Washington, D.C. — As global energy markets continue to reel from the War in Iran, the American Economic Liberties Project today released a new brief, “How Congress and States Should Respond to Electricity Price Spikes Due to the Iran War.” The paper analyzes how the continued reliance on natural gas — including liquefied natural gas (LNG) imports — to generate electricity creates supply-chain vulnerabilities that will translate into sharp electricity bill increases for customers, especially in the Northeast, over the coming year.

“Electricity price spikes are not just a risk, they are already baked into the system given how heavily our power markets depend on natural gas and how exposed regions like New England are to global LNG disruptions,” said Marissa P. Gillett, Senior Fellow at the American Economic Liberties Project. “Because households and small businesses are not typically exposed to real-time electricity market prices, families may not feel the full impact immediately, but when it hits, it can be sudden and severe. Policymakers cannot afford to wait. They should act now to shield households and small businesses from another foreseeable rate shock.”

The brief explains how natural gas plays an outsized role in determining electricity prices across American wholesale markets, meaning global fuel disruptions quickly cascade into higher power costs. The current crisis is particularly severe. The closure of the Strait of Hormuz, where roughly 20% of global LNG supply moves through, as well as regional infrastructure damage, have both significantly constrained global supply. Analysts warn that a prolonged disruption could mirror the 2022 energy shock following Russia’s invasion of Ukraine.

Northeastern regions are particularly sensitive to these crises: the 2022 shock drove electricity prices in New England to their highest levels in nearly two decades. Their vulnerability is due to their reliance on natural gas for electricity generation — in 2025, New England generated 55% of its electricity from natural gas while 40% of New England homes relied on natural gas for heating — as well as the Northeast’s limited pipeline capacity, which forces the region to depend on imported LNG during peak winter months. Further, since utilities in the region procure electricity through forward-looking auctions, upcoming procurement cycles in states like Connecticut, Massachusetts, and New Hampshire are likely to lock in higher prices for the 2026-2027 winter season, with rate increases potentially announced just weeks before they take effect.

The brief highlights other structural weaknesses in New England’s electricity system, including overreliance on a single LNG import terminal, as well as outdated utility procurement strategies. While recent additions of renewable energy and hydropower have improved the region’s fuel diversity, these resources are not yet sufficient to offset exposure to global gas market volatility. To mitigate the impact on households and small businesses, the brief outlines a set of near-term policy recommendations. At the federal level, policymakers should prioritize additional funding for the Low-Income Home Energy Assistance Program (LIHEAP) ahead of the next winter heating season. At the state level, officials should prepare targeted rate relief measures, preferably funded through non-ratepayer sources, and consider budget incentives and broader reforms, like fuel-cost sharing mechanisms, to reduce future volatility.

Ultimately though, preventing these price shocks requires long-term, systemic changes in US energy systems toward fuel diversification and strategic supply procurement.

Read the full issue brief, “How Congress and States Should Respond to Electricity Price Spikes Due to the Iran War,” here.

Learn more about Economic Liberties here.