When you flip a light switch in your house, turn on the toaster, or plug in your new electric vehicle, the price you pay for the electricity to power that appliance is likely higher than it’s ever been. While prices can fluctuate due to factors like weather, the overall trend in 2024 shows electricity costs are reaching new highs. Why is that? And what can be done to reduce the upward pressure on rates? We’ll look at data about what’s driving costs in the electric system and how SPAN is a part of the solution

First, some background about what goes into electric rates. There are more than 3,000 utilities across the United States and every single one of them has a different price for electricity, which is presented in different ways to consumers. What’s the same for everyone, no matter where you live or who your electric utility is, is that the total price you pay for power is driven by the costs of the power plants (and the fuel that goes into the power plants, if they’re not renewable energy resources like wind and solar) that generate power and the poles and wires and other equipment that distribute the electricity to end users. Technical aficionados will appreciate that both categories are made of physical infrastructure plus the costs of people and IT systems to manage the infrastructure, but we don’t need to get into that level of detail here.

To summarize, power prices include the costs of generation and distribution. So, what does the data tell us about each of these? The St. Louis Fed’s Federal Reserve Economic Data is an invaluable resource that has exactly what we need.

The cost of distributing power has gone up almost 97% since 2003. Here’s the cost of generation over the same time period:

While this data is lumpier because of extreme weather and volatile commodity prices, the overall trend is that the cost of generating power has gone up about 69% since 2003.

As a general reference, inflation since 2003 is up 71%. So, the cost of generation is roughly in line with overall inflation in the economy, but the cost of distributing power has far outpaced inflation.  What’s going on?

It’s useful to look at a specific example for an answer. Families in California pay some of the highest power prices in the country, which has led to an affordability crisis in the state. In July of this year, the California Public Utilities Commission released a report analyzing rate increases, which found that the cost of distribution has doubled since 2020, and is far and away the biggest contributor to overall rate increases.

This is one of the key findings from the Commission’s report:

Roughly three-quarters of this increase in PG&E’s distribution revenue requirement is attributed to costs approved in PG&E’s 2023 [General Rate Case]. These types of costs include power lines, poles, transformers, repair crews and emergency services, as well as certain wildfire mitigation costs related to grid reliability and safety, including liability insurance. The other approximately one-quarter of this increase is primarily due to wildfire mitigation and catastrophic event costs approved in several PG&E applications filed outside of the GRC proceeding process.

This is fairly common to what one would expect to see in virtually any utility across the country. The distribution system is aging and needs to be maintained, and maintenance is even harder, and more expensive, in the face of extreme weather and climate change. The good news is that these investments have helped with reliability and resilience—there’s no debate that this money is being used to improve the grid. But, if other states have experiences similar to what California is seeing, these positive outcomes may come with a large price tag attached.

We need a better path forward.

Leveraging better technology

The good news is that technology offers real solutions to the energy affordability crisis. Smart panels are a prime example of a cost-effective alternative to traditional infrastructure upgrades. Unlike poles and wires, smart panels equip utilities with the tools they need to manage energy use and load distribution more efficiently—without the high costs associated with massive infrastructure overhauls. By modernizing the grid with smarter, more adaptive technology, we can lower energy costs for consumers.

Smart panels offer another crucial benefit: they integrate seamlessly with renewable energy sources like solar power and electric vehicle (EV) charging. As we transition toward a more electrified energy system, smart panels can help reduce reliance on traditional grid infrastructure, making the system more flexible, efficient, and sustainable for the future.

Federal funding at the ready, but states
must act

The federal government has stepped up with programs like the Inflation Reduction Act (IRA), offering significant financial support to make smart energy technology more affordable for homeowners and utilities. But so far, many states haven’t fully tapped into these resources.

By taking advantage of this funding now, states can help ease the financial burden on families while enabling utilities to modernize the grid. Smart panels are a crucial part of the solution, empowering homeowners to better manage their energy use and keep costs under control. If states prioritize this opportunity, they can not only address today’s energy crisis but also pave the way for a cleaner, more affordable future.

As energy prices continue to rise, the stakes are getting higher for consumers. The choices people are being forced to make—between paying for power or other essential needs—are becoming tougher by the day. It’s time for states to step up, put this funding to work, and ensure a better energy future for everyone.

SPAN’s smart panels drive energy efficiency and affordability

At SPAN, we believe technology is key to solving the energy affordability crisis. Our smart panels offer a scalable, proven solution for both utilities and homeowners. By optimizing energy use and minimizing the need for costly infrastructure investments, SPAN helps utilities lower costs while empowering homeowners to take control of their energy consumption.

Our smart panels are designed to integrate renewable energy sources like solar and EV charging, making the grid more resilient and future-ready. As the energy system evolves, SPAN Panels provide a clear path toward electrification—without imposing additional financial burdens on consumers.

The energy affordability crisis isn’t just about rising costs; it’s a quality-of-life issue for millions of families. But the tools to address this crisis are within our reach. By embracing smart technology and leveraging available federal resources, states can protect their consumers from rising costs and help modernize the grid for a cleaner, more sustainable future.

At SPAN, we’re committed to making this transition as smooth and accessible as possible for everyone. The crisis is real, but so are the solutions. Now is the time for policymakers, utilities, and consumers to come together and work toward a more affordable, resilient energy future.