Whether you’re a business owner, property manager, or operations leader, your energy costs are likely feeling more unpredictable these days. Rising electricity and natural gas costs can quickly cut into your bottom line, and budgeting for market volatility takes you away from more important tasks.
However, with the right energy purchasing strategy—and partner— you can avoid the swings of the market that volatility brings. This article breaks down why energy rates change, what causes those swings, and how you can take more control over your energy costs.
How Utility Rates Are Determined
Every utility bill includes two parts:
- Energy supply costs: the price of electricity or natural gas commodity itself
- Delivery and infrastructure costs: the cost to maintain poles, wires, and pipelines
Even if you use the same amount of energy, your bill can rise when:
- The cost of energy production increases
- Utilities upgrade equipment or add infrastructure
- Regulations or market conditions shift
When those changes happen together—as they have over the last few years—the cost increase can be quite sharp.
Why Electricity Rates Are Increasing
Businesses throughout the Northeast have seen significant increases in electricity rates. Here’s why:
- Rising fuel costs: Many power plants in the Northeast generate electricity by burning natural gas. When gas prices rise, electricity becomes more expensive.
- Limited fuel delivery: In New England, gas pipeline capacity is tight. During cold months, when demand is high and supply limited, prices rise quickly.
- Aging infrastructure: Utilities are investing heavily to modernize the grid to prevent outages and energy producers are replacing retiring power plants with renewable options. The cost of those upgrades, however, often increase distribution and transmission costs in the short-term.
In 2025, New Jersey saw electricity commodity rates rise by as much as 20% and in New Hampshire, commodity rates increased up to 48%. Many states saw similar trends and the prices are expected to rise.
Why Natural Gas Rates Are Volatile
Natural gas prices fluctuate even more than electricity. Factors include:
- Commodity volatility: Weather, storage levels, and global markets all influence prices.
- Seasonal demand: Cold winters increase gas use for heating, which pushes rates higher.
- Pipeline limits: Infrastructure constraints can drive local price spikes.
Natural gas prices in recent years have been on steep upward path. In New York State, for instance, industrial gas prices in 2018 spiked at $8.54/thousand cubic feet, whereas the high in 2024 was $12.78/thousand cubic feet—a 49.6% increase.
Why Utility Rates Are So Volatile
Utility rates change because they’re closely tied to real market costs. Here’s what drives the volatility:
- Fuel price changes: Gas and oil markets shift daily.
- Utility cost pass-throughs: Many utilities automatically adjust rates to recover fuel costs.
- Capital investments: Utilities add grid upgrades, new meters, or resiliency projects.
- Policy goals: Renewable mandates or carbon-reduction programs can add costs in the short term.
- Demand peaks: When everyone uses energy at once, prices jump.
The result: Electricity rates and natural gas rates in the Northeast often move faster than inflation or other costs of doing business.
How Utilities Raise or Adjust Rates
Utilities can’t just raise rates overnight. They file detailed proposals, called “rate cases,” with their state’s public utilities commission.
The process includes:
- A review of costs and investments.
- Public hearings and feedback.
- Approval of new rates that recover costs plus a fair return.
Many utilities can also use fuel adjustment clauses, which allow mid-year price changes based on market costs. You can find rate case details through your state’s regulatory agency. We also take a quarterly look at the landscape in Sprague’s regulatory summaries.
How Third-Party Suppliers Can Help
There are several strategies you can take to control your energy usage—such as using energy-efficient equipment and shifting energy usage to a low demand period—which can bring down your overall costs. These strategies can be very helpful but it’s also important to look at using a third-party supplier who will work with you to personalize your energy purchasing strategy. Businesses in deregulated states can choose a third-party supplier instead of paying the utility’s default supply rate.
This option can:
- Lock in fixed or blended pricing to protect against volatility
- Offer competitive bids from multiple suppliers
- Provide more transparent pricing and contract terms
- Reduce exposure to sudden seasonal spikes
The utility still delivers your power or gas; the difference is who manages your energy commodity. You can read more about why your business can choose it’s own energy supplier here.
Utility rates across the Northeast are rising, and that’s unlikely to change soon. Electricity rates and natural gas rates move with fuel markets, infrastructure costs, and policy shifts. And, in an energy-constrained environment like the Northeast that relies significantly on natural gas for electricity generation, those price movements can be more extreme. By exploring competitive supply options, you can bring more predictability and control to your energy expenses.
To learn more about energy trends or explore supply strategies for your business, reach out to our team of experts today.
