I discussed factors which contribute to electricity price increases in a previous commentary. Richard Greene, the editor of the Honest Climate Science and Energy blog commented that I had not included the effects of increased natural gas prices.

The US Energy Information Administration (EIA) provides the following data on the natural gas prices paid by electric generators.

US EIA reports that the January 2026 price increased to $7.72/mcf, likely the result of very cold weather in much of the US in January 2026.

Note that these natural gas prices are for purchases in the spot market, which change daily as a function of supply and demand, and not for gas under long term contracts. Spot market natural gas prices are significantly affected by weather conditions, particularly in winter when firm customer demand tends to peak, reducing the quantity of natural gas available in the spot market.

Greene’s comment particularly noted the increase in the natural gas price in January 2025 ($6.21/mcf) versus the January 2002 price ($3.10/mcf), a difference of $3.11 per mcf. Therefore, we will calculate the electricity rate impact of that increase.

One thousand cubic feet of natural gas (1 mcf) contains approximately one million BTUs of energy. A modern natural gas combined cycle powerplant converts that natural gas energy into electric energy at an efficiency of ~50%, producing ~500,000 BTU of electric energy.

500,000 BTU / 3412 BTU/kwh = 146.5 kwh

$3.11 / 146.5 kwh = $0.02/kwh

Approximately 10% - 15% of US natural gas fueled electricity generation is produced by simple cycle gas turbine generators, which operate at an efficiency of ~25%, which would result in an increase of ~$0.04/kwh for that portion of the generation.

The US average residential electricity rate is ~$0.19/kwh, Therefore, the effect of a $3.11/mcf increase in natural gas prices for electric generation in combined cycle gas turbine generators would be an increase of approximately 10.5%. Generation of 15% of natural gas fueled electricity generation by simple cycle gas turbine generators would increase that estimate to ~12%.

US EIA reported an average US residential electric rate of $0.08 – 0.09 per kwh in 2002, when the natural gas rate was $3.11/mcf. Therefore, over the period or 2002 – 2026, electric rates increased by $0.10 - $0.11 per kwh, or ~123%, compared to a electricity price increase of 10.5%.- 12% resulting from the increase in natural gas prices.

Natural gas generates ~40% of US electricity annually. Therefore, an increase of $0.02/kwh in the price of natural gas generated electricity would contribute ~0.008/kwh to ~$0.009 to the US residential electricity price, or ~4% compared to the overall 123% increase in electricity prices. The increased natural gas price of $7.72 in January 2026 would have resulted in price difference of $4.61/mcf from the January 2002 price, or a difference of approximately $0.03/kwh, or ~6%.

Clearly, increases in natural gas prices for electric power generation have contributed to the increases in US electricity prices. However, equally clearly, there are numerous other factors which have contributed far more to the 123% increase in electricity prices since 2002.