US electric utility customer affordability: Goldman Sachs sees customer-affordability pressure as most acute in PJM, where higher capacity prices are driving utility-bill inflation.
The report explains how US residential power bills are constructed and why their drivers differ between regulated and deregulated markets. It forecasts 3.7% average annual bill inflation through 2029, while identifying geographic affordability exposure as a potential regulatory constraint for utilities.
Summary
The report explains how US residential power bills are constructed and why their drivers differ between regulated and deregulated markets. It forecasts 3.7% average annual bill inflation through 2029, while identifying geographic affordability exposure as a potential regulatory constraint for utilities.
- Residential utility-bill inflation is forecast to average 3.7% annually through 2029, moderating from 5.9% in 2026 to 2.1% in 2029.
- PJM customers face the sharpest affordability pressure as supply-demand tightening lifted capacity prices from $28.92/MW-day to $269.92/MW-day.
- DC, New Jersey, Maryland, New York and Ohio had the highest three-year bill inflation through June 2026.
- Rising bills may make regulators less willing to authorize higher rates, returns or incremental utility investment programs.
- Utilities with lower-pressure geographic exposure, substantial commercial and industrial demand, or large-load tariffs screen more favorably in the report.
Report Interpretation
Overview
Goldman Sachs introduces an affordability research series focused on US residential electricity bills. It argues that the underlying source of bill inflation varies materially by market structure, with competitive PJM-type markets facing particularly acute near-term pressure from higher capacity and wholesale power costs, while regulated utilities face a longer-term affordability balance between infrastructure investment and customer bills.
Core views
The report breaks a residential electricity bill into supply, delivery and other customer charges. Supply covers power generation or wholesale purchases and is generally volumetric; it is driven by natural-gas prices, wholesale energy costs and capacity markets. Delivery recovers transmission and distribution infrastructure costs, while other charges include taxes, public-benefit programs, low-income assistance, clean-energy mandates, wildfire costs and specialized riders. A flat customer charge, typically about $10-$20 per month, recovers fixed grid-connection costs. Thus, an increase in a customer bill can reflect commodity prices, grid investment, public-policy charges, or a combination of these factors. Goldman Sachs emphasizes that regulation determines how those cost drivers reach customers. In traditionally regulated markets, a utility owns generation, transmission and distribution, and regulators approve a consolidated revenue requirement intended to recover prudent costs and provide a return on investment. Bill growth is therefore more closely linked to approved generation, transmission and distribution investment, reliability needs, asset replacement and load growth. In deregulated markets, utilities are generally delivery companies while generation and supply are priced through competitive wholesale energy and capacity markets; supply and delivery charges are shown separately and market-price changes can pass through directly to customers. In the report's ConEd bill example, supply charges were roughly $31 and delivery charges roughly $72. The national bill outlook remains elevated in the near term. Goldman Sachs forecasts residential utility-bill inflation at a 3.7% CAGR through 2029, with growth slowing from 5.9% in 2026 to 2.1% by 2029. Its bull-capex scenario produces 7.9% average annual bill growth through 2029. Although residential electricity costs are expected to decline from about 2.7% of disposable income in 2025 to about 2.6% by 2030 as income growth outpaces bill growth, the near-term burden remains acute: projected 2026 bill growth of 5.9% exceeds projected personal disposable-income growth of 4.7% and discretionary-cash-flow growth of 3.7%. The average monthly US residential bill was $171 on a trailing-twelve-month basis as of June 2026, versus $165 a year earlier; bills grew 6% year on year. The state range was $76 in New Mexico to $255 in Hawaii. Regional dispersion is central to the report's argument. Three-year accumulated bill inflation from June 2023 to June 2026 was highest in DC at 55.8%, New Jersey at 43.4%, Maryland at 40.0%, New York at 29.1% and Ohio at 27.4%; Nevada at -18.0%, New Hampshire at -4.7%, Hawaii at -2.0%, Louisiana at 1.8% and Kansas at 3.0% were the lowest. Every PJM state recorded bill inflation above the national average over that period. Goldman Sachs views affordability as most acute in PJM, particularly DC, New Jersey, Maryland and Ohio, as well as New York. It attributes this to competitive-market supply-demand tightening, plant retirements, rising load and higher capacity prices. The report illustrates the PJM mechanism using JCP&L and PSE&G customer bills. Supply represented about 73% of the JCP&L bill and about 70% of the PSE&G bill, leaving customers highly exposed to wholesale-market changes. Supply charges accelerated in May and June 2026 as PJM capacity prices rose about 833%, from $28.92/MW-day to $269.92/MW-day. After removing seasonal usage effects from customer bills, the report still finds movements in supply and delivery charges. Its annual-average regression for June 2021 through June 2025 produced an R-squared of 0.73 between JCP&L bills and capacity prices; including natural-gas prices raised the multi-variable regression R-squared to 0.88 over six years. Affordability is not assessed solely through bill inflation. Goldman Sachs notes that bills averaged 12.6 hours of work at the state minimum wage in 2026, or roughly 30% of a 40-hour workweek; the burden ranged from 22.5 hours in Texas to 6.4 hours in Colorado. Share-of-wallet measures can also differ from recent inflation: Alabama, Mississippi, Hawaii and West Virginia had some of the highest bills relative to disposable income, while Alabama and Hawaii showed below-average three-year bill inflation. California and Connecticut also had below-average recent bill inflation but remain affordability-sensitive because absolute costs are high. California's rate was 33.2 cents/kWh and its average monthly bill was $160.16 versus $149.60 nationally, reflecting wildfire mitigation, public-purpose programs and other policy-related charges. For equity implications, the report argues that affordability concerns can reduce regulators' willingness to approve rate increases, allowed returns or incremental capital programs. It views utilities concentrated in PJM or NYISO as more challenged: ED and EXC are Sell-rated, PEG is Neutral-rated and FE is Buy-rated, though the report cautions that this geographic screen does not fully account for individual utilities' bills relative to regional peers. PEG customers experienced a 51% bill increase versus a 43% state average over the three years ended June 2026. EIX, PCG and SRE also remain exposed to affordability pressure due to California's high absolute rates despite more moderate recent bill inflation. Conversely, XEL, SO and NEE screen more favorably because of exposure to states with lower affordability pressure, including South Dakota, Minnesota, New Mexico, Colorado, North Dakota, Texas, Georgia, Alabama and Florida. XEL customer bills rose about 4% over three years versus about 10% across its weighted state footprint; SO customer bills rose 11.1% versus a 12.0% weighted state-footprint increase. AEP is positioned between these groups: 58% of its rate base is in above-average-inflation jurisdictions, but its larger commercial and industrial customer mix and large-load tariff structures may help absorb future infrastructure costs. Goldman Sachs similarly views commercial and industrial exposure and large-load tariffs as mitigating factors, highlighting XEL, WEC and SO for relatively high commercial and industrial demand exposure and noting tariffs implemented or proposed by SO, AEP, NEE, WEC, DUK, D, AEE and XEL.
Analysis framework
The report first decomposes residential bills into supply, delivery and other charges, then compares how regulated and deregulated market structures pass costs to customers. It combines EIA, company and regulatory data with state-level bill-inflation comparisons, customer-bill examples, normalized usage analysis and regressions against PJM capacity and natural-gas prices. It then maps regional affordability exposure, absolute bill burdens, customer mix and large-load tariffs to implications for covered utilities.
Methodology notes
Power-market supply-demand analysis
The report links tighter capacity supply, plant retirements and rising electricity demand to higher capacity prices and supply charges in deregulated markets.
Customer-bill component and usage-normalized analysis
Goldman Sachs separates supply, delivery and customer charges and normalizes bills for usage to distinguish seasonal consumption effects from underlying price and charge movements.
Regression of customer bills against capacity and natural-gas prices
The report uses annual-average regressions to quantify how closely JCP&L customer bills moved with PJM capacity prices and, separately, capacity and natural-gas prices.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Exelon Corp. (EXC)More challenged by affordability pressure because of exposure to high-inflation competitive-market jurisdictions.
- Weaknesses
- Exposure to jurisdictions with elevated customer-bill inflation.
- Comparison
- EXC customer bill inflation was slightly below the weighted average across its footprint over the three years ended June 2026.
- Risks
- Affordability-driven regulatory risk.
- Consolidated Edison Inc. (ED)More challenged by New York affordability pressure.
- Weaknesses
- Customer bills were slightly above New York state-average bill inflation.
- Comparison
- Compared with the New York state average over the three years ended June 2026.
- Risks
- Affordability-driven regulatory risk.
- Public Service Enterprise Group (PEG)More challenged by exposure to high-inflation jurisdictions.
- Weaknesses
- Customer bills rose 51% versus a 43% state average over three years.
- Comparison
- PEG customer bill inflation exceeded the state average.
- Risks
- Affordability-driven regulatory risk.
- Xcel Energy Inc. (XEL)Screens favorably on affordability due to exposure to lower-pressure states and commercial and industrial demand.
- Strengths
- Customer bills rose about 4% versus about 10% across its weighted state footprint; notable commercial and industrial exposure and a large-load tariff.
- Comparison
- Bill inflation was below its weighted state-footprint average.
- Southern Co. (SO)Screens favorably because of lower-pressure geographic exposure and customer mix.
- Strengths
- Customer bills rose 11.1% versus a 12.0% weighted state-footprint increase; high commercial and industrial exposure and an approved large-load tariff.
- Comparison
- Customer bill inflation was slightly below its weighted footprint average.
- American Electric Power (AEP)Falls between the more challenged and better-positioned groups.
- Strengths
- Commercial and industrial customer mix and large-load tariffs may help absorb infrastructure costs.
- Weaknesses
- 58% of rate base is in jurisdictions with above-average bill inflation.
- Risks
- Affordability-related regulatory risk despite mitigating customer mix.
Key data
- Forecast residential bill inflation3.7% CAGR through 2029Base-case forecast; bill growth moderates from 5.9% in 2026 to 2.1% in 2029.
- Bull-capex bill inflation7.9% average annual growth through 2029Scenario showing the potential customer-bill effect of higher utility investment.
- Average US monthly residential bill$171TTM as of June 2026, versus $165 as of June 2025.
- Highest three-year bill inflationDC +55.8%June 2023 to June 2026; followed by New Jersey at +43.4% and Maryland at +40.0%.
- PJM capacity-price increaseApproximately 833%Rose from $28.92/MW-day to $269.92/MW-day and contributed to May-June 2026 supply-charge increases.
- JCP&L bill and capacity-price regressionR-squared of 0.73Annual-average relationship for June 2021 to June 2025; adding natural gas produced an R-squared of 0.88 over six years.
- Minimum-wage affordability burden12.6 hoursAverage work required to pay a monthly utility bill in 2026; Texas was 22.5 hours and Colorado was 6.4 hours.
Impact & implications
Goldman Sachs argues that customer affordability is becoming a meaningful regulatory consideration for US utilities. Higher bills can support recovery of approved investment, but may also limit approval of future rate increases, returns and capital programs. The report sees the largest risk in competitive power markets with high capacity-price exposure, while lower-pressure jurisdictions, commercial and industrial demand exposure, and large-load tariffs can help mitigate that risk.
Risks
- Rising customer bills may make regulators less willing to approve rate increases, allowed returns or incremental capital-investment programs.
- Tight supply-demand balances, plant retirements and load growth can lift capacity prices and create immediate bill pressure in deregulated markets.
- Higher capex could increase annual bill growth to 7.9% through 2029 in the report's bull scenario.
- Wildfire mitigation, storm recovery, public-policy programs and bad-debt charges can add to customer affordability pressure.
What to watch
- PJM capacity prices, wholesale power costs and natural-gas prices as drivers of supply charges.
- Residential bill inflation relative to disposable-income and discretionary-cash-flow growth.
- Regulatory willingness to approve utility rate increases, returns and capital programs.
- Development and adoption of large-load tariffs as electricity demand and grid investment accelerate.