Electricity Inflation Is the Next Economic Shock
Why rising power costs could shape growth, prices, and the Trump agenda
Electricity prices are now rising far faster than overall inflation. Because power is a foundational input across the economy, those increases risk becoming a persistent cost shock—raising prices, slowing growth, and constraining the Trump administration’s economic and industrial agenda just as AI-driven demand accelerates.
Memorandum
Subject: Recent Changes in Consumer Electricity Prices and Underlying Drivers
The change in electricity prices as measured in the CPI was calculated from December 2023 to December 2024 and from December 2024 to December 2025 for four regions and for the nation as a whole.
Electricity inflation is surging in the Trump economy, exacerbating the affordability crisis for U.S. households.
Results by region and for the United States as a whole:
Northeast: Electricity prices rose 9.0 percent from December 2023 to December 2024 and 10.0 percent from December 2024 to December 2025.
Midwest: Prices increased 0.7 percent from December 2023 to December 2024, followed by a larger increase of 11.4 percent from December 2024 to December 2025.
South: Electricity prices rose 0.8 percent from December 2023 to December 2024 and 5.5 percent from December 2024 to December 2025.
West: Prices increased 3.9 percent from December 2023 to December 2024 and 2.5 percent from December 2024 to December 2025.
U.S. total: National electricity prices rose 2.8 percent from December 2023 to December 2024 and 6.7 percent from December 2024 to December 2025.
By comparison, the overall CPI for all items rose 2.7 percent over the 12 months ending in December 2025, according to the latest official CPI release from the Bureau of Labor Statistics.
Electricity price increases significantly outpaced headline inflation in most regions over the most recent year, with three of the four Census regions seeing higher electricity price growth than overall CPI growth.
Electricity price inflation was 2.48 time larger than the overall rate of inflation on all goods and services.
The Bureau of Economic Analysis treats electricity as an intermediate input in its Input–Output Accounts, meaning higher electricity prices raise production costs for manufacturing, health care, retail, transportation, and digital services. Unlike many other inputs, electricity is difficult to substitute away from in the short run, so price increases are more likely to be passed through to final prices rather than absorbed by firms. As a result, electricity inflation can have a multiplier effect, pushing up prices economy-wide rather than remaining confined to the energy sector.
When electricity prices rise faster than overall inflation, those higher input costs can reinforce broader inflationary pressures and make inflation more persistent. In this sense, electricity inflation functions less like a narrow relative-price shift and more like a structural cost shock, especially when rising demand is met by constrained supply growth.
Recent reporting highlights that electricity prices face new upward pressure as AI data-center demand surges.
A Reuters article notes that the AI boom—particularly energy-hungry server farms—has contributed to electricity price increases of roughly 6.9 percent in a single year and raised concerns among voters and officials over utility bill affordability.
Tech firms including Microsoft and OpenAI are now publicly engaging with communities and offering pledges to mitigate energy cost impacts as the technology’s infrastructure expands.
The rise in electricity prices documented will be impacted by government regulations on energy supply.
The Trump administration was highly critical of the Biden administration’s regulations of fossil fuels. Inexplicably, the Trump administration actions targeting wind project approvals have increased regulatory uncertainty and will likely impede the growth of new electricity and likely exacerbating the ongoing increases in electricity prices.
Read my essay on how both the Trump and Biden administration are basing energy policy on their political preferences instead of economic, national security and environmental concerns.
There is a lot of irony in the current situation. President Trump returned to office in part on voter frustration with inflation under President Biden. Electricity is a foundational input across the economy. Wind power has been proven to be a viable source of clean electricity. It is Trump’s economy now, and President Trump’s opposition to wind power is exacerbating affordability and could impede future economic growth.
Some additional reading:
Readers interested in the official BLS and U.S. Energy Information Administration discussions on causes of the electricity price increases can consult BLS CPI household energy documentation (https://www.bls.gov/cpi/factsheets/household-energy.htm) and EIA analysis (https://www.eia.gov/todayinenergy/detail.php?id=65284).
The Reuters article on AI Demand impacting electricity prices is here.
Reuters article on Microsoft effort to mitigate impact of AI and data center growth.