"Electric Rates Go Up 6% to 8% Every Year"
Utility rates go up 6 to 8 percent every single year, so over 25 years you'll save over $150,000 by locking in solar now.
What's actually true
From 2005 to 2025, average U.S. residential electricity prices rose about 3.1% a year, or about 0.5% a year after inflation (EIA and BLS data). Some years and some states spike higher, but a 6% to 8% yearly assumption for 25 years inflates savings a lot.
The yearly electric rate increase is the single assumption that most changes a solar savings estimate. Many proposals use 5% to 8% a year. The long-run national record is much lower: from 2005 to 2025, the average U.S. residential price rose about 3.1% a year, roughly 0.5% a year above general inflation. Rates do spike sometimes, and some regions rise faster, but assuming a spike lasts 25 years makes solar look far better than it may be.
What the data shows
All figures below come from the EIA price series, with inflation from the Bureau of Labor Statistics CPI.
| Period | Yearly price growth | After inflation |
|---|---|---|
| 2005 to 2025 (20 years) | about 3.1% | about 0.5% |
| 2015 to 2025 (10 years) | about 3.2% | about 0.1% |
Recent years have been steeper. The U.S. average was 18.31¢ per kWh in July 2026, and year-to-date 2026 prices were about 6.9% higher than the same period in 2025. That’s a real jump, and it’s worth taking seriously. It’s also one year, not a 25-year trend. Your own utility may differ a lot from the national average, in either direction. Our electricity rate history tool lets you look at your state.
A worked example
Your bill today is $200 a month ($2,400 a year). Here is what you’d pay the utility over 25 years with no solar, under different assumptions:
| Assumed yearly increase | Bill in year 25 | Total over 25 years |
|---|---|---|
| 3.1% (20-year U.S. average) | about $413/month | about $88,300 |
| 6% | about $810/month | about $131,700 |
| 8% | about $1,268/month | about $175,500 |
Moving from 3.1% to 8% doubles the “cost of doing nothing.” Every dollar of that gap turns into claimed solar savings. A system that pays back in 9 years at 8% might take 12 or more at 3%.
Why salespeople do it
It’s legal to make an assumption, and few buyers check it. A bigger escalation rate makes the 25-year total huge and shortens payback. It also makes any lease escalator look harmless, because the utility seems to rise even faster.
How it shows up in a proposal
- A line in small print: “utility escalation 6%” or “rate inflation 7.5%”
- A chart where your no-solar bill curves sharply upward
- A 25-year “lifetime savings” headline with no year-by-year table
- No discounting of future dollars (see undiscounted savings)
Questions to ask
- “What yearly utility rate increase does this proposal assume?”
- “Where does that number come from? Is it my utility’s history or a company default?”
- “Can you rerun this at 2% and 3% so I can compare?”
- “What is my payback period if rates rise only with inflation?”
What to do next
Recalculate with a realistic rate in the solar calculator or the payback calculator. Our guide to solar payback periods shows what a reasonable range looks like. If your deal still pays back at 2% to 3% a year, rising rates are a bonus. If it only works at 7%, it’s a bet.
Bottom line: A good solar deal should still make sense if electric rates rise at about 3% a year. Ask to see that version.
Where to report it
An optimistic assumption isn’t automatically illegal. If a rep presented a made-up rate as a fact or a guarantee, you can report it to your state attorney general or the FTC at reportfraud.ftc.gov.
Related red flags
Inflated 25-Year "Lifetime Savings" Numbers
Lifetime savings headlines usually add up 25 years of future dollars as if they were worth the same as today's, assume you stay the whole time, and sometimes count tax credits or inflated rate increases as savings. The real value is usually much smaller and depends on what else you could do with the money.
"Your Electric Bill Will Be $0"
Most homes with solar still get a utility bill every month. Fixed customer charges, minimum bills, low export credits under net billing, and winter months with less sun mean a $0 bill is rare.
Inflated Solar Production Estimates
Production depends on your location, roof direction, tilt, shading and system losses. Estimates that ignore shading, skip degradation or use optimistic losses can overstate output, and every savings number built on it, by a wide margin.
Lease and PPA Escalator Clauses
Escalators of 2.9% to 3.9% a year nearly double or more than double your payment over 25 years. If utility rates rise more slowly than your escalator, your solar price can end up higher than buying from the utility.