Pennsylvania’s Bad Bet on Fuel Sources
Pennsylvania’s higher electricity rates are driven by a complex mix of energy generation, transmission & distribution costs (see Chart below). A large portion of costs are related to PA’s outdated infrastructure (the electric grid) which is overdue for upgrades & repairs to provide reliability during storms, severe weather & to supply new sources of electricity.
But the single largest driver of higher utility bills comes from the fuel source for PA’s electricity supplies (see the light Blue “Generation” slice in the Chart below).
Pennsylvania Has Placed a Bad Bet on Only One Fuel Source
Pennsylvania’s cumbersome system has favored only one fuel source – methane (or natural gas), so much so, that 60% of our electricity now comes from gas. PA’s reliance on gas is one of the problems at the root of the state’s soaring electric bills, experts say, because it means PA consumers must pay more whenever global gas prices go up.
The national average price of natural gas bought by electric generators in 2025 increased by more than 37%. See also PA PEC Electricity Affordability Report Here. With the Iran war, Pennsylvania families & small businesses have already seen that energy costs, including oil and gas prices, have continued to increase even more in 2026.
What Industry Experts Are Saying About Pennsylvania’s Bad Bet
In recent studies of energy cost increases, industry experts and academics have found that Trump era inflation, an over-reliance on gas, and PJM’s conclusions that gas plants were less reliable (after Winter Storm Elliott) were major factors for higher energy prices.
In a May 2026 Report – Understanding the Drivers of Rising Electricity Rates and the Role of Data Centers, Energy and Environmental Economics, Inc. (E3), a leading economic consultancy focused on the power sector in North America for over 30 years, concluded that “a number of factors, beyond load growth alone, have been major contributors to rising electric rates” and highlighted the following:
- Inflation: Recent inflation has significantly increased the cost of labor, materials, and financing, directly increasing the amount of revenue utilities need to collect to recover their investments.
- Natural Gas Price Volatility: Natural gas prices have become more volatile and regions reliant on gas-fired generation are particularly exposed to this price volatility.
- Natural Gas Dependency: Electricity prices are sensitive to natural gas prices, depending on the amount of gas-dependent generation within each state. Between 2019-2025, natural gas prices fluctuated substantially with the Ukraine-Russia war, causing similar fluctuations in retail electricity prices.
- Less Reliable Fossil Fuel Resources: There was a substantial change to the methodology impacting the reliability contribution of fossil fuel resources, thereby lowering the amount of available supply. Following extreme weather events, such as Winter Storm Elliott, during which several gas plants failed to perform, fossil fuel resources were deemed less reliable and assigned lower capacity values by PJM for planning purposes.
- PJM – Historically, it has taken PJM eight years to bring new generation online, prompting reforms aimed at streamlining the interconnection process.
In a series of June 2026 reports, academic researchers have also concluded that states that are over-reliant on gas as a fuel source run the risk of price spikes for electricity. In Drivers of Electricity Prices and Load Growth in the US: Insights from a Center on Global Energy Policy at Columbia University Roundtable Series, experts noted:
- Natural gas price volatility has also contributed substantially, particularly for states with a high share of gas in their generation mix, such as those in the Northeast, Florida, Nevada, and Pennsylvania.
What Industry Experts Say About Energy Supply Investment Strategies
On July 13, 2026, – Lazard, Inc. (NYSE: LAZ) announced the release of the 19th edition of its Levelized Cost of Energy+ (LCOE+) Report. Lazard is a private sector investment advisory and publishes the annual LCOE+ Report as an objective, data-driven resource for industry stakeholders, policymakers and investors navigating today’s energy landscape where “the relevance of data-driven cost analysis has never been greater.”
Lazard’s July 2026 Press Release is neither subtle nor ambiguous: RENEWABLES REMAIN THE LOWEST-COST NEW-BUILD GENERATION DESPITE RISING COST PRESSURES. The Lazard’s Report’s main takeaway for investors is: Unprecedented Power Demand and Rising New-Build Costs Are Reinforcing the Need for a Diverse Generation Fleet and Increasing the Competitiveness of Existing Generation.
Key Findings from the 2026 LCOE+ Report
Natural gas plant generation costs are at a 15-year high. They are “expected to continue to rise” with an “historically long development & equipment delivery timeline.” Increased reliability concerns “including for fossil resources” are intensifying market pressures. Renewable energy remains the most cost-competitive form of new-build generation on an unsubsidized basis. Renewable energy will account for the majority of near-term capacity additions in the U.S. The Lazard LCOE+ Report found:
- Renewables Remain Lowest Cost New-Build Generation; All Generation Faces Increasing Cost Pressure: Despite rising and inflationary cost pressures across all generation technologies, renewables remain the most cost-competitive form of new-build generation on an unsubsidized basis and will account for the majority of near-term capacity additions in the U.S. Continuous upward revisions to demand projections have driven a sharp increase in announced new-build natural gas generation despite a 15-year high LCOE, which is expected to continue to rise, and historically long development and equipment delivery timelines.
- Unprecedented Demand Reinforces Need for Diverse Generation and Thoughtful Acceleration of Permitting/Approval Processes: Rising power demand and intensifying reliability considerations – as evidenced by the increasingly broad application of sophisticated capacity accreditation methodologies across the generation stack, including fossil resources – are compounding the pressures already confronting the industry. Facilitating investment in grid infrastructure, while safeguarding the interests of affected stakeholders, is therefore critical. In this context, the LCOE+ reinforces that an acceleration of permitting and approval processes is needed to meet growing demand and to enhance overall system reliability and security. The analysis also continues to reinforce the need for, and the value of, a diverse generation fleet (emphasis added).
The Lazard Report “Apples to Apples” Cost Comparison
According to the U.S. Department of Energy, the Levelized Cost of Energy (LCOE) is the average net present value of the unit-cost of electricity generated by a power plant over its operational lifetime.
LCOE is used to compare different generation methods (e.g., solar, wind, natural gas) on an “apples-to-apples” basis by dividing total lifetime costs by total expected energy output. Lazard attempts to provide energy industry stakeholders, policymakers & investors with an objective, data-driven resource. The 2026 LCOE+ Report findings are summarized below.
Lazard’s 2026 Levelized Cost of Energy Comparison—Version 19.0
On a cost per mega-watt hour basis, unsubsidized renewable energy remains the most cost-competitive form of newly built generation. Higher capital costs, sustained interest rates, tariff pass-through and supply chain repricing have increased costs during the Trump administration across all generation technologies. Lazard’s unsubsidized costs are:
- Utility-Scale Solar PV: $40/MWh to $98/MWh
- Onshore Wind: $37/MWh to $99/MWh
- Gas Combined Cycle: $51/MWh to $129/MWh
- Offshore Wind: $105/MWh to $167/MWh
- Nuclear: $175/MWh to $255/MWh
- Gas Peaking Plant: $144/MWh to $276/MWh
According to Utility Dive, federal subsidies like the Production Tax Credit can drive the low end of costs much lower, such as utility-scale solar potentially dropping to $16/MWh.
Anticipating Future Price Increases for Gas Power Plants
The Lazard analysis is published annually and focuses primarily on current market conditions to determine the levelized costs of new energy supplies. An April 2026 Report by the Institute for Energy Economics and Financial Analysis (IEEFA) focused more on the potential long-term impacts of natural gas costs on the prices consumers are likely to pay for electricity in the future. IEEFA’s key findings on potential future costs included:
- Consumers face significant risks from spikes in natural gas prices caused by weather and geopolitical events; these risks rise in relation to the amount of new gas-fired capacity added to the grid.
- Rising Liquefied Natural Gas (LNG) exports will lead to additional price volatility in the U.S. and could lead to persistent and long-term increases in natural gas costs.
- The price of new combined-cycle gas plants is triple the cost of projects built in the early 2020s, and orders placed now likely will not be fulfilled until 2030, or later.
- The costs of wind and solar, paired with battery storage, are lower than the rapid climb in gas prices; hardware is readily available; and they have no fuel costs.
The IEEFA Report concludes that because utilities are generally allowed to pass fuel costs directly on to consumers, the financial risks from future price spikes are being downplayed or ignored by utilities and many current proponents of gas plants.
Practical Solutions for Pennsylvania
PA should enact a practical, affordability-first alternative to the current bad bet on gas:
- First, catch up with other states by allowing investors to compete and build a massive amount of fast, cheap, home-grown clean energy and storage so energy supply can meet demand at the lowest cost and spur economic growth.
- Second, protect ratepayers by adopting fair cost-allocation, “bring your own new clean energy” & forecasting policies for data centers. Data centers must be required to “pay their own way” on the new clean energy supplies they need to operate.
- Third, modernize the grid and reform PJM so new projects connect faster, reliability improves, and consumers see the benefits of lower long-term costs.
Betting on only one source of fuel is a bad strategy. West Virginia relies on coal-fired electric plants for about 87% of all electricity production, and as a result, WV’s average household electricity rate per kilowatt-hour has surged 73% in the past year.
Doing nothing is not a good strategy. Big Tech & gas company lobbyists are already out in full force in Harrisburg. Some elected officials want to double down on the failed “all gas” strategy & are trying to blame other states for our high electricity prices. Instead, PA should embrace a market-based strategy to diversify energy sources with cheaper clean energy.