourly Electric Grid Monitor. The next day, peak demand set another record, reaching 759,180 MW.
The previous record was 745,020 MW set on July 15, 2024.
The EIA forecasts U.S. electricity demand fulfilled by the electric power sector will grow at an annual rate of just over 2% in 2025 and 2026, according to the agency’s Short-Term Energy Outlook. Until 2020, electricity demand was relatively flat. Forecast electricity demand growth is higher in areas with plans for large data centers and manufacturing facilities, such as in Texas and northern Virginia.
Paul Cicio, chairman of the Electricity Transmission Competition Coalition, blames higher electricity bills on increases in power transmission rates.
Monopoly utility companies are exempt from “competitive bidding processes for new transmission lines that keep prices in check,” Cicio asserted. The Federal Energy Regulatory Commission’s policies are “anti-consumer and anti-free market,” he contends.
Because there is little to no competition on transmission projects, consumers “are left paying the price for energy infrastructure,” he said. “With hundreds of billions in new transmission projects planned, this problem will only get worse unless regulators act to protect consumers.”
In the PJM Interconnection, the nation’s largest regional transmission organization, power transmission costs have risen as a percentage of the price of electricity from 7% to nearly 28%.
Investment in assets
produces profits
A related matter is utility companies’ investment in long-term infrastructure, such as construction of new power generation facilities or, as in the case of Public Service Co. of Oklahoma, acquisition of an existing power plant.
With the recent approval of state regulators, PSO officially took control of the ‘Green Country’ power plant in Jenks. The $730 million acquisition was endorsed by the Corporation Commission on a 2-1 vote: Commissioners Kim David and Brian Bingman voted aye but Commissioner Todd Hiett voted nay.
An increase in customer utility bills to retire the debt has already begun to appear. “The average residential customer using 1,100 kilowatt-hours per month will see an increase of $7.19 on their total bill,” said Matt Rahn, PSO’s region communications manager. “In 2026 that average impact will drop to $6.47.”
In announcing its takeover, PSO proclaimed that the 795-megawatt natural gas plant “will deliver dependable, cost-effective electricity to homes and businesses across the state” while PSO is “enhancing energy reliability for its customers by becoming the full owner and operator of the Green Country power plant.”
Similarly, Oklahoma Gas & Electric Co. recently broke ground on two new power generation units at its Horseshoe Lake Power Plant in Harrah.
OG&E transported massive equipment – including half-million-pound transformers – across 44 miles of Oklahoma County to the Horseshoe Lake Power Plant. The new natural gas units, set to begin operation in late 2026, will replace two aging units at the power plant, providing increased generating capacity and improved reliability.
After arriving in Oklahoma by rail, the huge equipment required a coordinated fleet of heavy haul contractors, safety escorts, and special permits from Oklahoma County to move these super-loads. Crews will transport the remaining equipment – including two 444,000-pound General Electric Vernova natural gas turbines and two 492,000-pound General Electric Vernova generators – in phases throughout June, July, and August. Specialized trailers with 240 tires are needed to transport the generators.
Southwestern Power Co., like PSO a subsidiary of American Electric Power Co., asked Arkansas regulators recently to approve a 27% monthly increase in residential utility bills. SWEPCO said it needs the additional revenue to pay for new power generation operations, including two wind farms, and to recover its expenses on system-wide grid improvements.
Evergy intends to build three natural-gas-fired power plants (two in Kansas and one in Missouri) and two solar farms (one each in Missouri and Kansas). The total cost is expected to exceed $2.75 billion.
Accordingly, Kansas regulators approved a $13 per month rate increase for Evergy Kansas Center customers, to help pay for construction of two 710-megawatt combined cycle gas turbine power plants and a solar farm.
Missouri regulators approved a $13.99% rate hike for Evergy on Jan. 1, 2025. The increase will give the Kansas City-based company nearly $104 million more revenue per year – on top of the $731 million in earnings Evergy recorded in 2023.
A utility’s expenses for salaries, maintenance and fuel are pass-through costs for which the company is prohibited from earning a profit. But infrastructure costs are financed with a mix of debt and equity, and the utility recovers those expenses from its customers via equal payments over the life of the asset.
For example, PSO’s 23-year-old Green Country generating plant at Jenks has an estimated 30-year remaining lifespan; thus, PSO customers will pay for it in 30 annual installments.
Debt can include borrowed money, and equity is money the utility earns from sales of its stock to the public. If equity is used to finance a utility’s assets, the company charges its customers for a percentage of that value.
That percentage is set by state regulators and is known as the “return on equity.” And that is the company’s profit.
Demand spikes as
federal tax breaks
for renewables cut
The timing of the spike in demand for electricity coincided with a surge in renewable energy. The U.S. Energy Information Administration reported that 93% of the electricity capacity added to the electric grid this year was attributed to wind, solar, and battery storage.
That trend was expected to accelerate in coming years because of federal tax credits that made building clean power sources less expensive. Previously, companies building wind and solar farms could qualify for a tax credit worth at least 30% of their costs if construction began before 2034.
However, President Trump’s now-enacted “One Big Beautiful Bill” phases out tax credits for solar and wind projects and electric vehicles. Under the new law, construction on those projects will need to start by July 2026 and become fully operational by 2028.
