TCB September 2025

September 2025

When Energy Costs Meet Economic Reality: Philadelphia's Electricity Crisis Demands Regional Solutions

By Jeff Hornstein, PhD, Executive Director
Economy League of Greater Philadelphia

The numbers tell a stark story that every Philadelphia household is feeling in their monthly budget. PECO residential customers using 700 kilowatt hours monthly saw their bills jump 10 percent ($13.58) in 2025, with another $2.70 monthly increase coming in 2026. Across Pennsylvania, some communities faced rate hikes exceeding 30 percent as the Pennsylvania Public Utility Commission approved widespread retail price adjustments in December 2024.

These are not merely line items on utility statements. They represent a fundamental challenge to Greater Philadelphia's economic competitiveness and the financial stability of working families already stretched by housing costs, transportation expenses, and stagnant wages. For a region that has worked to position itself as an affordable alternative to New York and Washington, soaring energy costs threaten to erode one of our key competitive advantages.

The Hidden Economics of Energy Burden

To understand the true impact of these increases, we must examine them within the context of household economics in Greater Philadelphia. For a median income Philadelphia household earning approximately $52,000 annually, a $200 monthly increase in electricity costs (not unrealistic given current trajectories) represents nearly 5 percent of pre tax income. For lower income households, the burden is exponentially greater.

The Economy League's analysis of energy burden across the region reveals troubling disparities. In neighborhoods like North Philadelphia, West Philadelphia, and parts of South Philadelphia, households already spend upward of 6 percent of their income on electricity alone, double the national average of 3 percent. These communities, often living in older, less energy efficient housing stock, face a cruel double burden: higher consumption due to inefficient systems and higher rates due to infrastructure investments they cannot avoid.

The mathematics become even more sobering when we consider cumulative effects. A household facing both SEPTA fare increases and electricity rate hikes simultaneously sees their basic cost of living rise faster than wages, effectively reducing their purchasing power and economic mobility. This is not just a utility problem; it is an economic development problem that affects regional competitiveness and quality of life.

The Infrastructure Investment Imperative

Behind these rate increases lies a complex story of deferred maintenance, climate adaptation, and changing energy demand that utilities and regulators have struggled to address transparently. PECO and other Pennsylvania utilities are investing billions in grid modernization, storm hardening, and infrastructure replacement, necessary investments that have been postponed for decades.

Consider the infrastructure reality: Much of southeastern Pennsylvania's electrical grid was built in the post World War II era, designed for different consumption patterns, weather extremes, and reliability expectations. The increasing frequency of severe weather events, from Hurricane Ida's devastating floods to the polar vortex events that strain heating systems, has exposed vulnerabilities that require immediate attention.

Simultaneously, the region faces unprecedented electricity demand from data centers, cryptocurrency operations, and other energy intensive industries drawn to Pennsylvania's historically low energy costs. This demand surge, combined with the broader national conversation about reshoring manufacturing, creates a perfect storm of infrastructure strain and cost pressure.

The challenge is that these necessary investments are being financed through rate increases that fall most heavily on residential customers who have the least ability to manage their consumption or find alternatives. Commercial and industrial users often have sophisticated energy management capabilities and can negotiate better rates, while residential customers become the utility equivalent of a captive market.

Regional Solutions for a Regional Problem

While PECO's $10 million Customer Relief Fund, launched August 4, 2025, provides important short term assistance for eligible customers, it represents a bandage approach to what requires structural solutions. The fund will help some households manage immediate bill relief, but $10 million spread across PECO's customer base provides only temporary respite from a long term cost trajectory.

Greater Philadelphia needs to think more systematically about energy policy as economic development strategy. Other regions have pioneered approaches that could inform Pennsylvania's response to rising energy costs while maintaining necessary infrastructure investment.

In Texas, despite its grid reliability challenges, competitive retail electricity markets have created downward pressure on residential rates while enabling infrastructure investment through separate transmission and distribution charges. While Pennsylvania has retail choice, it has not translated into the consumer savings seen elsewhere.

Connecticut's Green Bank model demonstrates how public private partnerships can accelerate energy efficiency investments that reduce both consumption and bills while creating local jobs. The bank leverages limited public funds to attract private investment in energy efficiency and renewable energy projects, generating returns while reducing energy burden for participating households.

California's approach to demand response and time of use pricing, while controversial, has successfully reduced peak demand and infrastructure strain. Similar programs could help southeastern Pennsylvania manage the growing demand from data centers and other large users while providing savings opportunities for residential customers willing to shift their usage patterns.

Innovation and Efficiency Pathways

The current crisis also accelerates opportunities for Philadelphia to become a leader in energy innovation. The city's commitment to carbon neutrality by 2050 creates alignment between climate goals and economic necessity, reducing consumption reduces both emissions and costs.

Philadelphia Housing Authority's ongoing energy efficiency retrofits demonstrate the potential for large scale residential improvements. Early results from PHA's partnership with energy service companies show 20 to 30 percent reductions in electricity consumption in participating properties. Scaling similar approaches across the city's housing stock could significantly reduce regional electricity demand while improving quality of life for residents.

The city's recently launched Building Energy Performance Standards program requires large buildings to meet energy efficiency targets, but smaller residential properties, where most Philadelphians live, lack similar support. A comprehensive residential efficiency program, potentially funded through utility partnerships and federal infrastructure dollars, could address both energy burden and infrastructure strain simultaneously.

Moreover, Philadelphia's research institutions and growing clean energy sector position the region to become a hub for energy innovation. Companies like Eaton Corporation, headquartered in our region, are developing grid management technologies that could reduce infrastructure costs while improving reliability. Supporting local energy innovation through targeted economic development incentives could create jobs while addressing utility challenges.

The Governance Challenge

Pennsylvania's utility regulation system, like many state level frameworks developed in the 20th century, struggles to balance competing priorities in a rapidly changing energy landscape. The Pennsylvania Public Utility Commission faces pressure to keep rates affordable while ensuring utilities can maintain and upgrade infrastructure, invest in clean energy, and adapt to climate change.

This tension is particularly acute in Pennsylvania, where political divisions over energy policy, coal versus renewables, local control versus regional coordination, complicate rational planning. The state's status as both a major energy producer and consumer creates additional complexity as policymakers balance economic interests across different sectors.

Philadelphia, as the state's largest city and electricity consumer, needs stronger representation in these statewide conversations. Regional coordination through entities like the Delaware Valley Regional Planning Commission or newly created regional authorities could provide more effective advocacy for consumer interests while supporting necessary infrastructure investment.

A Call for Comprehensive Action

The electricity cost crisis facing Philadelphia households demands response at multiple levels, just as our transit funding crisis requires regional solutions rather than municipal band aid fixes. State regulators must develop more sophisticated approaches to balancing infrastructure investment with affordability concerns. Utilities must embrace transparency about cost drivers and innovative approaches to managing demand and improving efficiency. Local leaders must advocate for policies that protect residents while supporting necessary improvements.

Most importantly, we must recognize that energy policy is economic policy. High electricity costs reduce disposable income, increase business operating costs, and diminish regional competitiveness. Conversely, strategic investments in efficiency, renewable energy, and grid modernization can create jobs, reduce long term costs, and enhance quality of life.

PECO's Customer Relief Fund represents a recognition that current rate trajectories are unsustainable for many households. But sustainable solutions require more than temporary relief, they require fundamental changes in how we finance, deliver, and consume electricity in Greater Philadelphia.

The Economy League stands ready to support evidence based approaches to energy policy that balance infrastructure needs with economic equity. The question is whether regional leaders will embrace the comprehensive solutions this challenge demands, or continue addressing symptoms while ignoring underlying structural issues.

The stakes extend far beyond monthly utility bills. They touch the fundamental question of whether Greater Philadelphia can maintain its position as an economically accessible region while investing in the infrastructure necessary for 21st century competitiveness. The choices we make about energy policy today will shape our region's economic trajectory for decades to come.

Jeff Hornstein, PhD
Executive Director
Economy League of Greater Philadelphia