Americans’ electricity bills tend to match inflation every year.

However, upgrading to wires, enhancing and protecting power lines from bad weather and changes in fuel costs (other factors) are soaring.

High power consumption from data centers and other sources of increased demand may lead to further increase in the near future.

The impact on consumers is particularly striking in Pennsylvania, where rate hikes are common.

For example, PECO residential customers using 700 kWh of electricity increased by 10% per month in 2025 – or $13.58. These bills will rise another $2.70 per month in 2026.

The majority of the Penn Utilities Commission approved retail price adjustments approved by the Penn Utilities Commission have provided higher bills to many customers across the state in December 20024. In some parts of Pennsylvania, the estimated increase is estimated to be as high as 30%.

As professors working in the field of energy law and electricity markets, we know that electricity costs are rising in many parts of the United States

However, Pennsylvania faces obvious challenges related to the grid (the maze of wires and generators) that can both drive growing and limited supply demand for electricity.

PJM and the Grid

Pennsylvania power plants produce large amounts of electricity. In fact, the Keystone Country is the largest exporter of electricity in the United States, and has been around for many years.

But Pennsylvania's electricity doesn't always stay in the state.

That's because Pennsylvania's power grid is run by a company called PJM. PJM can coordinate all or part of the flow of electricity through 13 states and the District of Columbia and ensure the reliable and safe operation of wholesale power transmission systems.

Pennsylvania Electric Power Company (Peco or Duquesne Light) and then distributes this wholesale power to retail customers, including homeowners and tenants.

PJM requires utilities to ensure in advance that they can meet customers’ future electricity needs, including during heat waves and winter storms. This requirement is met using a market called “capacity auctions” where power suppliers bid for physical infrastructure that will generate electricity in the future.

The price of PJM capacity auctions in 2025-2026 is more than 800% higher than the previous year, partly due to the growing demand for electricity in PJM. This is equivalent to tens of billions of dollars in additional costs.

Power plants in Pennsylvania cannot simply stop exporting electricity and provide more in-state power because they send the power to a regional grid operated by PJM, and the flow of current is determined by the physical structure of that grid.

Data center demand soars

U.S. electricity demand grew 3% in 2024 and is expected to increase in the coming years.

Much of these new requirements comes from data centers that support from AI applications and data storage (considering the thousands of emails and files backed up on our computers) to sports betting, online retailers, such as national security applications like Amazon, such as North American Aerospace Defense Command.

Pennsylvania is on the same grid as Virginia, which accounts for about a quarter of all data centers in the Americas. Pennsylvania has also established a new data center.

The increase in electric vehicles and the replacement of gas and oil-based furnace drivers with electric heat pumps. These alternatives are ultimately more energy-efficient, but require electricity.

Supply bottled

Increased demand for electricity within PJM is happening, while supply is shrinking.

Many of the older power plants in the PJM grid retired at the end of their service life and lowered profits for plant operators, especially as gas and solar energy became more affordable. Some of these older power plants also emit a lot of pollution and are converted to expensive to meet the current pollution limits.

Apart from the challenges of plant retirement, PJM is slow, allowing hundreds of newly proposed power plants, most of which are solar cells and batteries, to connect to transmission lines.

This long-term "interconnect queue" prevents new, requiring generations of internet access. This is happening even if companies are eager and ready to build more power generation and battery storage.

The infrastructure for aging and extreme weather are growing

One of the major drivers of high consumer electricity bills is that utilities upgrade their aging wires very slowly.

Recently, many have made significant investments in new infrastructure, and in some cases, wires are being buried or strengthened to protect them from increasingly high weather.

Electricity customers are billing for the job.

Response from decision makers

In response to the rise in electricity prices, Pennsylvania Gov. Josh Shapiro filed a legal complaint to the Federal Energy Regulatory Commission against PJM in December 2024. This complaint blames PJM for his ability to auction design, thinking that it creates unnecessary costs for consumers.

According to the settlement reached after the complaint, the PJM price cap will be reduced by 35% in the next major capacity auction. Reduced wholesale prices may limit the rise in retail prices.

But this is a temporary fix at best. It cannot address the growing demand, aging power infrastructure hit by extreme weather or transmission bottlenecks.

More changes are needed to allow Pennsylvania residents to see lower electricity bills at any time. For example, many experts have previously observed that PJM needs to repair queues and go online, and many power plants ready to build and wait for the transmission interconnect.

Although PJM reforms the queue process, the queue is still long. New power plants are not rising fast enough, partly due to other challenges such as local opposition, supply chain and financing issues.

Read more stories about Philadelphia and Pennsylvania.