Few topics garner as much attention and debate these days as energy affordability. For instance, rising energy prices, especially electric utility rates, catapulted to the forefront of the 2025 gubernatorial elections in Virginia and New Jersey. Researchers, regulators, and policymakers are all grappling to ensure all customers have access to affordable electricity.
While energy affordability has become a topic of understandable interest and action—connected closely to broader discussions about inflation—many people lack clarity about the primary drivers of energy costs. Also, little is understood about how energy costs may change as electricity takes on a more prominent role in powering transportation, heating and cooling buildings, and an increasing number of industrial uses.
Many people think of their electricity bill when they assess their household energy costs. But for the average U.S. household, gasoline is the single largest energy expense—a fact that often surprises people because fuel purchases don’t arrive as a monthly bill. Clarifying the full picture of household spending across all energy sources—and how it is affected by increasing electrification—was the focus of the August 2025 white paper, The Energy Wallet: U.S. and State-Level Household Energy Expenditures, Past and Future.
A clear understanding of how electricity’s contribution to household energy costs compares to other energy types, and how it is changing with greater electrification, matters for utilities as they plan to meet load growth, communicate the value of electrification for their customers, develop and operate customer programs to ensure affordability, and consider rate designs and incentives to contain costs.
A Comprehensive View of Energy Spending
EPRI’s Energy Wallet analysis uses data from the U.S. Energy Information Administration (EIA) State Energy Database System and other sources to quantify what households in all 50 states spend on all sources of energy, including electricity, natural gas, heating fuels, gasoline, public charging for electric vehicles (EVs), and the amortized cost of residential solar.
The report provides a historical view of this basket of average household energy expenses, presents them in both nominal and inflation-adjusted terms, and accounts for population growth. EPRI compiled future projections through 2050 using its US-REGEN energy systems model, which analyzed scenarios with and without continued implementation of the Inflation Reduction Act (IRA) policies and varying fuel prices. In both scenarios, consumers adopt EVs and heat pumps based on their cost advantage over conventional alternatives. The results point to a perhaps counterintuitive conclusion: as electrification expands, total household energy costs are likely to fall significantly, even as electricity bills increase.
Main takeaways about current energy spending included:
- Average Energy Wallet spending—meaning direct annual spending on all energy sources—in the U.S. in 2024 was $5,530 per household. States differed significantly in their average household energy expenditures, with New England states and Alaska spending the most (Maine topped the list at approximately $7,800) and Utah coming in lowest at about $4,400.
- On average, U.S. homes spent the most on gasoline, at nearly $3,000 per household, while average electricity expenses were $1,850. In every state, electricity expenses accounted for less than half of all Energy Wallet spending.
- Adjusting for economy-wide inflation, the average U.S. Energy Wallet in 2024 was almost identical to what it was in 2020. Over nearly two and a half decades, Energy Wallet spending fluctuated considerably. During the COVID-19 pandemic in 2020, when people commuted much less because of lockdowns, the U.S. average was $4,590. Elevated fossil fuel prices in 2008 drove average Energy Wallet spending to nearly $8,000. There was much less fluctuation in electricity spending over the same period, with average household utility bills ranging from $1,600 to $2,000.
- While the average U.S. residential electricity price increased 30 percent in nominal terms between 2020 and 2024, the price adjusted for economy-wide inflation rose by only 5 percent.
The Electrification Advantage
Pinpointing the elements that constitute the Energy Wallet and examining historic trends provides helpful clarity into household energy expenditures. For utilities, what is arguably more important is to understand how household energy expenditures may change in the future, especially as electrification gains momentum.
The report offers potentially good news for the affordability of household energy expenses. Depending on the policy environment and fuel prices, if consumers adopt EVs and other electric technologies, like heat pumps, at the rates suggested by their cost advantages, the average U.S. household Energy Wallet could fall in real terms by 36 to 42 percent by 2050, with state-level declines ranging from 10 to 55 percent.
Simply put, greater electrification has the potential to significantly improve household-level energy affordability. The main driver of the savings is the shift from gas-powered vehicles to EVs; the final energy consumed per mile by a light-duty EV is about a third that of a comparable internal combustion engine vehicle. “The decline in the Energy Wallet is driven primarily by replacing gasoline expenditures with increased spending on electricity as personal vehicles are electrified,” said Geoffrey Blanford, an EPRI principal technical executive, who co-authored the report with Chris Roney, senior team lead in the Energy Systems and Climate Analysis Group at EPRI. Building electrification, including the proliferation of heat pumps and improved appliance energy efficiency, also contributes to lower household energy expenses.
While lower overall energy costs would undoubtedly be welcomed by households, increased electrification is also likely to increase scrutiny on utility bills. “As you electrify a home, people are going to spend more on electricity, both in nominal and inflation-adjusted real dollars,” Roney said. “They’re going to spend a lot less on their energy bill, but it’s going to have the secondary effect of increasing the prominence of electricity bills in home energy economics.”
Turning Insight into Action
The dynamics of falling overall household energy costs, fueled by increased electrification, combined with rising utility bills, are ones that utilities and customers need to grasp fully. Indeed, the data and modeling in the report can help inform utility communication and education efforts targeted at regulators, policymakers, and consumers around what increased electrification means for individual customers. This takeaway might not be immediately obvious to customers concerned about rising electricity bills.
The full picture provided by the Energy Wallet equips utilities with tools to more effectively address affordability concerns. “The electrification trend drives down household expenditures, even though you’re increasing your electricity bill,” Blanford said. “That’s such an important message for utilities to be able to share with their customers.” Insights from the Energy Wallet research provide data points to help frame rising electricity prices within the context of falling total energy costs.
The research can also support utility designers of customer electrification programs. Clarity about which households stand to save the most from electrification can help inform how to target incentives and assistance programs to households that will benefit financially.
The insights have immediate value in addressing growing concerns about the impact of data centers on electricity prices. “There’s a widespread fear that if electricity has to do more, including powering data centers, then affordability is going to get worse and worse,” Roney said. “But the evidence points in the other direction. EPRI’s Win-Win Watts research has shown that new electricity demand has historically tended to lower rates on average, and what the Energy Wallet research shows is that there are a ton of possible savings for households because of greater electrification.”
The Energy Wallet analysis presents state-level averages, which provide valuable insight but don’t capture the wide variation in energy spending across different household types. A family with multiple vehicles and long commutes, for example, will have higher energy costs than a household that drives little. When analyzed alongside income data, these variations become critical for understanding energy burden—the share of household income spent on energy—particularly for vulnerable populations.
EPRI is launching supplemental research to address these questions through collaborative case studies with participating utilities. Utilities can still participate in the follow-on work, which will focus Energy Wallet findings on utility service territories and examine distributional impacts across different household types. “We want to understand the factors that are going to change an individual household’s spending profile and how much money they might stand to save in an energy transition towards more electrification,” Roney said. This granular analysis will help utilities design programs to meet both today’s needs and anticipate how those needs will evolve as electrification accelerates over the next few decades.
As households electrify their vehicles and homes, the electricity bill will likely become the most visible measure of what Americans spend on energy. “Utilities need to prepare for what that means,” Roney said. “Communicating the financial benefits of greater electrification means helping customers understand that a higher electricity bill can mean lower overall energy costs.”
EPRI Technical Experts:
Chris Roney and Geoffrey Blanford
For more information, contact techexpert@eprijournal.com.
