Higher natural gas costs reshape power prices and generation mix across regions
Average wholesale day-ahead electricity prices across most major trading hubs in the Lower 48 states were higher in 2025 compared with 2024. The main reason for this increase was higher natural gas prices paid by electric power generators. The largest price rise occurred in New England, while the biggest decline was recorded in the upper Northwest region.
Wholesale electricity prices reflect the cost of supplying power in day-ahead and real-time markets. These prices change daily due to shifts in electricity demand and fuel costs. Most retail customers do not see these daily changes because they pay rates based on seasonal average costs. However, wholesale prices remain important because they influence long-term electricity costs.
Natural gas plays a major role in setting wholesale electricity prices. In most regions and during most hours, natural gas-fired power plants determine the marginal price of electricity. In 2025, benchmark Henry Hub natural gas prices averaged much higher than in 2024, when prices were unusually low. Natural gas prices in the Northeast rose even more sharply, further increasing electricity prices in that region.
Total electricity generation in the Lower 48 states increased by 2 percent in 2025, even though the year had one less day than 2024. Despite higher overall generation, electricity produced from natural gas declined because higher fuel prices made it less competitive. Natural gas-fired generation fell by 3 percent nationwide.
The drop in natural gas use was offset by growth in other energy sources. Coal-fired generation increased as it became a more affordable option in several regions. Solar power saw strong growth, rising by more than 30 percent as new capacity came online, and operating costs remained low.
Regional trends varied across the country. In the Mid-Atlantic and Midwest, coal and solar replaced much of the reduced natural gas generation. In Texas, rising electricity demand was largely met by increased solar output. In the Northwest, milder winter weather reduced overall generation needs, while hydropower and solar increased despite lower nuclear output due to maintenance outages.
Overall, 2025 showed how fuel prices and weather conditions can strongly influence electricity prices and the mix of energy sources used to generate power in the United States.
Photo Credit: Energy-Information-Administration