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The cost of electricity is rising as utilities and municipalities spend significant capital to maintain and upgrade the aging electric grid. Rising natural gas prices, a primary feeder fuel for generating electricity, and increasing demand from data centers is adding to the burden placed on the grid. In fact, the National Energy Assistance Director’s Association notes that the price of electricity and natural gas services as reported by the August 2025 Consumer Price Index has been rising more than twice the rate of inflation for the past year.
Rates for electricity are expected to continue to rise over the next few years as utilities pass these costs on to customers via higher rates. The Center for American Progress recently reported that as of September 2025, at least 102 gas and electric utilities in 41 states and Washington, D.C., had raised rates or proposed rate hikes for 2025 or 2026.
What is Causing These Rising Costs?
Data Centers
The rapid growth of energy-intensive AI data centers is putting pressure on the grid, forcing costly upgrades to infrastructure that are ultimately passed on to all utility customers, including businesses. According to a recent Bloomberg News analysis, wholesale electricity costs as much as 267% more than it did five years ago in areas near data centers. States such as Maryland, New Jersey, and Virginia (referred to as Data Center Alley) are greatly impacted.
Aging Infrastructure
Aging infrastructure is to blame as well, as much of the nation’s electricity transmission and distribution infrastructure was built in the 1960s and 1970s and is nearing the end of its life. The cost of upgrading these aging systems is a major driver of higher electricity costs for both businesses and households. This problem is widespread and no region of the country is spared.
- Midwest. BFit gym in Evansville, Indiana, has seen a 52% rise in its electric bill in two years, rising from $36,000 a month in August 2023 to $55,000 in August 2025.
- Northeast. In Maine, energy costs increased 36.3% from 2024 to 2025. The Maine Wire notes that ratepayers in Maine faced an increase nearly twice as large as those in Connecticut, the state with the second-fastest rising costs, which saw an 18.4 percent increase from May 2024.
- Pacific Northwest. In the West, increasing electrification and wildfires that damage infrastructure are leading to higher energy costs as well.
Propane Can Lower Prices and Boost Profits
With electricity prices rising, how are businesses nationwide impacted? Increased operating costs due to skyrocketing utility bills can lead to higher prices for consumers, reduced profit margins, and decreased demand if consumers have to lower their spending. It can also impact staffing if lower profits lead to layoffs. Many businesses are choosing to protect prices, profits, and employees by choosing propane as an energy source.
In many cases, facilities can reduce their electricity consumption by switching major energy-intensive systems from electric to propane. For example, an electric water heater could be replaced by propane tankless water heaters or a propane boiler, and an electric heat pump could be replaced by a propane-powered version or supplemented with propane heat.
Facilities can also use prime propane generators to replace grid electricity entirely, which may be financially viable during peak pricing periods. Combined heat and power systems are another option to reduce reliance on the grid, generating electricity while also using the thermal energy created for water heating and space heating.
Consider Spark Spread When Specifying Equipment
For businesses, an important consideration for determining energy costs is “spark spread.” Spark spread is the price difference between the local electric utility and other energy sources in a given market, such as propane. It can affect a variety of equipment decisions for a facility and should continually be re-evaluated. What is the tipping point when you should move to propane-powered equipment? Increasing the use of propane appliances and systems reduces the electrical demand.
In many U.S. markets, electricity has high rates, peak pricing, or mandatory brown outs. For commercial operations, it may be a more cost-effective solution to use propane to offset electric demands. The use of propane is particularly viable in states with high electric rates, lower propane rates, and limited electric infrastructure.
Next Steps
Facilities ready to begin using propane equipment can look into PERC’s convenient Commercial Equipment Directory to understand the products available and how to work with local propane marketers. Users simply choose the desired equipment from a dropdown, then review parameters that will help to further narrow the equipment options and respective manufacturers.
In addition, PERC‘s Alternative Technology Demonstration & Research Program helps commercial and industrial businesses adopt propane-powered CHP and cooling systems—providing lower energy costs, improved reliability, and reduced emissions. Plus, Alt Tech Demo participants earn up to $30,000 for sharing performance data!
