US Wholesale Electricity Prices Nearly Double Since 2020, Outpacing Consumer Rates
Wholesale electricity prices have skyrocketed across the US since 2020, with average costs nearly doubling in some regions. According to analysis of location marginal pricing data from 17 trading hubs, wholesale costs increased by 2-4 times their baseline levels in 2020 by 2022, before partially recovering. In contrast, consumer electricity prices rose a relatively modest 35% during the same period.
The sharp increase in wholesale prices is attributed to transmission congestion spreads widening across most Independent System Operators and Regional Transmission Organizations (ISO/RTOs). PJM, SPP, and NYISO are among the regions experiencing significant bottlenecks, making it increasingly difficult for consumers to access cheaper generation. California's CAISO stands out as an exception, with wholesale prices remaining flat or declining in 2025 despite natural gas volatility.
"The rapid rise in wholesale electricity prices is a major concern for consumers and businesses alike," said Dr. Emily Chen, energy economist at the University of California. "As transmission congestion worsens, it becomes increasingly difficult to bring cheaper power online, leading to higher costs for end-users."
Background analysis reveals that location marginal pricing (LMP) data from 17 trading hubs shows a stark contrast between wholesale and consumer prices. While wholesale costs skyrocketed, consumer rates rose at a relatively slower pace. This disparity is largely due to the complexities of the grid's transmission infrastructure.
"The grid is facing unprecedented challenges, including aging infrastructure, increased demand, and changing weather patterns," said Mark Johnson, spokesperson for PJM Interconnection. "As we work to modernize our systems and improve efficiency, we're seeing a significant impact on wholesale prices."
In contrast, California's CAISO has implemented innovative solutions to mitigate the effects of transmission congestion. By leveraging advanced weather forecasting and demand response programs, CAISO has managed to keep wholesale prices in check.
The cheapest wholesale electricity continues to trade in SPP's Oklahoma-Kansas region at 16-17 cents per megawatt-hour. This anomaly highlights the need for more efficient grid management and investment in infrastructure upgrades.
As the US power sector continues to evolve, experts warn that wholesale price volatility will remain a pressing concern. To mitigate these risks, policymakers and industry stakeholders must work together to modernize the grid, invest in renewable energy sources, and develop more sophisticated demand response programs.
"By prioritizing grid resilience and efficiency, we can create a more sustainable and affordable electricity system for all," said Dr. Chen. "It's essential that we take proactive steps to address these challenges head-on."
*Reporting by Hardware.*
