Energy Bills Are Rising in 2025: Here’s What You Can Do

Electricity bills are set to increase by at least 20% over the next two years, affecting thousands of homeowners and businesses across Greater Philadelphia and beyond.

These rate increases continue a troubling trend: since 2020, electricity prices have outpaced the record inflation percentages the U.S. has experienced.

As energy prices continue to rise, solar power remains a much more predictable and affordable alternative to relying on the grid. Once you own a solar system, you have a power-generating asset that takes care of most or all your home’s electricity needs, stabilizing costs.

There are two primary reasons for the electricity rate increases:

1. Utility Bill Increases: Several local utilities, including PECO, have already raised, or are planning to raise, their rates, totaling billions of dollars.

2. PJM’s Capacity Auction: Last year, PJM, the interconnection provider that manages our region’s electricity grid, held a “capacity market auction” to plan for future energy demands. The result? A $14.7 billion cost that will be passed on to customers starting in 2025, increasing electric bills by at least 10% in 13 states.

To put this in context, the average residential customer in the U.S. pays $136/month ($1632/year) for using 900 kWh monthly.

These rate increases mean that some homeowners could pay $500 more in energy bills annually by the end of 2026, bringing their annual electric bill above $2,000 for the same power and infrastructure they already use.

Low-income households may be hit particularly hard by these increases.

PECO’s Rate Increases

PECO, the utility responsible for delivering power to Philadelphia and surrounding areas, proposed a rate increase of $464 million in December. The Pennsylvania Public Utility Commission (PAPUC) approved a rate increase for electrical bills by 10% this month, and an additional 1.8% in 2026.

This will translate to an additional $13.58 to $149.43 per month for the average residential customer that uses 700 kilowatt hours per month.  

PJM’s Role in the Rate Increases

Behind most major utility providers in the U.S., there’s a Regional Transmission Organization (RTO). An RTO is like a traffic controller for electricity. It’s an organization that manages and coordinates the flow of electricity across large areas (often several states). The RTO ensures electricity gets from power plants to homes and businesses smoothly, balancing supply and demand to stabilize the power grid.

PJM Interconnection is the largest RTO in the U.S., managing the flow of electricity to over 65 million people across 13 states and the District of Columbia. PJM ensures the electric grid’s reliability by managing the buying and selling of electricity in real-time and long-term markets.

The RTO is like a traffic manager traffic manager that directs electricity instead of cars. It decides which routes to send electricity along to keep power reliable and affordable across huge regions and also ensures supply meets demand by managing electricity transmission over high-voltage power lines. 

PJM also conducts “capacity auctions” to generate enough power to meet future demand.

The capacity market auctions that PJM runs each year ensure their service area will have enough power to meet peak demand during the hottest and coldest days of the year. Power plants bid in this auction, guaranteeing they’ll be available when needed most, and customers pay a fee to cover these “capacity commitments.”

In July 2024, PJM’s auction for the 2025-2026 period surprised the industry with a massive price hike. The total cost of capacity surged to nearly $14.7 billion (from $2.2 billion last year), leaving customers across PJM’s footprint, including people in PECO’s service area, to shoulder these additional costs.

Why the sudden spike? There are three simple answers: the gradual yet predictable continued decline in reliability across fossil fuel plants, PJM’s delays in connecting renewable energy sources to the grid, and the gradual yet significant increases in electricity demand as EVs and “electrification” continue to grow strong and large companies invest in data centers across the country.

More demand is being placed on outdated fossil fuel systems, and renewable capacity isn’t being added to the grid fast enough to balance it out.

Fossil fuel plants, especially natural gas facilities, have proven unreliable during extreme weather events. 2022’s Winter Storm Elliott is a prime example of gas plants failing to deliver during peak demand due to a lack of infrastructure and reliance on fossil fuels. This extreme weather event left thousands without power in below-zero temperatures, exposing customers to outages and higher costs.

Since fossil fuel plants can no longer be considered entirely reliable, PJM changed how it evaluates grid reliability last year. Under their new standards, 26 GW of its natural gas and coal resources are “unreliable” because they can’t operate at their total output in all weather conditions.

Because PJM couldn’t count those 26 GW towards its total capacity, the cost of ensuring capacity for their distributors spiked. Now, consumers in their service area will experience double-digit percentage price increases for power.

As extreme weather events increase and coal-fired power plants decrease, the need for a robust grid made up of a variety of reliable power sources is evident. Yet PJM has been slow to approve hundreds of Gigawatts of clean energy projects in its queue, instead relying almost entirely on fossil fuel-burning power plants. Due to PJM’s slow regulatory processes, these renewable resources haven’t been connected to the grid in time to meet rising demand. PJM has approved some renewable projects—but have yet to be built.

As a result, customers are paying higher prices for less reliable power. PJM’s reliance on fossil fuels has created an expensive and increasingly fragile system.

Now is the Time to Invest in Solar

As a homeowner or commercial property owner, you can opt out of ever-increasing electricity prices and strengthen the overall grid by investing in solar power.

A well-built solar system will save the owner tens or even hundreds of thousands of dollars over its lifetime. But solar systems don’t just save money, the owner can earn money through various incentive programs.

“I was averaging over $200 a month for my PECO electric bills with spikes in the winter to keep my house warm and spikes in the summer to keep my house cool. Often to save a few bucks, I would adjust the thermostat for our electric heat pump and settle for being too cold or too hot. That was not fun at all. Five years later, it looks like I made the right decision. I haven’t had to pay PECO a nickel.

“I get refund checks from PECO every year because my solar panels produce more energy than I use. Due to the state SREC program, I get money deposited into my savings account every month. Yesterday I checked my balance and saw $96.25 extra in my account!”

– Steve Cickay, a Bucks County homeowner who went solar with Exact Solar in 2019.

With power costs rising, customers’ return on investment from “going solar” may range from 200% to 400% or more, depending on the specific system and local utility cost.

Here’s why now is the perfect time to go solar:

1. The cost of going solar has decreased significantly. The cost of solar system components has steadily declined over the past decade. When compared against rising electricity rates, homeowners now see a return on their investment faster than ever.
   
2. Federal incentives are at an all-time high. The Federal Investment Tax Credit (ITC) remains one of the most substantial incentives for going solar. Homeowners and commercial property owners can claim 30% of their total solar system costs as a tax deduction, reducing the overall financial burden.
   
3. Solar Renewable Energy Certificates (SRECs) and Net Metering. In Pennsylvania, homeowners can benefit from Solar Renewable Energy Certificates (SRECs). These certificates allow solar system owners to sell credits for each megawatt-hour of electricity generated, creating an additional income stream on top of the savings from lower energy bills.
   
   Pennsylvania also has its own net metering programs. Net metering is a billing arrangement that allows homeowners or businesses with solar panels to send excess electricity they generate back to the grid. In return, they receive credits on their utility bill, which can offset the cost of the electricity they consume from the grid during nighttime or cloudy days.
   
4. Favorable solar financing options. As lending rates continue to drop, homeowners can lock in affordable financing options for their solar installations. Clean Energy Credit Union offers refinancing options as low as $100, allowing customers to lower their loan rates as soon as interest rates fall.

TL:DR: There is no reason to wait to go solar.

“There are so many benefits of going solar. First, you can reduce your environmental impact, lower air pollution, and help combat climate change. Second, going solar can drastically reduce or even totally cover your electricity costs. And if you add storage, you can help capture additional clean energy, provide reliable, consistent backup power, and build resilience to climate-related outages and variables such as rising energy costs.

With federal tax credits and incentives, going solar is more affordable than ever. So there’s never been a better time to power your life with the sun!”

– Flora Cardoni, Deputy Director of PennEnvironment

Energy prices are rising significantly in 2025 and 2026. Solar power offers a stable, affordable alternative that can protect you from the volatility of the traditional grid.

With solar installation costs at historic lows, incentives, and financing options more accessible than ever, and power costs skyrocketing, there’s no financial benefit to waiting to switch to solar.
Exact Solar can see if solar is a good fit for your home, answer all your solar-related questions, and show you your potential paybacks from investing in a solar system. Book your free consultation today!

Cover photo: A residential rooftop solar system installed by Exact Solar in 2022.