CAP Testimony Before the House Committee on Small Business’s Rural Development, Energy, and Supply Chains Subcommittee

Thank you, Chair Ellzey, Ranking Member Morrison, and members of the committee for inviting me to provide testimony today about energy prices. My name is Trevor Higgins, senior vice president for Energy and Environment at the Center for American Progress.

Over the last year, energy costs have risen at more than four times the rate of overall inflation and at more than four times the rate of wage growth.¹ Residents in some states experienced electricity price increases of 10 percent or more between June 2025 and June 2026, including in New Hampshire, Virginia, Michigan, and Idaho, and the average household is expected to spend nearly $800 on electricity this summer.² Commercial energy costs, too, have increased by 10 percent for electricity and 24 percent for natural gas since the start of 2025, according to the most recent data, putting strain on small businesses.³

Crude oil prices have also risen dramatically, creating pain at the pump and across the broader economy. Compared to last year, gasoline prices are up 30 percent, diesel prices up 52 percent, and jet fuel prices up 72 percent, according to the U.S. Energy Information Administration.⁴ The average household has spent an extra $396 on gasoline since the start of the war in Iran, according to analysts at Brown University.⁵

Many American families and small businesses are struggling to keep up with the increasing costs. A recent survey found that while 80 percent of small business owners reported that their energy costs have increased over the past three years, an equal proportion states that energy costs significantly impact their business.⁶ These extra costs are forcing households to cut back on driving and other spending. A survey in June found that about two-thirds of Americans had tried to reduce their utility bills in the previous three months, while 58 percent changed the groceries they bought to stay within budget and 57 percent cut back on extras and entertainment to ease financial pressures.⁷ A survey in April found 44 percent of respondents have reduced their time on the road, 42 percent have cut back on other household expenses, and 34 percent have changed travel plans as a result of high gas prices.⁸ I will also note that the need to adapt household budgets and behaviors to afford rising energy costs is being compounded by increasingly extreme temperatures, with 81 percent of Americans saying extreme heat had an impact on their electricity bills over the past year.⁹

Why prices are rising

There are many reasons why energy prices are rising and likely will continue to rise without appropriate federal policy solutions. One is that the U.S. is facing growing repair costs for grid infrastructure that is both aging and increasingly vulnerable to extreme weather. Disaster-related recovery charges are showing up for customers across states, while grid-damaging events like hurricanes and wildfires have contributed to power outages costing an average of $67 billion every year for residential and business customers between 2018 and 2024.¹⁰

Further straining the grid is data center energy demand, which grew almost 150 percent between 2014 and 2022 and could grow another 300 percent by 2030, according to an analysis by the Rhodium Group.¹¹ This would increase total electricity system costs roughly 15 percent, which ought to be paid for by the developers of the new data centers, not by existing businesses and households through higher electricity prices.¹² Unfortunately, this is not always the case under current policies. In the region served by the PJM transmission operator, for example, new data center demand increased the cost of the capacity auction for the 2025–2026 delivery year by more than $9 billion, increasing retail electricity bills for other PJM customers.¹³ While data center impacts have started out as regional, their projected growth is more widespread and could strain the grid, raising costs for ratepayers who may not even be in the same state as the data center being built.¹⁴

Federal policy should support solutions to address these rising challenges. Unfortunately, while Americans ask for relief from these high energy prices, the Trump administration is raising energy costs in several major ways.

1. The One Big Beautiful Bill Act limited new energy capacity added to our grid at a time we need more energy, not less. Repealing or restricting federal clean energy investment incentives is projected to have eliminated more than half of the new electricity generation capacity that would have been added to the grid over the decade through 2035, including up to 72 percent of all new clean energy additions.¹⁵ At a time when U.S. energy consumption is growing for the first time in over a decade, adding new clean energy capacity is the most affordable way to meet rising demand.¹⁶ Analysis from the research organization Energy Innovation estimates that the disinvestment enacted by the One Big Beautiful Bill will cause Americans’ electricity bills to rise $170 on average by 2035, while commercial customers can expect a 12 percent increase in electricity rates.¹⁷ In addition, cuts to electric vehicle investments made by the bill and its functional elimination of enforcement for vehicle fuel economy standards are projected to increase gas prices between 25 and 37 cents per gallon by 2035.¹⁸
2. Blocking clean energy projects raises costs. Although the termination of federal investment incentives requires ratepayers to shoulder a greater share of the costs of new generating capacity, wind and solar projects remain the least expensive sources of new electricity-generating capacity to meet the demands of a growing grid.¹⁹ However, the administration has sought to block new clean energy development on many fronts.²⁰ Through executive order on the first day, the administration banned permits for new offshore wind projects.²¹ The administration has since attempted to issue stop work orders on projects already under construction.²² In recent deals, the administration has spent nearly $4 billion of taxpayer dollars to encourage private developers to abandon clean energy projects.²³ Onshore, the administration’s permitting blockade has delayed routine permits for more than 150 new clean energy projects on private lands that would add 30 GW of additional electricity capacity to the grid.²⁴ Blocking new energy resources from reaching the grid requires utilities to fall back on older power plants that cost more to fuel and cannot ultimately meet the growth in electricity demand. The latest analysis from Energy Innovation estimates that the combination of disinvestment through the One Big Beautiful Bill, regulatory rollbacks, and clean energy permitting obstacles together will cost the average household $460 annually by 2035.²⁵
3. Economic uncertainty caused by announcing new and ever-changing tariffs makes the supplies we need for our grid more expensive. The Trump administration’s broad and ever-changing tariffs have contributed to increased costs, raising input prices for critical equipment and potentially slowing efforts to build and repair grid infrastructure. As far back as April 2025, the administration’s tariffs were anticipated to increase the cost of key grid components between 3 and 9 percent, and since then, the Trump administration has repeated, added, and altered tariffs on the imported materials needed to manufacture these components.²⁶ The incessant whipsaw of tariff levels since then has mired investment decisions in uncertainty.
4. Starting the war of choice in Iran has damaged energy security and increased prices for Americans. Since the war began, Americans have paid more than $1,200 per household as a result of higher energy prices, which influence everything from costs at the pump to groceries to air travel.²⁷ In the face of surging energy prices, the U.S. Strategic Petroleum Reserve has been depleted by 30 percent since the war started and has now fallen to the lowest level recorded in nearly a quarter of a century.²⁸ Even once the conflict ends, prices will likely be slow to recover, with the war’s inflationary effects persisting.²⁹

There are solutions

Rather than blocking investment in new clean energy, the United States needs investment in grid infrastructure, including transmission lines, distribution lines, transformers, and inverters; distributed energy resources like rooftop solar that deliver benefits directly to homes and businesses; least-cost electricity generation capacity like utility-scale wind and solar; firm generation resources like demand response, nuclear, geothermal, and batteries that can lower total system costs with little to no ongoing fuel costs; and much more to build a bigger, better power system. At the Center for American Progress, we have published a Plan for American Electricity Affordability recommending reforms and investments to make this happen, alongside a rate relief fund to deliver immediate relief to households.³⁰

Data center developers must be made to pay for costs of grid infrastructure improvements needed to serve the new loads they are building, which can require as much electricity as hundreds of thousands of households.³¹ This includes a grid interconnection fee that is sufficient to cover all upfront capital costs for grid infrastructure and electricity generation without imposing costs on the existing customer base, as well as a full-cost electricity rate so that data centers as a class are paying their fair share of ongoing system costs.

Electricity prices are but one of the impacts of data centers that policy must address. Many states are now taking action to govern development. In Texas, Gov. Greg Abbott (R) directed state energy regulators to complete a comprehensive audit of the fiscal, water usage, and electricity usage of data centers advancing through the grid interconnection process before any project moves forward.³² In Pennsylvania, Gov. Josh Shapiro (D) is requiring legally enforceable commitments to his Governor’s Responsible Infrastructure Development (GRID) as a condition of permits.³³ In New York, Gov. Kathy Hochul (D) imposed a one-year pause on certain state environmental permits for new hyperscale data centers while New York develops a statewide environmental framework and rules for electricity costs.³⁴ In New Jersey, Gov. Mikie Sherrill (D) signed legislation creating a separate rate class for data centers to ensure they pay for their energy use and associated grid costs.³⁵ Oregon, Maryland, and Florida, among other states, have also acted to protect other ratepayers from infrastructure costs associated with data center development.³⁶ Particularly where states are part of regional transmission organizations, states need the support of federal policymakers and regulators.

Ultimately, any data centers that are built should be connected to the electricity grid. While building natural gas or diesel generation detached from the grid can avoid creating grid infrastructure costs that the developer would need to pay for, off-grid data centers raise other affordability concerns and significant pollution problems. Currently planned off-grid data center development could consume about 18 percent as much natural gas as the entire power sector did in 2025, according to my organization’s estimates, which would drive up fuel prices for home heating and cooking, industry, and on-grid natural gas power plants.³⁷ If these data centers instead pay their fair share of connecting to the electricity grid, the addition of so much new power demand could actually lower average costs by spreading out the fixed costs of operating, maintaining, and amortizing the electricity system over a larger base of customers, particularly where there may be spare capacity.³⁸

Conclusion

Energy prices are rising and the current administration’s policies are making the problem worse, not better. While many states are responding to the administration’s attacks on clean energy investment and to the surge in data center development, federal policy change is needed. The United States needs to invest in new clean energy generation, ensure data centers are paying their fair share, and build a bigger, better electrical grid. A combination of immediate relief and long-term reforms are needed to deliver cost savings for small businesses and households alike while building a more resilient, capable, flexible, clean, and affordable electricity system.