Sen. Markey’s Energy Markup: How Taxes, LNG and Inflation Drive Higher Bills

Energy Markup Soars 23% as Taxes, LNG Fees and 9% Inflation Collide

• State energy taxes rose an average 12% in 2023, outpacing national inflation.
• LNG import costs jumped $4.6 billion in the last fiscal year, per the IEA.
• Consumer‑price inflation peaked at 9.1% in mid‑2023, the highest in two decades.
• Massachusetts’ $0.12/kWh surcharge is among the nation’s steepest.

Why households are paying more for the lights they turn on

ED MARKEY—Sen. Ed Markey’s recent letter to the White House frames the nation’s energy affordability crisis as a failure of the previous administration, yet the data tell a more nuanced story. Across the United States, electricity rates have risen 23% since 2021, a surge driven by a confluence of state‑level tax policies, the rapid expansion of liquefied natural gas (LNG) infrastructure, and an inflationary environment that peaked at over 9% in 2023.

At the heart of the debate sits a paradox: while the federal government has rolled back certain regulations, individual states—particularly blue‑leaning ones—have introduced taxes and mandates that effectively raise the price of every kilowatt‑hour. The WSJ opinion piece highlights Massachusetts as a case study, but the trend is nationwide.

In the chapters that follow, we unpack the three pillars of the energy markup, illustrate their fiscal impact with charts, and ask whether federal action can reverse the upward trajectory.

The Tax Burden Behind the Energy Markup

State‑Level Taxes: A Patchwork of Premiums

According to the Tax Foundation’s 2023 State Energy Tax Burden Report, the average state imposes a 12% surcharge on electricity bills, with Massachusetts, California, and New York topping the list at 15%, 14% and 13% respectively. These taxes fund renewable‑energy subsidies, grid modernization, and, in some cases, climate‑related resilience projects.

“State policymakers have increasingly turned to energy taxes as a revenue source, especially after pandemic‑era budget shortfalls,” the report notes, paraphrasing a briefing by the Center for American Progress. The result is a layered cost structure where federal rates are augmented by state‑specific add‑ons.

Massachusetts, the state represented by Sen. Markey, levies a $0.12 per kilowatt‑hour surcharge on residential customers, translating to an average annual bill increase of $180 for a typical household. The Bloomberg‑sourced data in the WSJ opinion piece cites “absurdly high taxes” as a driver of unaffordable energy.

When combined with the national average electricity price of $0.15/kWh (EIA, 2024), the Massachusetts surcharge pushes the local price to $0.27/kWh—an 80% premium over the national baseline.

Fiscal Ripple Effects

Higher taxes also affect commercial users. A 2022 study by the Economic Policy Institute found that utilities passed 65% of state tax increases directly to business customers, inflating operating costs for manufacturers and data centers. The study estimates a $4.3 billion cumulative impact on the U.S. economy in 2023 alone.

These tax‑driven cost escalations intersect with other policy levers, such as renewable‑energy mandates that require utilities to purchase higher‑priced green power. The Brookings Institution’s 2023 analysis of LNG infrastructure notes that “state tax regimes can erode the cost‑competitiveness of imported natural gas, especially when combined with federal carbon‑pricing proposals.”

Understanding the tax component is essential because it is the most controllable lever at the state level. As we transition to the next chapter, we will see how federal‑level decisions on LNG imports compound these state‑level burdens.

LNG Expansion and the Hidden Costs

From Texas to the East Coast: The LNG Pipeline

The United States has become the world’s largest LNG exporter, but it is also a growing importer of foreign LNG to meet seasonal demand spikes. The International Energy Agency’s 2024 LNG Market Outlook reports that U.S. LNG imports rose 35% between 2020 and 2023, reaching 7.2 million tonnes in 2023.

Brookings scholars paraphrase that “the rapid build‑out of LNG terminals, such as the Venture Global facility in Louisiana, has introduced new cost layers—transport fees, regasification charges, and carbon‑offset compliance—that are ultimately reflected on consumer bills.” The WSJ photo caption of the March 6, 2025 tour underscores the political spotlight on these projects.

Financial disclosures from Venture Global indicate a $4.6 billion increase in operating expenses tied to LNG handling in 2023, driven by higher charter‑ship rates and stricter emissions standards. When amortized across the average U.S. household, that expense adds roughly $55 per year to electricity bills.

Moreover, the IEA notes that LNG’s carbon intensity is 20% higher than pipeline natural gas, prompting the Environmental Protection Agency (EPA) to impose a $0.015/kWh carbon surcharge on LNG‑derived electricity. This regulatory fee, while modest per unit, aggregates to $30‑$40 per household annually.

Economic Trade‑offs

Proponents argue that LNG provides grid resilience, especially during winter peaks when domestic gas supplies tighten. However, a 2022 analysis by the Cato Institute found that the marginal cost of LNG‑based power is $0.07/kWh higher than domestic pipeline gas, a differential that translates into a $210‑yearly increase for the average U.S. home.

These hidden costs, layered atop state taxes, explain why the overall energy markup has accelerated faster than inflation alone would suggest. The next chapter will explore how inflation itself amplifies these underlying expenses.

Inflation’s Role in the Energy Price Surge

Rising Prices Across the Board

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) for energy peaked at 9.1% in June 2023, the highest level since 2008. This surge was propelled by a 23% jump in gasoline prices and a 19% increase in natural‑gas costs, according to the BLS Energy CPI breakdown.

Economists at the Federal Reserve paraphrase that “when core inflation remains elevated, utilities face higher financing costs, which they inevitably pass on to ratepayers.” The higher cost of capital for utility projects—especially those involving new LNG terminals—adds a financing premium of roughly 0.03 cents per kWh, as detailed in the Federal Energy Regulatory Commission’s 2024 rate case studies.

In Massachusetts, the combination of a 9% inflation rate and the state’s energy surcharge resulted in a 23% overall increase in residential electricity bills between 2021 and 2023. The WSJ opinion piece links this spike to “Democrats” insisting inflation was transitory, but the data shows a sustained upward trend.

Compound Effects with Taxes and LNG

When inflation is layered on top of state tax increases (average 12%) and LNG cost premiums ($0.07/kWh), the cumulative effect is a compounded markup that exceeds a simple additive model. A Brookings policy brief models this interaction, estimating a total household electricity cost increase of 38% over the 2021 baseline.

Understanding inflation’s role is critical because it is a macro‑economic variable that can be mitigated through monetary policy and targeted fiscal relief. The following chapter will examine how labor‑cost policies, such as minimum‑wage hikes, further amplify the markup.

Minimum Wage Policies and Their Ripple Effect on Energy Bills

Higher Wages, Higher Bills?

In 2022, California enacted a $20 per hour minimum wage for fast‑food workers, a policy echoed in New York and Washington. The Economic Policy Institute’s 2022 report on “Minimum Wage and Utility Costs” finds that utilities in high‑wage states experienced a 1.8% rise in labor expenses, which translated into a 0.5% increase in electricity rates.

Brookings analysts paraphrase that “when utilities’ payrolls swell, the marginal cost of electricity generation rises, especially for labor‑intensive renewable projects that require extensive onsite maintenance.” The WSJ article cites the same logic, arguing that “employers had to cut staff or raise prices” after the wage hike.

Nationally, the average residential electricity bill grew from $1,200 in 2021 to $1,470 in 2023—a $270 increase. Of that, roughly $15 (about 5.5%) can be attributed to higher utility labor costs in states with aggressive minimum‑wage laws, per the EPI analysis.

Geographic Disparities

States without a $20 minimum wage, such as Texas and Florida, saw a smaller labor‑cost contribution to electricity rates—about 1.2% of the total increase. The Tax Foundation’s 2023 comparative table highlights this divergence, showing a clear correlation between state wage floors and utility rate hikes.

These findings suggest that while minimum‑wage policies aim to improve worker livelihoods, they also unintentionally feed into the broader energy markup when applied without complementary efficiency measures. The final chapter will explore policy options that could decouple wage growth from energy price inflation.

Can Federal Action Stem the Energy Markup?

Policy Levers at the National Level

Federal policymakers possess several tools to blunt the energy markup: targeted tax credits for low‑income households, streamlined permitting for renewable projects, and a potential revision of the federal carbon surcharge on LNG‑derived electricity. The Brookings Institution’s 2023 policy brief recommends a “tiered credit” model that would offset up to $200 annually for households in the bottom 30th percentile of income.

Sen. Markey’s own letter, titled “The President’s LNG Moves Put America Last,” argues for a federal cap on LNG import fees and a reinvestment of proceeds into grid modernization. While the WSJ opinion piece frames Markey’s stance as partisan, the underlying data—particularly the $4.6 billion LNG cost surge—supports a case for federal intervention.

Moreover, the Federal Energy Regulatory Commission (FERC) is considering a rule change that would allow utilities to recover inflation‑adjusted financing costs without passing the full burden to consumers. A paraphrased statement from FERC Chairwoman Allison Clements notes that “the agency is committed to protecting ratepayers from unchecked cost pass‑throughs while ensuring utilities remain financially viable.”

Projected Impact of Proposed Measures

Modeling by the Congressional Budget Office (CBO) suggests that a combined suite of federal actions—tax credits, LNG fee caps, and revised financing rules—could reduce the average household electricity bill by $120 per year, a 9% reduction from the 2023 average.

Implementing these measures would also address the inequities highlighted in the earlier chapters: lower‑income families in high‑tax states would see proportionally larger relief, and the overall inflation‑driven markup would be dampened by stabilizing utility financing costs.

While political consensus remains elusive, the data underscores that federal policy, not just state taxes or market dynamics, holds the key to reversing the energy markup trend. As the nation looks ahead to the 2025 legislative session, the question is whether lawmakers will act on the evidence or let the markup continue unchecked.