U.S. Grid Congestion Costs Hit Record $17 Billion in 2025

Grid congestion cost the United States a record $17 billion in 2025, according to a new report from consultancy Grid Strategies. This marks a sharp increase from the $12 billion recorded in 2024 and continues a multi-year trend of rising costs for moving electricity across constrained networks.

Annual average congestion costs nearly doubled between two five-year periods. From 2016 to 2021, the average was roughly $9.2 billion.

Drivers of Record Costs

The primary factors behind the surge are a familiar trio: a failure to build sufficient new transmission lines, extreme weather events, and high natural gas prices. These elements widen price disparities between different areas of the grid, forcing grid operators to use more expensive local generation when cheap power cannot be delivered.

Among the nation's regional transmission organizations (RTOs), PJM Interconnection shouldered the highest congestion costs at $3.2 billion. The Electric Reliability Council of Texas (ERCOT) followed with $2.5 billion.

Regional Breakdown and Impacts

In ERCOT, the report highlights a clear mismatch between generation and demand. The Texas Panhandle holds abundant, low-cost wind power but is export-constrained. Meanwhile, the Permian Basin is experiencing massive demand growth from data centers and oil and gas activity but is import-constrained, leading to a 27% year-over-year cost increase in that region.

PJM's costs were driven largely by record demand during summer heat waves. Transmission lines could not move enough cheap power from western suppliers to East Coast cities. This forced operators to activate expensive local power plants out of merit order, pushing congestion costs for July alone to $608.9 million.

The Midcontinent Independent System Operator (MISO) saw its overall congestion costs rise 23%. A 67% jump in electricity prices, driven by high natural gas costs, was a key factor. Simultaneous generation and transmission outages, accounting for 28% of its year-over-year congestion increase, also played a role. For example, widespread tornadoes and high winds in April collided with planned outages, causing emergency power cuts and a single-day congestion cost of $10 million.

The Western U.S., where most areas lack an RTO, has long accounted for the bulk of national congestion costs. A lack of transparent market data makes precise measurement difficult, so Grid Strategies estimates costs by scaling known market figures based on the region's share of national power demand.

Paths to Reducing Congestion

Building new high-capacity transmission lines is the fundamental solution, but progress is slow. The report notes projects in the West can take two or three times longer than elsewhere due to permitting challenges on federal lands and the absence of a central grid planner.

Some initiatives are underway. ERCOT's 'Strategic Transmission Expansion Plan,' approved in December 2025, includes several thousand miles of new 765-kilovolt lines designed to carry cheap power from the Panhandle to the Permian Basin, with completion expected in the early 2030s.

Grid-enhancing technologies are also being deployed. The Federal Energy Regulatory Commission (FERC) approved a proposal from the Southwest Power Pool (SPP) to use topology optimization software to reroute power around congested lines. A similar program in MISO saved $95 million in the first half of 2025.

SPP also expanded into the Western Interconnection in spring 2025, adding nine utilities across seven states into its footprint for market oversight and transmission planning. However, the physical transmission link between SPP's eastern and new western regions is currently capped at just 310 megawatts, limiting immediate relief.

Grid Strategies argues that more granular congestion pricing and a broader regional planning process will provide the data needed to justify new interregional lines. The report concludes that only once those lines are built will congestion prices finally begin a sustained decline.