Why Is Your Electricity Bill So High?

Most Pennsylvania households saw their electricity bills climb on June 1, with double-digit increases in the generation portion of their bills for Penelec, West Penn Power, and UGI Electric. Three days later, the Public Utility Commission approved PPL’s first distribution increase since 2016, effective July 1. That is two increases landing on your bill within a month, from two different parts of it.

The pattern is the same at every stage: government taxes electricity, mandates more expensive sources, shields the wires from competition, and slows new supply through permitting. Hold supply back while demand grows, and higher prices will follow.

Your bill has three main components: generation (producing the power), transmission (carrying it long distances), and distribution (delivering it to your home). Here is how policy drives up the cost of each.

Generation

This is the one segment that is genuinely competitive. Power plants sell into the regional wholesale market run by PJM, the grid operator for Pennsylvania and 12 other states, where the price reflects real-time demand. Private developers risk their own capital to build and operate plants. PJM also runs a capacity market, essentially an insurance program that pays generators to guarantee their power will be available years in advance, with penalties if they fall short.

The state then layers mandates on top. Pennsylvania’s renewable mandate, the Alternative Energy Portfolio Standards (AEPS), requires that a set share of electricity come from favored sources. Compliance now costs Pennsylvanians more than $700 million a year, passed straight through to your bill.

Gov. Josh Shapiro has also distorted the capacity market. Beginning with the 2026–27 auction, he negotiated a price ceiling on the capacity payments that has been continued until 2030. Capping that price weakens the signal that tells generators to build new plants and keep existing ones running, at the very moment the grid needs more reliable supply. (For more information on why these caps distort pricing and add unnecessary costs, click here.)

Then there was the multi-state carbon tax, the Regional Greenhouse Gas Initiative (RGGI). Shapiro’s predecessor, Gov. Tom Wolf, entered Pennsylvania into the tax without legislative approval, triggering years of litigation. RGGI’s legal limbo drove investment away, forfeiting an estimated 3,833 megawatts of generation capacity that could be online today.

To make matters worse, Shapiro’s Lightning Plan threatens to reintroduce a carbon tax as well as supersize the renewable mandate, more than doubling residential bills over 10 years.

Even when a developer wants to build, permission takes years. A new power plant must clear federal and state environmental reviews and state siting approval, then wait in PJM’s interconnection queue. The pipelines that would carry gas to those plants run the same gauntlet of permits and lawsuits. Every year of delay is a year that new supply does not arrive, even as demand keeps climbing.

When policies restrict supply as demand increases, high prices follow.

Transmission 

Once power is generated, high-voltage lines carry it across the region. This segment is a regulated monopoly, with costs allocated administratively by PJM in compliance with the Federal Energy Regulatory Commission.

How PJM divides the cost of a new line matters as much as how much the line costs. For the largest backbone lines, those running at 500 kilovolts and above, PJM splits the bill in half: about 50 percent is assigned to the zone the line serves, and the other 50 percent is spread across the entire region.

Pennsylvania is already in line to pay for this. PJM approved the Mid-Atlantic Resiliency Link—a roughly 105-mile-long, 500-kilovolt line that would run from Pennsylvania to Virginia—to shore up reliability as load grows, especially in Virginia’s Dominion zone. Its cost follows the formula above: a share to the zone that benefits most, with the rest spread across the region, including Pennsylvania. Pennsylvania’s Office of Consumer Advocate has objected that the line may be built mainly to serve demand in other states, leaving Pennsylvanians to help pay for it.

The other problem is who gets to build. Federal rules opened only the largest regional lines to competitive bidding and left everything else—local lines, reliability upgrades, routine expansion—to the incumbent utility, which builds it by default. Where projects have been competitively bid, a recent R Street analysis found projects came in roughly 30 percent cheaper, with no added delay.

The root issue is that the cost split, who builds, what gets built, and whether it is built at all are settled administratively rather than by the market. The builder recovers its costs and a guaranteed return through your rates either way, so no one deciding to build faces a loss if the line turns out not to be worth it.

Distribution

The final step, the local wires that reach your home, is also a government-granted monopoly. Distributors—such as PPL, Duquesne Light, and PECO—earn an allowed return on equity, set by the Public Utility Commission, that functions in practice as a near-guarantee because prudent investment is almost always recovered.

Since that return scales with the dollar amount a utility spends on infrastructure, the structure rewards spending more rather than spending wisely, so long as the regulators approve. And because there is neither a market test nor a real risk of loss, there are no clear price signals to indicate a return on investment, making it difficult to justify the spending.

On top of all three sits the state’s Gross Receipts Tax, a 5.9 percent tax on electricity sales that distribution companies and suppliers pass straight through to you. Because it is a percentage of the bill, it climbs automatically every time one of the charges above it rises.

The Bottom Line
So, why is your electricity bill so high? Excessive government intervention—that’s why.

At every stage, government either restricts the supply of electricity or shields it from competition. Mandates, such as AEPS, force you to pay for more-expensive generation. The threat of RGGI’s carbon tax drove power-plant investment out of the state. Slow and uncertain permitting keeps new plants and pipelines from being built. In transmission and distribution, a single utility owns the territory, so there’s limited competition to keep costs down. And a direct tax sits atop it all.

Each measure raises costs on its own. Together, and with demand climbing from new data centers and electrification, they make rising bills all but inevitable.

However, none of this is permanent. Rolling back mandates, restoring undistorted price signals, and fixing how monopoly costs are allocated as well as opening them to competition could save Pennsylvanians hundreds of millions of dollars a year. The same reforms would restore and strengthen the competition that delivers reliable, affordable power over the long term.