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Ever looked at your electricity bill and wondered why the amount changes from month to month—even when your habits seem the same? You’re not alone. Reports show that the average U.S. household spends about $149.37 per month on electricity in 2025—but that number can swing significantly based on location, season, and market conditions.
Electricity pricing is influenced by a combination of your personal energy usage and larger market forces that you don’t see on your statement. Understanding what drives these costs can help you make smarter energy choices and keep your bills in check.
Let’s break it down.
Your electricity bill starts with how much power you use. The more you know about your consumption habits, the more control you have over your costs.
Electricity is measured in kilowatt-hours (kWh)—a way of calculating how much power is used over time. For example, running a 1,000-watt space heater for one hour equals 1 kWh.
The average U.S. household uses around 10,500 kWh per year (EIA), but usage varies widely depending on climate, home size, and appliances. Smart meters and utility dashboards now make it easier than ever to track your consumption and see how daily activities impact your bill.
Electricity isn’t always priced the same throughout the day. Peak hours—often from 4 p.m. to 9 p.m.—are when demand is highest. Off-peak hours—usually overnight—have lower demand, and therefore lower rates for customers on time-of-use plans.
For example, California utilities report that running a clothes dryer during peak hours can cost up to twice as much as running it overnight. Shifting energy-intensive tasks can lead to monthly savings of 10–20% for some households.
While your usage habits matter, much of what you pay is shaped by external factors in the energy market.
In 2023, 40% of U.S. electricity generation came from natural gas (EIA). When natural gas prices spike—due to supply chain issues, extreme weather, or global market shifts—electricity prices often follow. For example, during the 2021 Texas winter storm, natural gas spot prices surged by over 700% in a matter of days… increasing electricity generation costs.
Electricity demand is influenced by many factors, with weather playing one of the biggest roles. Heatwaves send air conditioning usage soaring, while cold snaps drive up electric heating demand. In fact, record heat in the summer of 2022 pushed U.S. electricity consumption 6% higher than the previous year. The summer of 2025 saw the highest summer peak energy usage since June of 2006.
Beyond weather, broader market trends are reshaping demand as well. Energy-hungry data centers are rapidly expanding, adding new pressure to the grid. At the same time, renewable sources like solar are growing their share of the market. While vital for a sustainable future, their weather-dependent output can create fluctuations in demand from other sources, which must step in to balance the grid.
In deregulated states like Texas, Pennsylvania, and Ohio, customers can shop for electricity plans from multiple suppliers. This competition can keep prices lower—but it also means rates can change more frequently based on wholesale market conditions.
Once electricity is generated, it has to travel through a vast network before reaching your home. These transmission and distribution “delivery” charges often make up 30–40% of your electricity bill.
The U.S. electric grid spans more than 600,000 miles of transmission lines, connecting power plants to homes and businesses across the country. Building and maintaining this vast network requires massive investment, from the steel towers that carry high-voltage lines to the substations that step electricity down to usable levels. The further power has to travel, the higher the delivery cost—something that is especially noticeable in rural or hard-to-reach areas where fewer customers share the expense.
In addition to the sheer size of the grid, utilities must account for land use, rights-of-way, and environmental permitting when planning new lines. Utilities must also invest heavily in grid balancing technologies—such as energy storage, advanced forecasting, and load management—to ensure supply and demand remain aligned. Extreme weather events, wildfires, and population growth in high-demand regions also drive up infrastructure costs, as utilities need to reinforce the grid and expand capacity to keep pace with rising demand. All of these expenses ultimately flow into the “delivery” portion of your electricity bill.
Aging infrastructure is a growing challenge—some U.S. transmission lines are over 50 years old. Utilities also invest billions in grid modernization each year, such as installing smart grids and upgrading storm-resilient equipment. These costs are shared among customers.
The Public Utilities Commissions (PUC) are state-level government organizations that that ensure fair pricing and reliable service for electricity customers. This ensures that utilities can’t simply raise rates without justification.
When a utility wants to adjust rates, it submits a detailed case to the PUC, often citing increased fuel costs or infrastructure needs. The process includes analysis, public comment periods, and final approval. For example, Pennsylvania’s PUC approved a 5% delivery rate increase in 2023 to fund grid maintenance and upgrades.
Clean energy is changing how—and how much—it costs to generate electricity.
Solar and wind power now supply about 18% of U.S. electricity (EIA, 2024). Renewable energy can help reduce fuel cost volatility, but because these sources are weather-dependent, utilities sometimes need backup generation, which can temporarily raise costs.
Federal tax credits (like the 30% Solar Investment Tax Credit) and state-level rebates help offset the cost of renewable energy installations. Over the long term, a greater share of renewables could lead to more stable—and potentially lower—electricity prices.
Electricity pricing is shaped by a mix of personal habits, market forces, infrastructure needs, and policy decisions. By:
…you can take a more active role in managing your costs.
If you’re looking for a simple way to lower your energy costs, consider getting a low supply rate from a supplier like Shipley Energy. To understand a little bit more about shopping for electricity, check out our blog article here. Ready to shop for a lower rate? Click shop now below and find the lowest rates from Shipley Energy today!
