In 2025, national electricity and natural gas prices increased 2.5 and 4 times more than inflation, respectively.
Modernizing grid infrastructure and responding to severe weather contribute to increased electricity prices.
Households that are rural, non-white, and age 60+ spend more of their income on energy bills.
Electricity and natural gas are used to power and heat houses. In MO, 31% of households use electricity as the main heating source, while 59% use natural gas (Energy Information Association (EIA) 2023a). When setting energy prices, utility companies consider the cost of fuel, equipment, and personnel to generate, transmit, and distribute energy to customers (EIA 2023b). Residential customers typically pay a higher rate for electricity than commercial or industrial customers due to higher distribution costs (EIA 2023b).
Between 2020 and 2025, market prices for natural gas in the U.S. fluctuated between $8.14/million British Thermal Units (BTUs) and $1.49/million BTUs (EIA 2026a). Because natural gas supplies 42% of electricity generation in the U.S., its market volatility can affect both electricity and utility gas prices (EIA 2025, EIA 2024b).
Despite fluctuations in natural gas prices, U.S. residential electricity prices mirrored inflation between 2013 and 2023, with an inflation-adjusted increase of less than 1% in that time (EIA 2024a). At the same time, state prices varied. The largest inflation-adjusted increases were in CA, MA, and ME, at about 3% per year, while NE and UT had the largest decreases at about 2% per year. In MO, prices decreased by 1% per year.
In 2025, inflation increased 2.7%. When adjusted for inflation, national electricity prices increased 3.9% and natural gas utility prices increased 7.9%, (Bureau of Labor Statistics 2026, Mendez-Carbajo 2023, Figure 1). In the Midwest, electricity and natural gas utility prices both increased 8.5% adjusted for inflation over the same period (Federal Reserve Bank of St. Louis n.d.).
In 2026, U.S. utility companies will spend more than $10 billion to refurbish or replace existing transmission and distribution infrastructure (Tsuchida et al. 2025). Half of distribution equipment and 70% of transmission lines are more than 30 years old and near the end of their lifespans (McKenna et al. 2024, U.S. Department of Energy 2015). In contrast, generation infrastructure costs have declined over the last 20 years (Wiser et al. 2025).
Severe weather creates additional electricity expenses. In addition to costs from repairing and rebuilding damaged infrastructure, electricity companies also invest in improving, or “hardening,” infrastructure to increase resilience to severe weather (Wiser et al. 2025). Companies also pay more for insurance coverage to lower liability for future disasters.
Public Service Commissions (PSCs) regulate public utility rates for different customer classes. MO’s PSC approved a request from Ameren Missouri to increase residential electricity rates, effective June 2025, to recover costs from grid upgrades and storm hardening (MO Public Service Commission 2025, Ameren 2024). Evergy Missouri Metro submitted a similar rate increase request to the PSC to cover grid infrastructure upgrades (Penzig 2026). The proposed increase would start in January 2027.
Energy burden is the percentage of annual income spent on energy bills (Drehobl et al. 2020). An energy burden over 6% is considered high, while more than 10% is severe. The median household energy burden in the U.S. is 2.9%, but a quarter of U.S. households have an energy burden above 5.7% (American Council for an Energy-Efficient Economy 2024). Households whose income is less than 200% of the Federal Poverty Level have a median energy burden of 8.3%, and 40% of these households have a severe energy burden, while another 27% have a high energy burden.
Rural households’ energy burden is 4.4% (Ross et al. 2018). In the U.S., 24% of White households have a high or severe energy burden, compared to 27% of Hispanic households, 30% of American Indian households, and 31% of Black households (Jacobson & Tajo 2026). People over 60 have higher energy burdens than all other ages across all income groups (Tian et al. 2024).
Figure 1. Increases in energy utility prices relative to inflation. The Consumer Price Index (CPI) shows the percentage increase in prices relative to a base value. Numbers are adjusted to their January 2020 base values. The CPI for All Items (black), a common measure of inflation rate, increased 26% between January 2020 and January 2026. Nationally, electricity prices (blue) increased 40% in that time, and natural gas utility rates (gold) increased 56%. In the Midwest (dashed lines), electricity and natural gas prices increased 33% and 60%, respectively. National data is seasonally adjusted. Data from Federal Reserve Bank of St. Louis n.d.
References
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