Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) rewrites large parts of U.S. energy policy. Below is an easy-to-understand guide to what changed, why it matters, and what it could mean for electricity and natural gas prices in the U.S.
What Changed and Why It Matters
How Key Provisions May Move Prices
Renewable Subsidy Rollback
The repeal of renewable energy tax credits is likely to have a delayed but meaningful impact on prices. In the short term, developers are rushing to complete wind and solar projects before subsidies expire, which should keep supply stable and prices relatively flat. However, from 2028 onward, the absence of federal support will likely reduce the pace of new renewable construction. As these low-cost generation sources diminish, electricity markets such as NYISO, ISO-NE, and CAISO may experience higher wholesale energy and capacity prices.
A growing challenge for renewable developers is compliance with Foreign Entity of Concern (FEOC) restrictions. Under federal guidance, projects that source components such as solar panels, inverters, or batteries from companies linked to certain foreign governments, including China, may be ineligible for key tax credits. These rules aim to strengthen domestic supply chains and reduce reliance on geopolitical rivals, but they also create uncertainty and limit access to affordable equipment. For developers working to complete projects before tax incentives expire, navigating FEOC rules adds risk and could delay timelines or reduce economic viability.
Pro: Reducing subsidies may create a more market-driven environment where only the most cost-effective projects move forward. Higher power prices could reduce the relative need for tax credits in the future.
Con: With demand growing rapidly, especially from electrification and data centers, curbing renewables may create future shortfalls and limit generation diversity. End users may end up paying more due to the lost momentum in low-cost energy expansion.
Fossil Fuel Leasing Expansion
The expansion of federal oil and gas leasing is often promoted as a way to strengthen domestic energy security, create jobs, and increase federal revenues through lease sales and related activity. Supporters argue that increased leasing can reduce reliance on foreign imports and support long-term infrastructure investment.
Still, the impact on production and fuel prices is complex. U.S. crude output is already near record highs, but much of the oil produced from shale formations is light, sweet crude. This type of oil is not ideal for many U.S. refineries, which were built to process heavier, sour grades that still need to be imported. As a result, a significant portion of the additional crude may be exported rather than refined domestically, limiting the potential impact on U.S. gasoline and diesel prices.
Natural gas production often increases alongside oil drilling, particularly in basins like the Permian where associated gas is released. While this can temporarily improve gas supply, it also introduces volatility. If oil prices drop or drilling slows, associated gas volumes can fall quickly. At the same time, persistently low gas prices have discouraged investment in dry gas regions. With demand continuing to rise, this imbalance could tighten gas markets and place upward pressure on prices over time.
Pro: Expanded leasing creates the potential for increased domestic fuel production, which can help stabilize prices and support reliability during extreme weather or peak demand. It also offers long-term strategic value by improving energy security and reducing import dependence.
Con: Structural constraints such as limited refining capacity, mismatches between crude quality and refinery configurations, and reduced associated gas from oil drilling may limit how much supply actually comes online. If production lags while demand or exports rise, energy prices could increase rather than fall.
Infrastructure Permitting Reform
Permitting reform for pipelines and transmission lines could eventually help reduce price volatility, especially in constrained regions like ISO-NE and California. While the impact will not be immediate, successful infrastructure builds would help narrow regional basis spreads and mitigate peak-period price spikes.
Pro: Long-term gains in infrastructure efficiency and reliability should improve deliverability and reduce congestion-related costs.
Con: Local opposition, legal challenges, or delays in funding could still slow progress, limiting the price benefits that faster permitting is intended to provide.
LNG Export Fast-Tracking
While the bill streamlines the approval process for LNG export facilities, many of the largest and most impactful projects were already permitted before the law passed. U.S. export capacity is on track to expand significantly by 2030, with much of that growth front-loaded between now and 2028. Some argue that the current slate of projects may already be enough to meet global demand in the near term, limiting the need for additional fast-tracked approvals.
Still, the policy sends a strong signal that exports will remain a priority, and the resulting rise in domestic demand is likely to tighten supply. As more export terminals come online, natural gas prices could begin rising sooner than previously expected, particularly during winter when heating and power burn needs are highest.
Pro: LNG exports support U.S. economic growth and help balance global markets, encouraging more domestic drilling.
Con: With most capacity growth already in motion, the bill's changes may offer limited incremental value. Rising exports under existing plans could still drive prices higher for U.S. consumers sooner than expected.
Coal Royalty Cuts
The coal royalty is a fee paid by mining companies to the federal government for extracting coal on public land, typically a percentage of the coal’s sale price. The repeal of this royalty aims to extend the viability of older coal plants by reducing fuel costs. This could help maintain grid reliability in the near term, particularly in coal-reliant regions like MISO and PJM. Increased shipments from coal-producing regions could place added strain on freight rail networks, potentially raising transportation costs or introducing delivery risks for both coal and other freight-dependent sectors. The discount expires in 2034, after which many aging coal units may retire quickly, tightening capacity margins if replacement resources lag.
Pro: Keeps dispatchable generation online during a critical transition window, helping avoid reliability gaps.
Con: Delays the retirement of higher-cost, higher-emission assets, potentially increasing long-term energy and compliance costs.
Supply Chain Pressures Outside the Bill
While the OBBBA does not explicitly address tariffs, existing trade policies continue to influence how effectively its energy infrastructure goals can be achieved. Many key materials, including transformers, steel, aluminum, and electrical wiring, are sourced from other countries. Tariffs on these imports remain in place and contribute to cost volatility and extended lead times.
In the near term, these pressures are increasing utility capital expenditures, which are often passed through to end users in the form of higher delivery charges. Over time, sustained cost inflation and equipment delays could slow grid modernization, hinder interconnection efforts, and worsen capacity constraints.
Pro: May encourage more domestic manufacturing and strengthen long-term supply chain resilience.
Con: In the short term, higher costs and delays may lead to rate increases and slow the pace of infrastructure upgrades envisioned under the OBBBA.
Regional Impacts to Watch
The bill’s impact will vary by region, but most markets will feel both short-term benefits and longer-term risks. In ERCOT, abundant natural gas supply and light regulation may keep short-term prices relatively low, though slowing renewables and rising data center load could add peak volatility. PJM stands to benefit initially from cheaper gas and coal, but aging assets and limited renewable growth may strain capacity by the 2030s. ISO-NE and NYISO face tighter constraints, with limited pipeline access, expensive winter gas, and tariff-driven delivery cost increases compounding the effects of lost renewable momentum. MISO and SPP could see moderate relief from lower coal costs and gas availability, but their heavy reliance on wind and now reduced subsidies may push future capacity prices higher. Meanwhile, CAISO risks the sharpest price impacts, as subsidy rollbacks and equipment tariffs threaten to delay vital solar, battery, and transmission projects needed to meet soaring demand and maintain reliability.
What Can Energy Buyers Do?
The One Big Beautiful Bill Act delivers short-term relief by encouraging fossil fuel development and streamlining infrastructure approvals. However, by phasing out renewable incentives, it introduces long-term uncertainty that could lead to higher and more volatile energy prices, especially in regions with growing demand or limited supply. While the near-term outlook may feel more stable, the long-term cost trajectory for electricity and natural gas will depend heavily on how quickly new, affordable generation and delivery infrastructure can be built. Staying informed and proactive will be essential for managing future energy cost impacts.
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