Wholesale Electricity Prices Climbed in 2025 as Natural Gas Costs Rebounded

Tony Zelinski
5 hours ago
2 min read

Wholesale day‑ahead electricity prices across most major U.S. trading hubs rose in 2025, driven primarily by a sharp rebound in natural gas prices, according to new analysis from the U.S. Energy Information Administration.

After hitting inflation‑adjusted record lows in 2024, natural gas prices surged 56% at the Henry Hub benchmark in 2025. In key Northeast hubs such as Algonquin City Gate and Transco Zone 6 NY, prices doubled year‑over‑year. Because natural gas sets the marginal price of electricity in most markets, this fuel‑cost swing translated directly into higher wholesale power prices.

Regional Price Shifts

The impact varied significantly by region:

ISO‑New England saw the largest increase, with wholesale prices rising $29/MWh.
Mid‑Columbia in the Northwest experienced the largest decline, down $14/MWh, reflecting unique regional dynamics and historically low gas prices for part of the year.

Generation Mix Responds to Market Signals

Even with total U.S. electricity generation up 2% in 2025, natural gas‑fired output fell 3% as generators shifted to lower‑cost alternatives .

Key changes included:

Coal generation rising 11% (76 BkWh)
Solar generation jumping 32% (66 BkWh)

Regional displacement patterns varied:

PJM & MISO: Coal and solar filled the gap left by reduced gas generation.
Texas: Strong demand growth paired with a 20 BkWh increase in solar helped offset a decline in gas‑fired output.
Northwest: A milder winter reduced overall demand; hydro and solar picked up modestly while nuclear output dipped due to an extended outage.

What This Means for 2026 and Beyond

The 2025 data underscores a familiar but increasingly important reality: fuel price volatility continues to shape wholesale electricity markets, even as renewables expand their footprint.

For energy managers, utilities, and large consumers, the interplay between natural gas markets and generation economics remains a central factor in forecasting risk and planning procurement strategies.

As solar and other renewables continue scaling, their ability to buffer fuel‑driven price swings will be a key trend to watch.

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