In a year marked by fluctuating energy prices, small business owners across the U.S. will have to navigate a more expensive electricity marketplace in 2025. According to the U.S. Energy Information Administration (EIA), average wholesale electricity prices surged last year, driven predominantly by increasing natural gas costs, which could have significant implications for operational budgets nationwide.
Small businesses are particularly sensitive to electricity price changes, which can significantly impact their bottom line. In 2025, average wholesale day-ahead electricity prices at key trading hubs rose substantially compared to 2024. The most notable increase was recorded in New England’s Independent System Operator (ISO-NE), which saw prices jump by $29 per megawatt-hour (MWh). In stark contrast, the upper Northwest’s Mid-Columbia experienced a price decrease of $14/MWh, highlighting the regional disparities affecting small businesses.
The EIA reports that natural gas prices have a pronounced effect on wholesale electricity costs, as these prices typically establish the marginal cost of electricity in most regional markets. In 2025, benchmark Henry Hub spot prices averaged $3.52 per million British thermal units (MMBtu), up 56% from the inflation-adjusted lows of the previous year. This increase has a direct correlation to the wholesale electricity prices that small businesses face, making energy budgeting more challenging.
Moreover, the EIA noted a 2% increase in total electricity generation across the Lower 48 states, amounting to 93 billion kilowatt-hours (BkWh). However, natural gas-fired generation saw a decline of 3%, equivalent to 53 BkWh, as businesses began transitioning to more cost-effective energy sources. This shift resulted in an 11% increase in coal-fired generation and a remarkable 32% rise in solar generation. The implications are clear: while rising natural gas prices contribute to higher overall electricity costs, businesses may want to consider diversifying their energy sources in response.
For small business owners in the Mid-Atlantic and Midwest regions specifically, the impact reveals a distinct trend. While total generation increased by 3%, natural gas generation fell 24 BkWh, replaced by an increase in both coal and solar capabilities. Texas, despite also facing increased demand, shifted towards solar energy, hinting at a broader trend toward renewable energy adoption.
Challenges remain, however. With the overall increase in renewable generation, small businesses must factor in potential infrastructure changes and initial costs associated with transitioning to solar or other alternative energy sources. The dramatic shifts in generation sources—especially a decline in dependable natural gas-fired production—could create potential reliability issues during peak demand periods.
As these energy dynamics evolve, small business owners should take note of several critical takeaways:
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Persistent Price Pressure: Expect ongoing fluctuations in electricity prices due to heightened natural gas costs. Budgeting for energy expenses should be a priority, particularly for businesses relying heavily on electricity.
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Exploration of Alternatives: The marked increase in solar generation may provide a viable avenue for small business owners aiming to mitigate rising costs. Exploring local incentives for renewable energy adoption could lead to long-term savings.
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Regional Disparities: Awareness of regional price variations is vital. Businesses in states with significant increases may require tailored strategies compared to those in areas experiencing price decreases.
- Monitoring Trends: Keeping abreast of energy forecasts and technological advancements is crucial for making informed decisions regarding energy partnerships and sources.
The future of energy pricing is poised for shifts that will directly affect small businesses. As they adapt to new realities, they must embrace flexibility in their operational strategies to withstand these ongoing changes. For more detailed information, small business owners can refer to the original analysis provided by the EIA here.
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