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Gasoline Fell 9.7% in June. Latest Commercial Electricity Prices 5.8% Higher Than Last Year

Grid Stress, Storms and Resilience Economics| Electrification Economics at the Property Level| True Cost of Power

July 15, 2026•14 min read

Last week this column argued that the Iran conflict remained consequential, but that oil was only one of several engines driving the true cost of power. This week the market tested that thesis. Oil jumped to a one-month high, yet the June inflation report delivered real relief, and the benchmark rate that most influences commercial real estate pricing eased after the release. The war got louder while the near-term price picture got quieter, in the same two days.

This week's data separates short-term energy relief from the longer-term power exposure that owners and communities still must underwrite. It also points toward a practical sequence for protecting NOI, property value, and local competitiveness.

By Keith Reynolds | Publisher & Editor, ChargedUp!

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Did June's Inflation Relief Lower the Cost of Powering Commercial Property?

June brought consumer relief, but it did not reset the commercial power baseline. Gasoline fell 9.7 percent and the consumer electricity index fell 1.0 percent during the month. Electricity nevertheless remained 4.0 percent higher for consumers than a year earlier. The latest commercial-sector data, reported separately by the U.S. Energy Information Administration, show average commercial electricity prices 5.8 percent higher than a year earlier. Capacity markets, grid investment, and equipment constraints continue pointing toward elevated building-power costs.

Oil Took a Round Trip While Inflation Cooled

A building carries two different energy costs, and June pulled them apart in plain view. The first is the price of oil, and it swung hard. Oil fell to about $72 a barrel in late June when tankers resumed moving through the Strait of Hormuz, erasing the war premium built up since February. A fresh round of strikes and the renewed blockade of Iranian ports then sent Brent toward $87 before it eased again on July 15. That cost moves on headlines, and everyone watches it.

The June inflation report, released by the Bureau of Labor Statistics on July 14, showed that spike had not yet reached consumers. Overall prices fell 0.4 percent for the month, the largest one-month decline since April 2020, bringing annual inflation to 3.5 percent from 4.2 percent in May. The energy index fell 5.7 percent for the month. Within it, gasoline fell 9.7 percent and the consumer electricity index fell 1.0 percent. After the release, the ten-year Treasury yield, a benchmark that influences commercial real estate pricing, eased. Oil near a one-month high and inflation at a multi-month low, in the same week.

What the June Numbers Actually Say About Electricity

The headline energy figure needs careful reading, because it is mostly a gasoline story. The energy index rose 15.7 percent over the twelve months ending in June, and the Bureau of Labor Statistics attributes that increase largely to gasoline, which was 26.7 percent higher year over year. The consumer electricity index told a calmer near-term story: down 1.0 percent for the month and up 4.0 percent over the year. June delivered real energy relief, and the monthly electricity dip was part of it.

One distinction matters for underwriting. The Bureau of Labor Statistics electricity index measures consumer prices, not the tariffs a commercial building pays. The more directly relevant measure comes from the U.S. Energy Information Administration, whose latest data put the average commercial electricity price at 13.92 cents per kilowatt-hour, 5.8 percent higher than a year earlier. Monthly consumer prices ease and tighten with fuel. The structural cost of delivering power to a building, visible in capacity markets, grid investment, and equipment lead times, points in a different direction, and it is the one that lands on the operating statement year after year.

The reality is that three forces drive the structural cost of building power, and none of them moves with the price of oil.

1. Interest Rates Remain Restrictive

The ten-year Treasury yield eased after the June report, slipping from about 4.62 percent to near 4.58 percent, but it remained above its late-June level and the broader rate environment stayed restrictive. The Federal Reserve signaled it does not expect to cut this year and could raise rates, with its June meeting records pointing to inflation risks tilted upward. The relationship to property value is indirect: cap rates respond to Treasury yields, credit conditions, property fundamentals, and investor risk premiums together, and the Fed's policy rate does not flow straight into a building's valuation rate. A restrictive environment still tends to keep cap rates elevated, which pressures refinancing and valuations regardless of any single month's oil move.

2. Grid Capacity Costs Remain Near Records

PJM Interconnection, the operator that runs the grid for 13 states and the District of Columbia, held its latest capacity auction at the federally approved cap of $325 per megawatt-day, 2.5 percent below the previous capped record of $333.44 but still historically elevated, with the cleared supply valued at roughly $16.4 billion. More consequentially, the auction finished 6,831 megawatts short of PJM's reliability requirement, the second consecutive shortfall and the first two in the market's history in which the entire region fell short. PJM plans a special backstop procurement in September to address the near-term gap. PJM expects most of its demand growth to come from data centers, and the equipment to expand the grid is constrained: large transformers can cost more than 70 percent above 2019 levels and can take up to four years to arrive. Consumer inflation cooled in June while these structural grid costs stayed close to record levels.

The forward view reinforces the point. The latest ICF outlook projects total U.S. electricity demand rising 39 percent by 2035, with demand in the PJM region rising 43 percent. Projected demand growing faster than supply is precisely what a capacity shortfall looks like in advance.

3. Data Center Demand Competes for the Same Resources

Data center spending has now surpassed general office construction, making it the largest component of private office construction, at roughly 52 percent of that category and a seasonally adjusted annual rate near $50.7 billion. Building at that scale competes for the same electricians, equipment, steel, and power that every other project needs, which raises both price and wait time across the board. That demand does not pause for a ceasefire or a hearing in Washington. It runs steadily in the background, and it is a meaningful part of why building-power costs keep rising.

Why the Durable Response Starts at the Property

For anyone who owns, finances, or plans property, the useful conclusion is a distinction. The fuel cost is real but volatile. The building-power cost is quieter and more structural, and it is the one that recurs on the operating statement. Rate design, utility investment, and public policy all shape that cost over time, but an owner cannot wait for those systems to resolve the exposure. The measures that reduce it most directly are ones an owner can put on the property itself, starting with the cheapest.

Efficiency comes first, because it lowers the bill before any system is sized around it. Beyond that, onsite generation and storage can lock in a portion of a building's power cost and reduce exposure to grid price swings, though they carry financing, maintenance, replacement, fuel, and interconnection considerations that belong in the model. Qualified standalone energy storage remains eligible for the Section 48E investment credit, even as new wind and solar projects beginning construction after July 4 face the current statutory cutoff. Demand response and load flexibility can turn a building's ability to reduce draw into revenue where utility rules permit, including during the peak events that stressed the grid this summer. And ordering long-lead electrical equipment early can hedge the rising prices and extended waits building across the market. The arithmetic is straightforward: at an 8 percent cap rate, every $1,000 of durable annual NOI improvement represents approximately $12,500 in asset value.

A Practical Underwriting Sequence for Building Power

Owners evaluating this exposure can work it in a defined order rather than all at once. Each step informs the next, and several can be completed before any capital is committed.

1. Reduce avoidable load. Efficiency and controls lower the bill first and shrink every system sized after them.

2. Quantify rate exposure. Read the tariff and separate energy charges from demand charges and ratchets, then identify where time-of-use pricing concentrates the cost.

3. Evaluate demand response and load flexibility. Availability and compensation vary by utility and grid region, so confirm what the local program actually pays for the ability to reduce draw on signal.

4. Model storage and onsite generation. Size the system against durable savings, avoided energy cost and demand-charge reduction, and include financing, operations, degradation, and replacement costs, with market revenue treated as upside.

5. Order long-lead equipment after locking specifications. Confirm specs and utility requirements first so early procurement against multiyear lead times does not create stranded equipment.

6. Coordinate the schedules. Align land-use approval, utility service, interconnection, and construction so the timelines support rather than block one another.

Owners and Planners Are Working the Same Problem

Because this cost is structural, the response becomes a shared opportunity rather than a private expense. A building that generates and stores part of its own power can draw less from a strained grid, which is what a community planner needs when new demand is pushing local infrastructure toward its limits. The owner protects the building's income. The planner protects grid capacity, local reliability, and the tax base that depends on both. Those goals point at the same physical asset, and they tend to work better when designed together than when argued over at a zoning hearing.

The benefits are real but conditional. When designed around utility requirements and local grid conditions, onsite generation, storage, and flexible load can reduce the capacity a project requires from the grid. In some circumstances, those resources can improve the energization timetable and limit costs that might otherwise be allocated more broadly. Whether they lower communitywide rates or lift surrounding property values depends on tariffs, interconnection rules, cost allocation, and whether the assets actually provide grid services. A developer who arrives with a power plan and a planner who sets clear standards for one are working toward the same result: a building that holds its value, a community that stays competitive and resilient, and a grid that holds.

The same power constraint that changes a building's operating statement also changes the economics of development approval. Data centers make that connection visible at community scale: they can add tax base and infrastructure investment while consuming power, water, and interconnection capacity that residents and other businesses also depend on.

What Data Centers Do to a Community, and What Remains When They Leave

Communities across the country are weighing whether to court data centers, limit them, or shape them. They bring real benefits and real tradeoffs, and a durable plan accounts for both.

The Benefits Communities Point To

A large data center can deliver a one-time construction payroll and a property and equipment tax base that funds schools and services for years. It can anchor fiber and electrical upgrades that neighboring businesses use, and convert idle industrial land into a high-value assessment. The headline tax figure, however, is not the same as the net fiscal benefit. Sales-tax exemptions, property-tax abatements, infrastructure commitments, and added public-service costs can materially reduce it, which is why several states, including Virginia and Georgia, have begun reviewing the incentives they offer against the revenue they collect.

The Tradeoffs Communities Absorb

The costs land differently. A hyperscale facility can carry power demand that rivals or exceeds the existing load of some host communities. Whether that raises everyone else's rates depends on tariff design, infrastructure-cost allocation, and whether the customer supplies or contracts for its own incremental generation; where those protections are weak, part of the cost of new capacity can spread to other ratepayers. Water use for cooling can strain local supply. Permanent employment is modest relative to the footprint. Noise, backup-generator emissions, and heat are real neighbor concerns. And a single tenant occupying scarce interconnection can crowd out other development. These are the pressures behind the moratoriums and dedicated tariffs spreading across the country this year.

The Boom-and-Bust Question

Not every announced project will energize on schedule. Sightline Climate estimates that 30 to 50 percent of the large capacity it tracked globally for 2026 could be delayed, although other analysts argue the forecast counts too many preliminary announcements as committed projects. PJM now applies a similar caution, distinguishing firm large-load commitments from less mature requests in its load forecast. The planning lesson is straightforward: announced capacity is not the same as financed, permitted, and energized capacity, and communities should not treat every announcement as guaranteed load or tax revenue.

What Remains Either Way

Whether or not a data center breaks ground, the underlying condition holds: electricity is scarce, its structural cost is rising, and the grid is strained. A community that treats that condition as the real planning problem builds value that persists in either scenario. The electrical capacity, storage, flexible load, and local generation that make a place attractive to a data center are the same assets that make it resilient without one, provided the capacity is available to other users and its costs are allocated appropriately. Infrastructure dedicated to a single tenant may not carry the same communitywide benefit. The distinction is the point: the infrastructure is the durable asset. The tenant is optional.

What Else Communities Can Do With Electricity

Framed that way, the tools widen well beyond attracting or blocking one use. They include behind-the-meter solar and storage serving individual properties, utility or community-scale storage that firms the grid for a whole circuit, demand-response aggregation that turns flexibility into a shared revenue stream, dedicated large-load tariffs, service agreements requiring large users to fund incremental infrastructure, and zoning standards for onsite generation, water, and noise. Requiring a large load to bring its own generation does not by itself protect ratepayers; the protection comes from enforceable tariffs, service agreements, operating requirements, and cost-allocation rules. Applied well, these tools advance the same pair of goals: higher real estate value and a more competitive, more resilient community, with or without a hyperscale tenant.

Why the Conversation Itself Creates Value

Early coordination changes the scenarios both sides run. A developer who understands a community's grid constraints and goals gets clearer design requirements and can earn local support, rather than discovering objections at a contested hearing. A planner who understands the economics of distributed power gets better alternatives than an unconditional approval or a blanket moratorium. The conversation turns a zero-sum fight over one project into a shared strategy for the community's power future, and that is the exchange this publication exists to bring to one table.

June offered genuine relief at the pump and a calmer month for electricity. It did not remove the multiyear power constraint that sits inside commercial property, or the community strategy that constraint now demands. The owners and communities that hold their value will be the ones that use the quieter moment to build the plan, while the headlines stay fixed on the price of oil.

Frequently Asked Questions

Did electricity prices fall in June 2026?

The consumer electricity index fell 1.0 percent for the month as part of a broad 5.7 percent drop in the energy index. Over the prior twelve months, consumer electricity was still 4.0 percent higher, and the latest EIA data show commercial electricity prices up 5.8 percent year over year.

Why did the energy index rise 15.7 percent over the year if electricity was only up 4 percent?

The twelve-month energy increase was driven largely by gasoline, which was 26.7 percent higher year over year. The 15.7 percent figure reflects fuel more than electricity.

What does the June CPI report mean for commercial property?

It shows short-term energy relief was real and primarily driven by gasoline. Its electricity index measures consumer prices, not commercial tariffs. The latest EIA data show average commercial electricity prices 5.8 percent higher than a year earlier, while capacity and infrastructure costs remain elevated.

What is the most durable way for an owner to hedge power costs?

Reduce avoidable load first, then quantify rate and demand-charge exposure, evaluate demand response, and model storage and onsite generation sized against durable savings. Qualified standalone storage remains eligible for the Section 48E investment credit.

How much asset value does energy savings create?

At an 8 percent cap rate, every $1,000 of durable annual NOI improvement represents approximately $12,500 in asset value.

What are the main benefits and tradeoffs of a data center for a community?

Benefits include a tax base, construction payroll, and infrastructure upgrades, though incentives can reduce the net fiscal gain. Tradeoffs include possible upward pressure on local rates where tariffs do not isolate the load, water use, modest permanent employment, and the risk of one tenant crowding out other development for scarce interconnection.

What should a community do if the data center boom turns to bust?

Plan around the underlying condition, not the single tenant. Electricity scarcity and rising structural power costs remain whether or not a data center is built. The grid capacity, storage, flexible load, and local generation that attract a data center also lower costs and raise property values without one, where capacity is shared and costs are allocated appropriately.

Sources

Keith Reynolds

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