Electric Rate Increases in Mid-Atlantic Exceed National Average

Retail rates for electricity rose significantly across the U.S. year-over-year between this February and last, but several Mid-Atlantic states including Pennsylvania and Ohio, saw higher than average increases, the U.S. Energy Information Administration (EIA) recently reported.

Data from the Electric Power Monthly report shows average revenue per kilowatt hour (kWh) increased by 9% annually to 14.36 cents but several states within the PJM Interconnection region saw much higher jumps. Pennsylvania was one of those states, and the rate hikes have not subsided. The state Public Utility Commission recently alerted consumers that rates will rise again June 1, just as summer weather leads to increased air-conditioning use.

The EIA does not collect retail electricity rates or prices but uses data collected on retail sales revenues and volumes to calculate average retail revenues per kWh as a proxy. PJM is the regional transmission organization that manages the wholesale electric grid for 13 Mid-Atlantic states, where rapidly increasing demand from data centers and large industrial customers and constrained supply are leading to spikes in wholesale energy prices.

Virginia’s residential prices increased the most, rising by 26.3%. Ohio saw a 21.9% increase and Pennsylvania was third at 19.5%. New Jersey saw a 15-18% increase and Maryland a 12-15% increase. All are within the PJM footprint.

Virginia is the world’s largest data center market and Pennsylvania is seeing explosive growth in such projects, which are energy intensive and require firm, 24/7 baseload power and expensive infrastructure. PJM has been struggling to meet this rising demand and modernize its infrastructure while fossil fuel-fired power plants have been slated to retire and new generation is not being built fast enough.

The data indicates that national electricity prices rose across the residential, commercial, and industrial sectors, but the commercial sector saw the largest increase at 10.7%.

Demand growth and grid infrastructure upgrades are putting pressure on prices, the report determined, and states with reliance on natural gas generation also were affected by higher natural gas costs.

Those factors have led to rapidly rising electric rates in Pennsylvania. Electric distribution companies adjust their “price to compare” twice a year so that customers can compare their supplier options based on the kilowatt-hour cost. Customers of West Penn Power will see an increase of 10.3% in their price, while Duquesne Light customers bills will rise by just 2.84%.

Rising electricity costs have caught the attention of state and federal policymakers and led to a price cap on wholesale electric costs in the PJM region. Governors of PJM states are also working with the White House to force PJM to take action to address rapidly rising demand and make data center developers pay for their generation and infrastructure costs while the cost while keeping utility bills affordable for consumers. PJM is working to rapidly revamp its policies, but it remains unclear if it will be able to ensure reliable service by the end of the decade.