Illinois Electricity Outlook 2025-2026: What to Expect from Rates

Illinois Energy Market Shake-Up: Unpacking the Key Drivers for 2025-2026 Rates

Electricity rates result from complex interactions between fuel markets, generation capacity, regulatory policy, and grid infrastructure. Understanding these drivers helps predict where rates might head and informs procurement decisions.

Natural Gas Prices: The Dominant Variable

Despite Illinois' substantial nuclear capacity, natural gas-fired generation sets the marginal price for electricity during most hours. This makes natural gas prices the single most important driver of wholesale electricity costs.

Recent natural gas trends:

• 2021-2022: Prices spiked dramatically amid supply disruptions and extreme weather
• 2023-2024: Prices moderated from peaks but remained elevated compared to pre-2021 levels
• 2025 outlook: Continued moderate prices expected, with potential volatility from weather events

Factors influencing 2025-2026 gas prices:

• LNG exports: Growing export capacity ties U.S. prices more closely to global markets
• Production levels: Domestic production remains strong but faces investment constraints
• Storage levels: Seasonal storage patterns affect winter price risk
• Weather: Extreme cold or hot weather can spike demand and prices

Implication for Illinois: Natural gas price volatility translates directly to electricity price volatility. While Illinois' nuclear base provides some insulation, gas-on-gas competition at the margin means gas prices significantly influence wholesale power costs.

PJM Capacity Market Dynamics

Illinois is part of the PJM Interconnection, the regional transmission organization covering much of the Mid-Atlantic and Midwest. PJM's capacity market directly affects Illinois electricity costs.

What is the capacity market? PJM runs annual auctions where generators bid to provide capacity—the promise to be available to generate electricity when needed. Capacity prices are passed through to customers as part of their electricity costs.

Recent capacity price trends:

• Capacity prices have fluctuated significantly year to year
• Retirements of coal and older gas plants have tightened reserve margins in some areas
• Renewable resources' capacity value is limited (they're not always available when needed)

2025-2026 capacity outlook:

• Continued coal plant retirements may tighten supply
• New renewable capacity adds energy but limited capacity value
• Potential for higher capacity prices if reserve margins tighten
• Capacity costs could increase $5-15/MWh depending on auction results

Renewable Energy Growth

Illinois' renewable energy expansion under RPS requirements and CEJA continues to reshape the market:

Positive effects on prices:

• Solar and wind have zero marginal fuel costs, reducing prices when they generate
• Increased renewable supply can displace higher-cost gas generation
• Long-term contracts for renewables provide price certainty

Potential cost pressures:

• Grid integration costs (transmission, storage) add to delivery charges
• RPS compliance costs are passed through to customers
• Renewable intermittency requires backup capacity that adds costs

Net effect: In the near term, renewable growth likely has a modest dampening effect on wholesale energy prices while adding modestly to delivery charges. The net impact on total bills is roughly neutral to slightly positive for consumers.

Grid Infrastructure Investments

Both ComEd and Ameren Illinois are making substantial investments in grid modernization:

Investment drivers:

• Replacing aging infrastructure (poles, wires, substations)
• Grid hardening for resilience against storms
• Smart grid technologies for improved efficiency and reliability
• Transmission expansion to connect renewable resources
• EV charging infrastructure support

Rate impact: These investments are recovered through delivery charges, which have been increasing faster than supply charges in recent years. Expect continued delivery charge increases of 3-6% annually as utilities execute their infrastructure plans.

Regulatory and Policy Factors

State and federal policy continues to influence electricity costs:

CEJA implementation:

• Nuclear support costs (ZECs, CMCs) add to customer bills
• Renewable procurement expands, with costs flowing through rates
• Coal plant closure requirements may affect capacity markets

Federal policy:

• Inflation Reduction Act incentives may reduce cost of new renewable development
• EPA regulations on power plant emissions could affect generation mix
• Infrastructure spending may support grid improvements

Utility rate cases: Both ComEd and Ameren periodically file rate cases with the Illinois Commerce Commission to adjust delivery charges. These proceedings determine the pace at which infrastructure investments flow into rates.

Spike or Plateau? Our Expert Illinois Electricity Rate Forecast for 2025-2026

While no forecast is certain, analyzing current trends and market fundamentals provides a reasonable range of expectations for Illinois electricity rates.

Wholesale Energy Price Outlook

Wholesale energy prices (the supply component of your bill) are expected to:

Base case scenario:

• Moderate prices similar to late 2024 levels
• ComEd zone: $45-55/MWh average wholesale prices
• Ameren zone: Similar range with some variation
• Seasonal variation with summer peaks 20-40% above winter

Upside risk (higher prices):

• Natural gas price spike from extreme weather or supply disruption
• Nuclear plant extended outages reducing baseload supply
• Higher-than-expected demand from economic growth or weather
• PJM capacity market tightening

Downside potential (lower prices):

• Natural gas prices decline further on oversupply
• Faster-than-expected renewable capacity additions
• Mild weather reducing demand
• Economic slowdown reducing industrial load

Delivery Charge Projections

Delivery charges (transmission and distribution) typically show more predictable trends:

Expected trajectory:

• Continued annual increases of 4-7%
• Grid modernization investments driving increases
• Transmission upgrades for renewable integration adding costs
• Storm hardening and resilience investments flowing into rates

ComEd territory: Recent rate cases have approved substantial investment programs. Expect delivery charges to increase steadily as these investments are placed in service.

Ameren Illinois territory: Similar dynamics with ongoing grid improvement programs. Rural areas may see larger percentage increases as infrastructure is upgraded.

Total Bill Impact Projections

Combining supply and delivery components:

Residential customers:

• 2025: 3-7% total bill increase likely
• 2026: Similar range, depending on market conditions
• Annual increase of $50-150 for typical household

Small commercial:

• Similar percentage increases to residential
• Absolute dollar impact larger due to higher usage
• Demand charge components may increase faster

Large commercial/industrial:

• More exposure to wholesale market volatility
• Capacity cost increases could significantly impact large users
• Potential for 5-10% increases in competitive supply costs
• Delivery charges increasing in line with residential

Seasonal Patterns to Expect

Rate patterns throughout the year:

Summer (June-September):

• Highest prices, driven by air conditioning demand
• Peak wholesale prices 30-50% above annual average
• Critical for businesses with high cooling loads

Winter (December-February):

• Moderate prices, but potential for spikes during extreme cold
• Natural gas demand for heating competes with power generation
• Polar vortex events can cause dramatic price spikes

Shoulder seasons (Spring/Fall):

• Generally lowest prices with moderate demand
• Good time for contract negotiations
• Nuclear refueling outages often scheduled during these periods

The Bottom-Line Impact: How the Rate Outlook Affects Your Illinois Business Budget

Understanding rate trends is academic unless translated into business planning. Here's how to apply the forecast to your budgeting and decision-making.

Budgeting for 2025-2026 Energy Costs

For planning purposes, consider these scenarios:

Conservative (budget for):

• 7-10% total electricity cost increase year-over-year
• Accounts for potential market volatility and delivery increases
• Provides buffer against unexpected price spikes

Base case (expect):

• 4-6% total electricity cost increase
• Consistent with recent trends and current market outlook
• Reasonable planning assumption for most businesses

Optimistic (possible):

• 2-4% increase or flat costs
• Requires favorable market conditions
• Don't budget to this scenario unless hedged

Calculating Your Exposure

Estimate how rate changes affect your specific situation:

Step 1: Know your baseline

• Review last 12 months of electricity costs
• Identify average monthly spend and seasonal patterns
• Separate supply costs from delivery costs if possible

Step 2: Calculate scenario impacts

• 5% increase: Annual baseline × 1.05 = budgeted cost
• 10% increase: Annual baseline × 1.10 = conservative budget
• For a $50,000/year electricity spend: $2,500-5,000 increase potential

Step 3: Identify risk factors

• Contract expiration timing (exposed to market rates?)
• Seasonal concentration of usage (summer peaks?)
• Growth plans that could increase consumption

Risk Mitigation Strategies

For businesses concerned about rate increases:

Lock in rates:

• Fixed-rate contracts provide certainty against supply price increases
• Lock for 12-36 months depending on market outlook and risk tolerance
• Current market may offer attractive locking opportunities

Reduce consumption:

• Energy efficiency investments provide permanent cost reduction
• ROI improves as rates increase
• LED lighting, HVAC upgrades, and controls offer fast payback

Generate on-site:

• Solar installations lock in a portion of supply at known cost
• Illinois incentives through Illinois Shines improve economics
• Hedge against rate increases while supporting sustainability

Shift usage patterns:

• Time-of-use strategies reduce peak consumption costs
• Demand charge management can significantly reduce commercial bills
• Behavioral and operational changes cost nothing but attention

Industry-Specific Considerations

Manufacturing:

• High energy intensity magnifies rate increase impacts
• Demand charges often significant; focus on peak management
• Consider shift scheduling to optimize TOU rates

Retail:

• Summer cooling costs critical; budget conservatively
• Multiple locations may benefit from aggregated purchasing
• LED lighting retrofits often quick payback

Office buildings:

• HVAC dominates costs; smart controls offer savings
• Consider on-site solar for suitable buildings
• Tenant electricity arrangements may allow pass-through

Data centers:

• 24/7 operation limits TOU benefits
• Focus on efficiency improvements and on-site generation
• Long-term contracts critical for budget certainty

Your Proactive Strategy: How to Secure a Lower Commercial Electricity Rate in Illinois Now

Given the rate outlook, proactive procurement can lock in favorable pricing and protect against market volatility. Here's how to approach it.

Evaluating Your Current Contract

Before shopping for new rates, understand your current position:

Key questions:

• When does your current contract expire?
• Are you on fixed or variable rates?
• What are your early termination provisions?
• What rate are you currently paying versus market rates?

If your contract expires soon:

• Begin shopping 2-3 months before expiration
• Get multiple quotes from alternative suppliers
• Compare carefully including all fees and charges

If you're in a long-term contract:

• Review terms for any flexibility
• Monitor market for future planning
• Consider early termination if current rates are significantly above market

Shopping for Competitive Rates

Illinois' deregulated market offers choice among dozens of suppliers:

How to get the best rate:

1. Gather your data: 12 months of bills, account numbers, usage patterns
2. Request multiple quotes: Contact at least 3-5 suppliers
3. Compare apples to apples: Ensure quotes include all charges
4. Read the fine print: Understand contract terms, fees, and renewal provisions
5. Consider contract length: Balance price certainty against flexibility

What to compare:

• Price per kWh (all-in, including all supply charges)
• Contract term and early termination fees
• Renewal terms (auto-renewal provisions?)
• Green energy options if interested
• Customer service reputation

Timing Your Contract

Market timing considerations:

Current market assessment:

• Forward prices reflect market expectations
• Compare current offers to historical rates
• Consider whether prices are likely to rise or fall

Seasonal timing:

• Spring/fall often offer better rates (lower demand)
• Avoid locking during summer peaks if possible
• End-of-month/quarter may see supplier motivation to close deals

Contract term strategy:

• Short term (6-12 months): Flexibility to re-shop; exposed to volatility
• Medium term (12-24 months): Balance of certainty and flexibility
• Long term (24-36 months): Maximum certainty; potentially missed savings if rates drop

Working with Energy Brokers

For larger commercial customers, energy brokers can add value:

Benefits of broker engagement:

• Access to wholesale market insights
• Relationships with multiple suppliers
• Contract negotiation expertise
• Ongoing monitoring and advice

Broker compensation models:

• Supplier-paid commission: No direct cost to you; potential conflict of interest
• Fee-based: You pay directly; aligned incentives
• Hybrid: Combination of commission and fees

Choosing a broker:

• Verify credentials and experience
• Understand compensation structure
• Request references from similar customers
• Ensure they represent multiple suppliers

Beyond Rate Shopping: Comprehensive Energy Strategy

The best procurement approach combines rate optimization with broader strategies:

• Efficiency first: Reduce consumption to reduce total spend regardless of rate
• On-site generation: Solar or other DG can hedge against rate increases
• Demand management: Reducing peak demand addresses demand charges
• Rate structure optimization: Ensure you're on the best rate class for your profile
• Ongoing monitoring: Track usage and costs; don't just set and forget

For current rate options in Illinois, explore our pricing comparison tools or contact us for assistance.

Frequently Asked Questions

Conclusion: Positioning for Illinois' Energy Future

The 2025-2026 electricity rate outlook for Illinois suggests continued moderate increases driven by grid infrastructure investments and market fundamentals. While dramatic price spikes aren't the base case, volatility remains possible—particularly from natural gas price swings or extreme weather events.

For businesses, this outlook underscores the value of proactive energy management. Those who shop for competitive rates, invest in efficiency, and consider on-site generation will be better positioned to manage costs than those who simply accept default rates.

The broader context matters too. Illinois' clean energy transition under CEJA will reshape the market over time. Nuclear power continues providing stable, carbon-free baseload while renewables grow. These dynamics create both challenges (infrastructure costs, capacity market changes) and opportunities (declining renewable costs, incentive programs).

Whatever the market does, informed energy consumers have options. Understanding rate drivers, comparing supplier offers, and implementing efficiency measures all contribute to managing electricity costs. The best time to start is before you need to—monitor your contracts, track market trends, and plan ahead.

For current rate options and tools to compare Illinois electricity suppliers, visit our electricity comparison page or explore our guides to fixed versus variable rates and switching suppliers.