Introduction – Commercial vs. Residential Electricity Rates
Are you interested in commercial vs. residential electricity rates? There’s also “industrial” electricity rates that are in a different class. Residential rates are generally higher, but there’s considerable variation by state and the odd states where the relationships are inverted. We updated our data using March 2023 rates as reported by the EIA here.
The national average for residential electricity rates in the U.S. is 15.85 cents per kWh. This is the highest average compared to commercial and industrial rates. The national average for commercial electricity rates is 12.52 cents per kWh, and for industrial electricity rates is 7.91 cents per kWh.
| Sector | Electricity Rate (cents / kWh) |
| Residential | 15.85 cents / kWh |
| Commercial | 12.52 cents / kWh |
| Industrial | 7.91 cents / kWh |
Electricity is a crucial part of our daily lives, powering everything from our homes to our businesses. This article provides an in-depth look at these differences and what they mean for consumers and businesses.
Understanding the Basics
Before diving into the data, let’s define some key terms. A kilowatt-hour (kWh) is a unit of energy that represents the amount of electricity consumed over time. Residential, commercial, and industrial rates are the prices that these respective types of consumers pay for electricity per kWh.
These rates differ due to factors like the quantity of electricity used, the cost of delivery, and the time of use, with larger consumers like businesses and industrial entities often paying less per kWh due to economies of scale.
Note, the prices we list below are for electricity only, and not for delivery. The delivery of electricity constitutes a whole other set of transmission and delivery costs. The alternative upfront payment scheme for electricity in deregulated states will affect costs as well.
Analysis of Electricity Rates Across the US
Let’s delve into some data from the Energy Information Administration (EIA) that illustrates these differences. We obtained the monthly EIA data for electricity rates, stratified by sector and states.
The following table lists the average cost of electricity in cents per kilowatt-hour (kWh) for residential, commercial, and industrial consumers in each state, as well as the national average:
| State | Residential | Commercial | Industrial |
| Alabama | 14.65 | 13.11 | 6.69 |
| Alaska | 23.39 | 20.43 | 19.07 |
| Arizona | 13.63 | 10.96 | 7.03 |
| Arkansas | 12.21 | 10.48 | 6.66 |
| California | 27.15 | 21.31 | 17.20 |
| Colorado | 13.82 | 11.03 | 8.48 |
| Connecticut | 33.23 | 20.63 | 15.47 |
| Delaware | 15.25 | 11.78 | 7.92 |
| District of Columbia | 16.04 | 16.51 | 10.56 |
| Florida | 14.76 | 11.96 | 9.86 |
| Georgia | 13.57 | 11.18 | 6.15 |
| Hawaii | 44.25 | 41.91 | 38.01 |
| Idaho | 10.09 | 8.32 | 5.99 |
| Illinois | 17.43 | 11.61 | 8.67 |
| Indiana | 16.03 | 13.70 | 9.06 |
| Iowa | 11.90 | 9.21 | 5.79 |
| Kansas | 13.97 | 11.46 | 8.62 |
| Kentucky | 12.15 | 11.31 | 6.53 |
| Louisiana | 11.85 | 11.06 | 6.38 |
| Maine | 29.41 | 18.21 | 13.54 |
| Maryland | 15.76 | 12.56 | 9.51 |
| Massachusetts | 32.39 | 20.43 | 17.86 |
| Michigan | 18.06 | 13.01 | 8.12 |
| Minnesota | 13.76 | 12.00 | 9.05 |
| Mississippi | 14.01 | 13.11 | 7.24 |
| Missouri | 11.65 | 9.45 | 7.63 |
| Montana | 12.15 | 12.03 | 8.37 |
| Nebraska | 10.57 | 8.91 | 7.04 |
| Nevada | 17.16 | 11.29 | 9.32 |
| New Hampshire | 30.30 | 22.34 | 16.42 |
| New Jersey | 17.17 | 13.55 | 11.17 |
| New Mexico | 13.36 | 10.28 | 6.05 |
| New York | 21.18 | 16.80 | 6.77 |
| North Carolina | 12.97 | 9.57 | 6.91 |
| North Dakota | 9.72 | 8.04 | 6.68 |
| Ohio | 14.88 | 10.38 | 7.23 |
| Oklahoma | 11.93 | 8.67 | 6.10 |
| Oregon | 12.17 | 10.29 | 7.03 |
| Pennsylvania | 18.12 | 11.09 | 7.88 |
| Rhode Island | 28.05 | 17.13 | 18.80 |
| South Carolina | 14.26 | 10.57 | 6.48 |
| South Dakota | 11.31 | 9.58 | 7.82 |
| Tennessee | 12.48 | 11.89 | 6.37 |
| Texas | 14.46 | 9.13 | 6.46 |
| Utah | 10.88 | 8.38 | 7.01 |
| Vermont | 20.38 | 17.86 | 11.46 |
| Virginia | 14.74 | 9.45 | 9.10 |
| Washington | 10.80 | 10.24 | 6.35 |
| West Virginia | 14.20 | 11.23 | 6.96 |
| Wisconsin | 16.34 | 12.51 | 8.18 |
| Wyoming | 10.62 | 9.26 | 6.87 |
| U.S. Total | 15.85 | 12.52 | 7.91 |
At the bottom we compute the average cost for each sector. On average across the United States, as of 2023, residential electricity rates are 15.85 cents per kWh, commercial rates are 12.52 cents per kWh, and industrial rates are 7.91 cents per kWh.
On our website we publish commercial electricity rates that are more up-to-date than the table above.
Deep Dive: Residential Electricity Rates
The national average for residential electricity rates in the U.S. is 15.85 cents per kWh. This is the highest average compared to commercial and industrial rates. The state with the highest residential rate is Hawaii, with a rate of 44.25 cents per kWh, almost triple the national average.
Connecticut and Massachusetts also have high residential rates, each above 30 cents per kWh. On the lower end, the states with the lowest residential rates are North Dakota and Idaho, both under 11 cents per kWh.
Deep Dive: Commercial Electricity Rates
The national average for commercial electricity rates is 12.52 cents per kWh. Hawaii again has the highest rate in this sector at 41.91 cents per kWh, more than triple the national average. The District of Columbia and California also have high commercial rates, each above 20 cents per kWh.
The states with the lowest commercial rates include North Dakota, Oklahoma, and Idaho, each under 9 cents per kWh.
Deep Dive: Industrial Electricity Rates
The national average for industrial electricity rates is 7.91 cents per kWh. Industrial rates are generally lower than both residential and commercial rates. This may be due to the economies of scale associated with high-volume electricity consumption.
Hawaii again has the highest rate, at 38.01 cents per kWh. Other states with high industrial rates include Rhode Island, California, and New Hampshire, each above 15 cents per kWh. The states with the lowest industrial rates are Georgia, Louisiana, and Oklahoma, each around 6 cents per kWh.
Comparative Analysis
Observing the electricity rate spreads within individual states, a few noteworthy details emerge. Hawaii has the highest rates across all sectors and also shows the highest spread between residential and industrial rates, at approximately 6.24 cents. The cost of electricity in Hawaii is influenced by its geographic isolation and reliance on imported fuels.
Interestingly, Rhode Island has a higher average industrial rate than its commercial rate, which is contrary to the general trend observed across most states.
We also observe that the District of Columbia is the only region where the commercial rate is higher than the residential rate, which could be due to the large amount of commercial activity in the area.
For Idaho, North Dakota, and Oklahoma, we see these have some of the smallest spreads between residential and industrial rates, indicating a smaller cost advantage for industrial users compared to most other states. Similarly, Alabama, Kentucky, and Mississippi have small spreads between residential and commercial rates, less than 2 cents, suggesting relatively similar costs for these two sectors.
Electricity Rates Vary For A Few Major Reasons
Electricity rates vary significantly across states due to a range of factors. For instance, states with abundant renewable resources such as Washington and Idaho, which benefit from significant hydroelectric power, tend to have lower electricity rates. On the other hand, Hawaii, which is geographically isolated and depends heavily on imported fuels for power generation, has the highest rates across all sectors.
Similarly, California’s rates are influenced by its commitment to renewable energy and the associated infrastructure and regulatory costs. Areas with a high population density, like the District of Columbia, can spread the fixed costs of the infrastructure across many users, potentially leading to lower prices per unit of electricity.
In this particular case, a large amount of commercial activity in the area may also drive prices higher. The blend of these and other factors creates the complex landscape of electricity pricing we observe across the United States.
Conclusion – Commercial vs. Residential Electricity Rates
In conclusion, while the national trend shows residential electricity rates are generally higher than commercial and industrial rates, there are exceptions and variations across different states. Factors such as the mix of energy sources, local regulations, the level of competition among providers, and infrastructure costs all contribute to these differences.
Being informed about these rates can help consumers and businesses make more cost-effective decisions. It’s also a step towards a broader understanding of energy economics in the United States.
Understanding the differences in residential, commercial, and industrial electricity rates can be enlightening. Whether you’re considering a move to a new state or planning to start a business, being aware of these rates can help inform your decision-making process.
Remember, these are averages and actual costs can vary based on specific circumstances, so it’s always worth doing additional research to get a full picture of potential electricity costs.
References
Data was sourced from the Energy Information Administration (EIA). For further reading and more detailed data, visit the EIA’s official website.
