Many Factors Influence Electricity Prices
Electricity prices generally reflect the cost to build, finance, maintain, and operate power plants and the electricity grid (the complex system of power transmission and distribution lines). Some for-profit utilities also include a financial return for owners and shareholders in their electricity prices.

Several key factors influence the price of electricity:
- Fuels: Fuel prices, especially for natural gas and petroleum fuels (mainly in Hawaii and villages in Alaska), may increase during periods of high electricity demand and when fuel supply constraints or disruptions occur because of extreme weather events and accidental damage to transportation and delivery infrastructure. Higher fuel prices, in turn, may result in higher costs to generate electricity.
- Power plant costs: Each power plant has financing, construction, maintenance, and operating costs.
- Transmission and distribution system: The electricity transmission and distribution systems that connect power plants with consumers have construction, operation, and maintenance costs, which include repairing damage to the systems from accidents or extreme weather events and improving cybersecurity.
- Weather conditions: Extreme temperatures can increase demand for heating and cooling, and the resulting increases in electricity demand can increase fuel and electricity prices. Rain and snow provide water for low-cost hydropower generation, and wind can provide low-cost electricity generation when wind speeds are favorable. However, when droughts or competing demand for water resources occur or when wind speeds drop, the loss of electricity generation from those sources can put upward pressure on other energy or fuel sources and prices.
- Regulations: In some states, public service (utility) commissions fully regulate prices, and other states have a combination of unregulated prices (for generators) and regulated prices (for transmission and distribution)