The new politics of power

US residential electricity prices have risen by more than 40% since the start of 2021, which is much faster than general inflation. Utilities requested a total of US$31 billion in increased rates last year, double the amount in 2024. And investor-owned utilities are planning to spend US$1.4 trillion on capital projects over the next five years – enough, on one calculation, to build almost 2,000 Hoover Dams at today’s prices.

In this episode of Energy Gang, host Ed Crooks and regular contributor Dr Melissa Lott, who leads energy technology innovation at Microsoft, are joined by Charles Hua, founder and executive director of Powerlines, a nonprofit organisation focused on utility regulation and electricity affordability. Together, they explore a central question: why are US electricity bills increasing, and what can policymakers, regulators and utilities do to reduce costs for consumers?

US energy bills are rising  

In the past few years, US electricity bills have been rising, on average, and the issue has been rising up the political agenda.

Recent Ipsos polling commissioned by Powerlines found that four in five Americans feel powerless about energy costs. The proportion who believe their state officials are serving their interests as consumers fell from 38% to 29% in a single year. Charles Hua calls this "a new politics of electricity." It is a domain that until recently sat outside mainstream political attention, but now reaches governors' offices and the White House.

Unpacking the key drivers of rising electricity prices in the US

Melissa Lott outlines the top five cost drivers identified in the Lawrence Berkeley National Laboratory analysis:

1. Fuel and wholesale supply
2. Distribution costs
3. Generation capex
4. Transmission costs
5. Cost recovery from extreme weather events. 

Charles Hua points beyond the line items to a fundamental issue: the traditional utility business model, which structurally rewards capital spending.

How does the data centre boom impact energy prices in the US?

There is growing debate around the impact of data centres and electricity demand. Charles Hua breaks it down: until now, data centres have not been a meaningful driver of price increases across most of the US. But that does not mean they will not be in future. PJM's capacity auction, where prices have rocketed, is one early signal that the picture is starting to change.

Learn more about how data centres impact energy demand and how AI companies are seeking solutions to avoid raising electricity prices.

Three steps to improve electricity affordability in the US

To mitigate the risk of energy price rises and improve electricity affordability, in this episode of Energy Gang Charles Hua highlights three potential solutions:

• First, get more out of the existing grid: which is currently running at roughly 50% utilisation, through technologies he describes as "ibuprofen for the grid."
• Second, modernise the utility business model: potentially drawing on the UK's totex approach, where utilities can earn a return on operational as well as capital spending.
• Third, improve grid planning: particularly how load is forecast and how integrated resource plans are built.

Melissa Lott zooms out to remind listeners what is actually at stake. Borrowing a line from Amory Lovins, she says: "I don't care about my electrons. I care about cold beer and hot showers." The question is not just about price of electricity, but about whether households can keep their homes safe and liveable year-round.