By Mark Jaffe, EUCI energy writer
Rising natural gas prices – spurred increasing exports of liquefied natural gas (LNG) – are set to push up electricity prices at the same time new demands are being placed upon electric grids, according to an Institute for Energy Economics and Finance Analysis (IEEFA) study.
Natural gas generation become a dominant form of generation, rising to 42.4% of the nation’s generating capacity in 2024 from 16.5% in 2004 as hydrofracturing oil and gas drilling unlocked large gas reserves.
Supply, however, has not keep up with demand. A growing portion of that gas is going to European and Asian markets as eight export facilities have been built on the Gulf and East coasts.
In 2014, LNG exports were less than 1% of U.S. dry gas production, amounting to just 44.5 million cubic feet per day. By 2024, that had reached 11.9 billion cubic feet per day equal to 11.6% of total production.
“In March and April, for the first time, the amount of gas going to LNG exports totaled more than 50% of the amount of gas being used to produce electricity in the U.S.,” the IEEFA analysis said.
The Henry Hub spot price is forecast by the U.S. Energy Information Administration (EIA) to be $4.00 per million British thermal units in 2025 – almost double the price in 2024. EIA projects the 2026 price at $4.90.
“Higher natural gas prices in 2025 and 2026 are the result of strong export growth that persistently outpaces U.S. natural gas production,” the EIA said.
After closely tracking inflation over the last 10 years, electricity prices began to outpace inflation starting in 2022.
The average residential rate in 2024 was 17.47 cents a kilowatt, a 6% year-over-year increase, according to the EIA, while inflation for 2024 was 2.9%.
“The high demand for gas exports is also pushing up the price of the gas that supplies 40% of U.S. electricity – a cost that will be passed on to consumers,” the IEEFA study said
“Consumers will not just be paying for that higher-priced gas generation, either,” the analysis said, “because gas generation is such a large component of the overall electricity market, it now sets the marginal price for all generation in many markets across the U.S. … This means the rise in gas exports is contributing to higher electricity prices across the board – the costs of which will be passed through to consumers.”
Natural gas prices, however, aren’t the only forces pressuring electricity prices. Utilities are facing growing demand for energy, particularly from data centers, and are projected to invest $1.1 trillion in new infrastructure between 2025 and 2029, according to the Edison Electric Institute, the sector’s trade group.
There will be pressure on state public utility commissions to approve putting those investments in rates, creating a possible political backlash over rising rates, Moody’s Investor Service said in a September 2024 note.
“As power supply ramps up to meet rising load forecasts, the potential for higher electricity prices may leave U.S. regulated utilities with greater credit exposure to social risk,” Moody’s said.
Rising natural gas prices are already leading utilities to switch to other generation, the EIA said, such as coal-fired plants, hydro, nuclear, and renewables. As a result, the natural gas share of generation declined from 42% to 40% of the total in mid-2025.
In 2024, nuclear accounted for about 18.8% of generation, wind and utility-scale solar 16.2%, coal 15.6%, and hydropower 6%.
The rising natural gas prices also come as the Trump administration is sunsetting federal tax credits that in some cases can make up 50% of a wind or solar project’s costs, according to Jesse Jenkins, principal at the Princeton University Zero Lab.
This will make alternatives to natural gas generation more expensive, according to IEEFA analyst Dennis Wamsted.
“There will be higher prices for everybody, across the board,” Wamsted told Utility Dive. “I don’t see a way around that.”
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