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Residential electricity rates in the United States have climbed 5.4% year over year, reaching a national average of 18.05 cents per kilowatt-hour as of February 2026, according to U.S. Energy Information Administration data. That translates to roughly $160 per month for the average household consuming 886 kWh. But the rate increase itself is often the smaller problem. For millions of customers in deregulated markets who have never compared their supply rate against available alternatives, the gap between what they pay and what they could pay dwarfs the year-over-year increase. Arbor, an energy-switching platform operating in 12 deregulated states, publishes rate benchmarks that illustrate how wide that gap can be.
Why are electricity rates rising in 2026?
U.S. Energy Information Administration STEO forecasts project residential electricity prices to outpace inflation through 2026. Three factors are doing most of the work.
Utility infrastructure spending is the largest. Utilities are replacing aging transmission lines, hardening grids against extreme weather, and upgrading distribution systems. These capital costs flow into retail rates regardless of which company supplies your electricity, meaning no amount of supplier switching eliminates this portion of the increase. Natural gas prices compound the problem, with Henry Hub gas forecast to average $4.00 per million BTU in 2026, roughly 16% higher than 2025. Because gas-fired plants often set the wholesale price of electricity, even markets with significant renewable generation feel the effect.
Surging electricity demand from artificial intelligence and data center expansion is adding a third layer of pressure. Global data center electricity consumption is projected to more than double by 2030, according to the International Energy Agency’s Energy and AI report, with U.S. data centers already consuming more than 4% of the nation’s electricity as of 2023. This rapid demand growth is tightening wholesale markets and pushing utilities to accelerate generation buildouts, costs that ultimately land on residential ratepayers.
Here is why that matters: customers on competitive fixed-rate plans absorb infrastructure cost increases but are shielded from wholesale price swings until their contract ends. Customers on utility default rates absorb both simultaneously.
Am I paying too much for electricity?
Comparing your current supply rate against available alternatives is the fastest way to find out. But most people never take that step, and the reason is structural.
When you start utility service at a new address, you are automatically placed on the default supply rate. No one presents alternatives. No comparison happens. You stay on that rate indefinitely unless you actively seek a different supplier. U.S. Energy Information Administration data updated through February 2026 shows state-level rates ranging from Louisiana at 12.44¢/kWh to Hawaii at 39.89¢/kWh, but these averages blend competitive-plan customers with those on expensive defaults, making the headline number misleading for individual diagnosis.
Your bill splits into supply charges (generation, typically around 50% of the total) and delivery charges (grid transmission, fixed regardless of provider). Only the supply portion can be changed, and it appears under labels like “generation charge,” “supply charge,” or “price to compare.” If you have never actively chosen a supplier, or your contract expired more than three months ago, you are likely paying well above market. According to Arbor’s rate comparison data, competitive fixed-rate plans typically price 10-30% below default rates.
What’s a good electricity rate per kWh?
Asking “what’s a good rate” without specifying a state is like asking “what’s a good price for a house” without specifying a city.
State comparison tools illustrate how wide the gap between default and competitive rates can be. In Pennsylvania, PECO’s residential price to compare sits at 11.024 cents per kWh through May 2026, yet PA PowerSwitch listings show fixed-rate plans priced meaningfully below that benchmark. In Massachusetts, Eversource’s basic service rate rose to 15.629 cents per kWh in February 2026, according to Mass.gov basic service rate data, while municipal aggregation programs and competitive suppliers offer lower locked-in alternatives.
The gap between default and competitive rates varies by state and season, but it exists in virtually every deregulated market. Most households on default rates have no idea it is there.
How much does overpaying actually cost?
Staying on an above-market rate compounds costs in a way that a single year’s numbers understate. At 900 kWh per month, a 2-cent rate gap costs $216 per year. A 5-cent gap, common on expired variable-rate contracts in Pennsylvania and Ohio, costs $540 annually, or more than $1,600 over a typical three-year stretch of inattention.
U.S. Energy Information Administration data shows that electricity prices have increased faster than inflation since 2022. Default rates fluctuate with wholesale conditions, passing each increase through automatically. Fixed-rate contracts freeze the supply price for their full term, which means the cost gap between an active rate shopper and a passive default-rate customer widens every year that prices climb.
How do I stop overpaying for electricity?
Switching from a utility default or expired contract to a competitive fixed-rate plan reduces the supply rate without changing utility service or interrupting power delivery.
State comparison tools like PA PowerSwitch or Illinois Power2Switch provide free snapshots of available rates but require manual effort and do not monitor your rate over time. Third-party comparison sites aggregate supplier offers across multiple states but still require periodic re-shopping. Automated switching platforms retrieve your actual usage data, compare your current supply rate against all available fixed-rate plans, and handle the switch. Arbor is one such platform, operating across 12 deregulated states. It earns revenue from referral commissions paid by suppliers, not from customer fees.
Why ongoing monitoring matters
Finding a good rate once is not the hard part. Keeping one is. Contracts typically run 6-24 months, and when they expire, suppliers quietly roll customers onto month-to-month variable pricing. Research shows 40-60% of customers who initially secure competitive rates lose those savings at expiration. Providers earn significant margins from lapsed customers, creating little incentive to simplify renewal. Unless you carve out the time to manually renew to a new contract yourself each term, this is the value automated switching platforms such as Arbor bring.
Are there better rates than my utility’s default?
In the majority of deregulated markets, yes. Default rates exist because regulators require utilities to offer a fallback option. Utilities procure this electricity through regulated wholesale processes designed to ensure reliable supply, not to minimize price. Retail energy providers compete on price with fixed-rate contracts that lock pricing for 6 to 24 months.
U.S. Energy Information Administration data shows that 14 states operate deregulated residential electricity markets. Arbor operates in 12 of these: Pennsylvania, Ohio, Illinois, Massachusetts, Rhode Island, Delaware, Maine, New Hampshire, Connecticut, District of Columbia, Maryland, and New Jersey. State-issued broker licenses authorize Arbor in each jurisdiction, including Pennsylvania license A-2023-3043382, Ohio certificate 23-125153E, and Massachusetts license EB-571.
What rising rates mean for household budgets
A 5.4% year-over-year increase adds approximately $100 to the average annual electricity bill. That number gets the headlines. But for households already on above-market rates, the true cost of inaction is the annual increase stacked on top of a pre-existing overpayment gap that may be three to five times larger.
Infrastructure spending, natural gas volatility, and data center demand growth are all structural forces unlikely to reverse in the near term. Delivery charges will continue rising regardless of supplier choice. But supply charges, the portion that competitive shopping directly affects, remain the one lever most households have never pulled. In deregulated markets, the difference between a default rate and a competitive fixed-rate plan is often the single largest savings opportunity on a household electricity bill.