Increased natural gas costs predicted to boost electricity bills: IEEFA report indicates

The United States is set to witness a surge in LNG exports over the next four years, with an anticipated growth of 84%. However, the rise in demand for natural gas has not been matched by new production, leading to potential price hikes, according to various analysts.

Economics 101 suggests that as producers continue to seek out more competitive markets overseas, gas prices will reach new heights. Dennis Wamsted, an energy analyst, argues that surging natural gas prices and declining federal support for renewable energy will lead to higher electricity prices.

Renewable energy, particularly energy storage, could deliver far more stable electric prices than natural gas in the coming years, Wamsted claims. The International Energy Economy Financial Analysts (IEEFA) shares this view, stating that renewable energy could provide a more consistent and cost-effective solution to meet the growing demand for electricity.

The U.S. Energy Information Administration (EIA) predicts that natural gas prices will average $4/MMBtu in 2025, with a further increase to $4.90/MMBtu in 2026. These price increases are expected to impact the electric industry significantly. IEEFA does not see how most U.S. electric utilities can avoid raising electricity rates given the current situation.

The electric industry's ability to switch back to coal generation is limited, according to IEEFA's Wamsted. Aging coal plants will continue to go offline as they reach the end of their useful lives, and there is limited appetite for building new coal-fired power plants. Building new coal plants is considered very expensive, and regulators are unlikely to approve proposals for new coal plants due to doubts about their long-term viability.

The share of U.S. electricity coming from gas generation has dropped from 42% in 2024 to 40% as of mid-2025, due to a shift towards more coal, solar, and hydro. In March and April, the amount of natural gas consumed by LNG exports equaled about half of all the natural gas used to produce electricity in the U.S., according to IEEFA.

Rate case settlements to pay back the cost of past gas price hikes have resulted in fuel surcharges that are expected to remain on customer bills for years to come. Another international incident or severe winter weather causing additional gas price spikes could result in the sticker shock of multiple overlapping surcharges, potentially triggering backlash from consumers.

Wamsted believes that higher electricity prices are inevitable and will affect everyone across the board. Rising electric prices seem inevitable in the foreseeable future, according to Wamsted. His forecasts indicate that U.S. LNG exports will likely face challenges due to increasing global competition and potential shifts in energy demand.

To mitigate the impact of these rising prices, the U.S. needs to catch up on its massive grid infrastructure backlog and build enough new generation to meet growing demand from AI data centers to maximize the potential of battery storage. This shift towards renewable energy and energy storage could provide a more stable and cost-effective solution for the future.

Increased natural gas costs predicted to boost electricity bills: IEEFA report indicates