U.S. customers are feeling the crunch as receipts, bills, and rent or mortgage payments are showing higher price tags than ever before. Another inflationary threat may be on the horizon – this time in the form of electricity price increases.
A report from NERA Economic Consulting showed that repealing energy tax credits could raise electricity prices across the country, both for residential and commercial customers.
The report said that by 2026, residential customers would pay an average 7% higher bill, adding an average of about $9 per month to their electricity bill.
The tax credits reviewed under this analysis are the 48E investment tax credit (ITC) and the 45Y production tax credit (PTC). The credits are technology-neutral, awarded to any energy generation source that has net-zero emissions. This includes nuclear, hydropower, geothermal, biofuel, wind and solar.
The states expected to have the highest increase to their bills are Wyoming (21%), New Mexico (16.5%), Washington (14.6%) and Illinois (13.5%).
The report said for U.S. businesses, the repeal of tax credits would lead to a 10% bill increase by 2026.
Find out how much your state’s residential and commercial electricity bills are projected to rise should the tax credits be repealed using this chart.
The ITC and PTC tax credits, among other Inflation Reduction Act (IRA) energy provisions, are expected to be reviewed as part of the budget reconciliation process in late 2025.
House Speaker Mike Johnson (R-LA) said he supports a “scalpel” approach to IRA cuts rather than using a “sledgehammer.” However his approach appears to be growing slightly more aggressive.
“It’ll be somewhere between a scalpel and a sledgehammer. We’ll see,” said Johnson in a press conference in late February.
The ITC is a project-level credit that covers 30% of the cost of an installed project. This credit is offered to projects of any size, from utility-scale power plants to homeowners and small businesses installing solar on their rooftops.
The PTC is a generation-side tax credit, crediting emissions-free electricity generators generally between 0.3 cents per kWh to 1.5 cents per kWh.
“Combating the cost-of-living crisis for American consumers and fueling U.S. economic growth relies on more private investment in a diverse menu of clean energy sources,” said Rich Powell, chief executive officer, Clean Energy Buyers Association. “Maintaining the federal investment and production tax credits will enable electricity producers, buyers, and their customers to supply an abundance of low-cost energy sources.”
Repeal of the tax credits would affect about 167 GW of new technology-neutral energy assets expected to be added to the U.S. grid, said the report. Find the full analysis and methodology here.
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