Electric Power Supply Association

EPSA

Energy Cost Savings

Understanding What Drives Energy Costs—and why Customers Win When Companies Compete

Competitive Market Benefits
Why Are Electricity Bills Rising?
Policy Recommendations

Understanding What Drives Energy Costs

Electricity prices are top of mind for households and businesses alike. As costs continue to rise across the country, understanding what’s behind your energy bill is more important than ever. EPSA is committed to empowering consumers and policymakers with transparent, data-driven insights—and competitive power suppliers are leading the way in delivering cost-effective, efficient, and reliable electricity.

Competitive Markets Work for Consumers

For over 25 years, competitive wholesale electricity markets have helped keep power generation costs manageable by encouraging innovation, operational efficiency, and investment in advanced energy resources. In these markets, power suppliers compete to offer electricity at the lowest possible price—driving down costs and rewarding performance.

This is in sharp contrast to monopoly utility models, where regulated investments are guaranteed a return and customers are often left footing the bill for cost overruns and stranded assets. In competitive markets, companies—not ratepayers—absorb investment risk, ensuring that only the most cost-effective and reliable solutions succeed.

What’s Really Behind Rising Electricity Bills?

Contrary to headlines, the cost of generating electricity has remained relatively stable—even in the face of inflation, supply chain pressures, and growing demand. A 2025 report from EPSA and Energy Tariff Experts finds that:

  • Generation accounts for only about 45% of an average residential customer’s electric bill across key states in the PJM region (PA, NJ, MD, and OH).
  • Transmission, distribution, and state policy mandates have been the primary drivers of higher utility bills over the last decade.
  • Capacity prices, while rising from historic lows, remain in line with long-term trends and reflect supply-demand fundamentals—not market failure.

📊 The chart on page 1 of the EPSA/ETE study summary shows that the share of generation and capacity in total bills has remained flat over time, while costs for transmission infrastructure and state-mandated programs have steadily increased.

Debunking the Myths

Too often, competitive markets are wrongly blamed for price increases. Here’s what the data tells us:

  • MYTH: Most of your electricity bill comes from generating power.
    • FACT: Over the study period, generation accounted for only 45% of the cost of the average electric bill across the 5 utilities studied.
  • MYTH: Generation costs are skyrocketing, and consumers are on the hook.
    • FACT: Generation costs today remain lower than in recent years across the Mid-Atlantic.
  • MYTH: Capacity prices are rising to new highs, meaning much higher rates for consumers.
    • FACT: Capacity prices make up only a very small portion of electric bills across PJM. They’ve seen increases from recent record lows but remain consistent with average prices across the last decade.

The Path Forward: Smart Policy and Market Solutions

Competitive markets are working as designed. But state-and-federal level policy decisions—such as mandates that retire reliable generation prematurely or add costly infrastructure with little oversight—can distort prices and reduce efficiency.

EPSA urges policymakers to:

  • Maintain and strengthen competitive market structures.
  • Reassess mandates that increase consumer costs without delivering proportional reliability or environmental benefit.
  • Enable new investment in flexible, dispatchable resources to meet growing demand.

Why It Matters

Reliable, cost-effective electricity is the foundation of our economy. As demand grows and the grid evolves, competitive power suppliers will continue to lead the charge in delivering value and accountability to consumers.

Because electricity is the backbone of our economy, cost matters. When multiple power generators and independent companies bid to provide reliable electricity at the lowest cost, customers ultimately enjoy better outcomes.

Competitive wholesale electricity markets were established in many parts of the U.S. more than 25 years ago to replace a less-responsive, vertically integrated monopoly utility model. Since that time, competitive power suppliers have delivered substantial economic benefits to consumers and businesses.

Why? Because market signals provide incentives for power generators to improve operational performance and invest in new, more efficient technologies. Competitive markets also keep wholesale prices responsive to changing fuel costs. As resources become cheaper, markets integrate those resources and prices reflect the cost difference.

In a regulated monopoly utility model, investment costs are passed onto customer bills with less transparency. In contrast, as competitive power suppliers, EPSA members bear the investment and operating costs of project development and operations. Customers are shielded from investment risks and are not saddled with cost overruns or stranded assets.

Wholesale Electricity Costs Explained

  • Power market participants pay wholesale electricity prices when purchasing electricity from the wholesale market.
  • Buyers either purchase electricity for their own use or to supply to retail customers such as smaller businesses, homes and other power users.
  • Utilities then charge retail customers and end-users for power supply through their monthly bills. Rates are approved by the state through public utility commissions. While lower wholesale power prices help reduce the cost of electricity, there are many factors that contribute to total monthly utility bills. Learn more.

By the Numbers

$3.2-$4 billion: Annual savings enjoyed by consumers in the PJM Interconnection footprint, which serves 65 million customers in 13 states and the District of Columbia.

35%: The decrease in average price of New England’s wholesale electricity between 2004 and 2017, driven largely by declines in the cost of natural gas.

$30.67: The average real-time price for wholesale power in New England in 2019 per megawatt-hour—compared to more than $80 per MWh in 2008.

$3.2-3.9 billion: Regional savings delivered to Midwest electricity consumers in the Midcontinent Independent System Operator service area in 2019.