This article appears in the December 2025 issue of The American Prospect magazine. Subscribe here.
Electricity is a public good, dating back to when rural electrification was a pressing need for the nation during the New Deal era. Yet control over this essential service today rests largely in the hands of private monopolies known as investor-owned utilities (IOUs), which provide power to nearly 70 percent of utility customers in the U.S.
These monopolies are regulated at the state level by public utility commissions, which are responsible for setting rates. Utilities must justify any rate increases and convince regulators of the need for their actions. But 2025 may be the year that this regulatory framework collapses under its own contradictions.
In just the first half of the year, IOUs requested approval for an unprecedented $29 billion in additional revenue. They cited growing electricity demand, including from data centers powering artificial intelligence, needed upgrades to aging infrastructure, and mandates to decarbonize in several states. Yet rate hikes have also translated into skyrocketing CEO compensation and record-breaking profits for shareholders. And in many parts of the country, IOU rates are rising much faster than those of their municipally owned counterparts.
This has put unbearable weight on customers. Electric bills are increasing at twice the rate of inflation on average. More than 52 million Americans were unable to pay their electric bills at least once last year, and on an annual basis, roughly three million people who cannot afford these bills have their electricity shut off.
The myriad factors driving up electricity demand are “actually just shining a spotlight on the fundamental design of the utility system,” Isaac Sevier, founder and executive director of Public Grids, told the Prospect. And that design is badly broken, with public utility commissions either too confused or too captured to resist an onslaught of IOU pressure to approve rate hikes. Sevier believes this necessitates a rethink of how utilities deliver power in the U.S., and how to protect those who pay for it.
He wants to restore a promising and proven alternative—public power. The movement to reclaim democratic control over utilities has cemented itself in communities across the country. In their outreach, public power advocates have connected soaring electricity prices with the need to trigger a paradigm shift in the fundamental design of the utility system, one that decouples investment planning from shareholder profits.
ACCORDING TO CONSULTING FIRM ICF, load growth in the U.S. is projected to increase by 25 percent over the next five years. One of the biggest and most scrutinized factors for this is the historic expansion of data centers. Big Tech hyperscalers plan to spend up to $400 billion on the data center build-out just this year. To meet the colossal demand for AI and cloud services, data centers will more than double their 2024 energy consumption by the end of the decade.
Just keeping up with all that demand would be costly for utilities. But a number of other issues are converging at once to squeeze the system.
For instance, adding more power would meet demand and keep rates low, but interconnection queues can take years to hook up energy sources. As Grist reported, utilities “are now putting more than half of their expenditures into transmission and distribution through the end of the decade.” This has led to shortages of critical grid assets.
More critically, IOUs have been slow to implement transformative upgrades like non-wires alternatives, which reduce reliance on traditional transmission infrastructure, and are instead plowing capital into legacy assets like poles and wires, with customers footing the bill. The IOU financial model disincentivizes grid improvements that would simply make things more efficient, as the Department of Energy (DOE) acknowledged in a report last year. Unlike investments in traditional infrastructure, modernizing the grid does not contribute to the growth of a utility’s rate base.
Information asymmetry between utility commissions and utilities has given the latter carte blanche to squeeze ratepayers.
Tariffs on metals like steel and aluminum have put upward pressure on construction expenses, further stalling grid upgrades and making it more costly to rebuild after disaster strikes. Hardening the grid is already an expensive endeavor ratepayers must finance. In California, utilities have spent more on underground transmission lines and passed insurance costs on to customers, while utilities in the Southeast have been known to seek higher rates to cover the cost of rebuilding after hurricanes.
As the Trump administration pursues its policy of “American energy dominance,” the U.S. has continued to export more natural gas than it imports and is actively expanding its export capacity. That presents another problem for ratepayers, who find themselves more exposed to global gas market price swings. In 2022, U.S. households saw electric bills go up by almost 15 percent when the Russian invasion of Ukraine caused gas prices to spike.
Trump’s full-frontal assault on renewables threatens to drive up electricity prices even further. Over the summer, he ordered the Treasury Department to “strictly enforce” the termination of wind and solar energy credits. In other words, it is now official policy to make clean-energy projects, which accounted for almost all new U.S. electrical generating capacity in the first four months of 2025, as unprofitable as possible.
Fitting this together, you have the elements of a perfect storm: There’s a greater need for power at precisely the moment when there are limits, both real and artificial, on how much supply can be added. But against the backdrop of these factors, the IOUs are using their immense influence to push for even higher rates than the economic fundamentals would indicate. As a result, faith in the regulatory compact appears to be waning.
IOUs ENJOY THE BENEFITS OF A REGULATORY SYSTEM they built for themselves decades ago. They enabled the concept of public utility commissions as the electricity industry was built in the early 20th century, vowing that this setup would keep the rapaciousness of the profit motive in check. In reality, the idea was to cement private ownership of utilities and resist municipal control. And it set the stage for the shenanigans that we see today.
“The whole thing is like the emperor’s new clothes,” said Mark Ellis, a senior fellow at the American Economic Liberties Project and an independent expert witness who testifies before state utility commissions. In a recent report, Ellis provided evidence that unwarranted rate increases cost customers $50 billion per year, or about $300 for every U.S. household. “Many people know what’s going on is wrong,” he said, “but they’re all playing along because they’re afraid to call it out.”
In his past life, Ellis was the chief economist at Sempra Energy, a consultant with McKinsey, an analyst for ExxonMobil, and an engineer for SoCal Edison. At times, he feels like the little boy in Hans Christian Andersen’s fairy tale who says aloud what others know but won’t admit.
Regulators set electricity rates through a process known as cost-of-service regulation. The ratemaking process, in theory, is a delicate balancing act. On the one hand, public utility commissions that review utilities’ requests have the goal of ensuring that any rate increases are just and reasonable. On the other, they are pressured to set rates high enough so utilities can cover operating costs, maintenance, and expansion projects.
The rate charged for electricity is supposed to equal operating costs, the cost of the capital investment, and a “just and reasonable” profit; in sum, this is known as the rate of return. All shareholder-owned companies finance their capital expenditures through a blend of debt and equity; IOUs are no different. Calculating a utility’s cost of debt is relatively straightforward, but its cost of equity, which is not directly observable, must be estimated. This becomes a key variable, and the way that additional capital expenditures can translate into higher profits. Even in the context of needing massive upgrades to decarbonize and meet expanding demand, IOUs are overinvesting, typically in the kinds of activities that don’t benefit consumers or the environment, but instead juice returns.
The Supreme Court has long upheld that rate of return should equal the “cost of capital,” as determined by financial markets. Yet any cursory look at the stock prices of major IOUs shows that something is wrong. These staid, low-risk companies that are supposed to be earning tightly regulated profits are actually some of the most dazzling gainers on Wall Street. An RMI report earlier this year found that the top 20 IOUs were trading at an 81 percent premium, because their return on equity was far higher than their cost of equity.
The canyon of information asymmetry between public utility commissions and the utilities they regulate has given the latter carte blanche to squeeze ratepayers. Four consulting firms, Ellis says, scour the country to testify in 90 percent of all commission rate cases, using economic models to estimate rates of return that are not used in any other area of finance. Ellis acknowledges that the legal standard “doesn’t necessarily say what model to use,” but in his paper, he explains that the models IOUs use seem to be a means to an end.
For example, many consultants use an “expected earnings” analysis that arrives at a rate of return based primarily on future forecasts that the company expects to receive, a totally circular analysis. The Federal Energy Regulatory Commission banned the expected earnings model from use in federal hearings in 2022, but it continues to be used at the state level.
Whenever ratepayer advocates use their own witnesses and their own economic models, they come up with wildly different figures for what the rate of return should be. They are so different, in fact, that most public utility commissions wind up throwing those numbers out, so committed are they to utility industry dogma. Herein lies the fundamental ratemaking dilemma: Public utility commissions have seldom acted as a fiscal boundary to minimize operating costs. In fact, it’s just the opposite.
There are signs that policymakers are beginning to get fed up with the continued burdening of the public with higher costs, without improvements to grid reliability that might justify them. This past year, lawmakers in six states introduced measures to limit utilities’ return on equity, the key variable that is overestimated to give utilities excess profits. Legislation in New York and Rhode Island seeks to cap return on equity at 4 percent, while legislators in Massachusetts and New Jersey have proposed new regulatory guidance that would require public utility commissions to minimize return on equity.
To keep rates just and reasonable, enhance reliability, and accelerate the energy transition, Ellis launched MarketClear Utility Capital with the goal of delivering attractive returns on utility assets without shifting unnecessary costs onto ratepayers. In conjunction, he has proposed a new investment model for regulated utilities: competitive direct equity (CDE).
IOUs generate roughly $2 in shareholder value for every dollar they invest in infrastructure. CDE would eliminate this “capital bias,” which is the driving force behind utility overinvestment. The idea is to establish a market for equity capital that links financial incentives to regulatory outcomes and affordability by replacing “the current system of regulators setting utility returns with actual market competition for utility equity investment,” Ellis wrote in a Real Clear Energy article he co-authored in October.
“Under CDE, utilities would earn only their actual market-based cost of capital, removing the reward for excess spending,” he continued. “With capital bias eliminated, regulators could implement meaningful performance-based incentives that are better aligned with the public interest.”
WHEN PUBLIC UTILITY COMMISSIONERS TAKE the rare step of striving to keep rates just and reasonable, they risk their careers.
According to the Energy and Policy Institute (EPI), IOUs “often use donations to charitable organizations as a means to encourage organizations to support their political agenda.” Avangrid, which owns electric and gas utilities in Connecticut, has been especially combative toward the state’s Public Utilities Regulatory Authority (PURA). In 2023, several charitable organizations receiving donations from the Avangrid Foundation called on PURA to “moderate” a draft decision in which regulators rejected a rate hike requested by the company’s Connecticut-based subsidiary, United Illuminating. PURA upheld the decision.
Allegations lodged against Avangrid President and CEO Pedro Azagra Blázquez suggest he made “thinly veiled” efforts to pressure PURA to play ball. In a letter first obtained by CT Mirror, PURA General Counsel Scott Muska accused Azagra Blázquez of implying that the company would reduce its investment in the state if commissioners continued to hand down “adverse rulings.” Muska also alleged that Azagra Blázquez had offered opportunities for “international exposure” to then-PURA Chair Marissa P. Gillett in exchange for her support. (The Spanish multinational electric utility conglomerate Iberdrola is Avangrid’s parent company.)
Gillett resigned from her post this past fall following intense backlash—particularly by Avangrid—over her efforts to boost cost savings and modernize Connecticut’s approach to ratemaking through performance-based regulation (PBR), which despite its flaws, is premised on realigning utilities’ incentive structure with the public interest. Under Gillett’s leadership, PURA reined in IOU profit margins, advanced its Equitable Modern Grid initiative, and created the Office of Education, Outreach and Enforcement, “which has become a national model for public engagement and is even being replicated in other states and at the federal level,” she wrote in her resignation letter.
Utilities took PURA to the state Supreme Court five times during her tenure, all of them ending in PURA victories. Other lawsuits remain active. The pushback on Gillett’s attempts at reform was a constant, including public records requests designed to embarrass her and her team. Opponents claimed that Gillett sought to restrict access to staff from other members of the commission, and one state lawmaker threatened impeachment proceedings and suggested that Gillett lied under oath.
The series of episodes “exacted a real emotional toll both for me personally, as well as my family, and for my team,” Gillett wrote in her letter. “I did not make this decision lightly, but there is only so much that one individual can reasonably endure, or ask of their family, while doing their best to serve our state.”
Meanwhile, the lucrative nature of the modern utility industry has drawn in a troubling yet familiar face: private equity. The core incentive of the IOU financial model ties profit to capital spending. Private equity ownership turbocharges this incentive. In theory, a private equity owner could generate multiplicative returns by piling on debt and accelerating a utility’s capital deployment. Utilities also enjoy predictable cash flows and guaranteed cost recovery. That bodes well for BlackRock and Blackstone, which have been pursuing utility acquisitions to cash in on the AI data center boom.
In October, the Minnesota Public Utilities Commission met to approve BlackRock-owned Global Infrastructure Partners’ acquisition of ALLETE, the parent company of Minnesota Power. Previously, Ellis had testified before this commission, arguing that the transaction “proves, unequivocally, that Minnesota Power’s authorized rate of return is excessive, and that excessive [rates of return] are the key motivation for the transaction and the root cause of the forecast unprecedented rate increases.” But a settlement between ALLETE and the Minnesota Department of Commerce, endorsing the sale, made the October proceeding in St. Paul all but a formality.
When I attended the hearing, a fellow journalist was approached by an attorney for the buyers, Dan Lipschultz. He used to be on the commission, revealing a popular tactic for industry: hiring former regulators to influence their ex-colleagues. During deliberations, commissioners assured critics that they had the authority to hold the buyers accountable if anything untoward happened. “I really became convinced … when I realized that the goal here was to grow this Minnesota company,” said Commissioner John Tuma, who was initially a skeptic of the deal. He cited organized labor’s support; it had already been reported that Lipschultz ghostwrote a comment letter from the North Central States Regional Council of Carpenters and International Union of Operating Engineers Local 49. Tuma also cited another benefit from the BlackRock purchase: the possibility of a new utility owner willing to make investments being attractive to data centers.
In the end, the vote was unanimous in support of the acquisition.
As part of the $6.2 billion deal, Global Infrastructure Partners made several commitments, including a one-year moratorium on rate increases and a modest reduction to its authorized return on equity. But critics argue the concessions are not enough to prevent excessive rate increases over the long term. “Even with concessions made, the deal is still a bad deal for Minnesotans,” Alissa Jean Schafer, climate and energy director at the Private Equity Stakeholder Project, an expert witness in the case, said at the time.
THE INABILITY OF PUBLIC UTILITY COMMISSIONS to keep costs down for customers sits squarely at the center of the affordability crisis. It also reflects the failure of technocratic liberalization, which as Sevier observed in an October report he co-authored, “has failed at its core promise of increasing competition, without lowering costs for working people, stabilizing costs, making services more reliable, increasing energy conservation, reducing private utility opposition to rooftop solar, and slowing upward wealth redistribution.”
If regulatory capture is to blame, what might a viable alternative look like?
“Public power is the most sensible solution to answer these big questions,” Sevier told the Prospect.
This idea has appealed to a growing number of community organizers across the country who contend that cutting shareholders out of the equation would free up additional resources to strengthen the grid, enhance reliability, ease ratepayers’ debt burdens, and expand benefits for workers. There are existing models going back centuries that have delivered cheaper power and maintained energy democracy with public input.
“We’re part of a national movement … something that gets lost a little bit when you’re working at a local level,” Jessica Cook, an organizer with Milwaukee DSA’s Power to the People campaign, told the Prospect.
Cook is also legislative assistant to Alderperson Alex Brower, who represents the city’s Third District. The first socialist to win a Milwaukee Common Council seat in 77 years, Brower campaigned on replacing We Energies, an investor-owned electric and gas utility that serves more than two million Wisconsinites. Greater Milwaukee is its largest service area.
“We Energies acts like they own this town,” Brower said in an interview with the Prospect. “People are fed up, and they’ve realized the profit motive driving We Energies is to blame.”
In the last three years, the Public Service Commission of Wisconsin has approved two consecutive rate increases: an 8.8 percent base-rate increase, effective January 2023, and a cumulative increase of 12.38 percent for 2025 and 2026. “People are already hurting,” Alexander Hagler, a 35-year-old Milwaukee resident and owner of Kuumba Juice & Coffee, told the Prospect. “Electricity is like the air we breathe,” he added, describing it as one of the “many different resources in our society that we need to bring under the control of the people.”
Power to the People, which started in Milwaukee three years ago, has called on the city to replace We Energies with a municipal or cooperative utility, which would require a majority vote from the Milwaukee Common Council. Organizers have proposed funding the acquisition through tax-exempt municipal bonds, lowering the cost of capital without jeopardizing the city’s credit rating so long as a dedicated utility enterprise fund is established.
The campaign runs weekly canvasses and phone banks, speaking directly to ratepayers’ frustration and offering an established alternative. “People are looking for something,” said Audra Hale, an organizer with Power to the People and at-large executive committee member at Milwaukee DSA.
The day before we spoke, Hale and other canvassers collected over 300 signatures for the campaign’s petition to replace We Energies at a local No Kings Day protest. Nearly 14,000 people have now signed that petition, which Brower will eventually submit to the Common Council.
“We’re trying to convince my colleagues that this is a good idea,” Brower said, adding that Power to the People has been “doubling down” on canvassing in districts whose alderpersons “can be moved.” To date, no other alderpersons have come out to publicly support the campaign. With an election coming up in 2026, Milwaukee DSA is trying to change that by endorsing candidates who support Power to the People and running challengers against those who do not.
During a canvass in late October, volunteers split into two groups to collect signatures in District 6. I tagged along with the second group; we stopped at four different laundromats. Among the volunteers was Andy Barbour, co-chair of Milwaukee DSA. He spoke with a resident who, having been a We Energies employee, declined to sign the petition due to concerns over their pension. But the message seemed to stick; Barbour was pleasantly surprised when that same resident convinced a friend to sign on.
At one point, another resident who added her name to the petition claimed that We Energies had shut off her electricity after she missed a payment. “They suck … We’ve got to come together,” she said. By 3 p.m., canvassers had collected close to 60 signatures.
Despite the “success rate” of its canvasses, Barbour said Power to the People will need to “prepare for the fights ahead, because we know they are coming.”
UTILITIES HAVE SPENT BIG TO PREVENT public power campaigns from gaining traction in communities across the country. “Utilities are trying to make it as difficult as possible for cities to liberate themselves from corporations who do not care about actually delivering affordable service [and] would rather enrich themselves to increase returns for their shareholders,” said Shelby Green, a research and communications manager at EPI.
And they have been successful. As Maine Public reported, the parent companies of Central Maine Power and Versant Power spent tens of millions of dollars to defeat public power at the ballot box in 2023. Avangrid, which also owns Central Maine Power, contributed more than $18 million to the paradoxically named utility front group Maine Affordable Energy, while Maine Energy Progress received approximately $15 million from Enmax, the parent company of Versant Power. Our Power, the advocacy group behind the municipalization effort, only raised about $236,000.
Yet as electric rates skyrocket, this spending may mean nothing to angry voters. In Georgia, an industry front group called Power for Tomorrow spent almost $200,000 this year around the Georgia Public Service Commission race, an off-year special election where two Republican incumbents who had approved six rate increases over a two-year period were running for re-election.
Democrats Alicia M. Johnson and Peter Hubbard campaigned on affordability and reliability, laying the blame for recent rate increases on excessive profit margins and the slow pace of decarbonization. Despite the spending against them, they became the first Democrats in Georgia to win a nonfederal statewide election in nearly 20 years, smoking the Republican incumbents by 26 points. “Affordability is front and center in voters’ minds, and today they overwhelmingly said they’re tired of subsidizing corporate interests at the expense of their families,” Hubbard said on election night.
With affordability front and center, the public power movement has an opportunity to reclaim the narrative around public power. Next year, Ann Arbor for Public Power will submit a ballot proposal asking voters to create a consumer-owned utility that would replace DTE Energy, an electric and gas utility holding company serving more than three million customers across southeastern Michigan. Meanwhile, public power organizers in Clearwater, Florida, and Tucson, Arizona, pressed local officials to rigorously consider municipalization after the cities had commissioned feasibility studies. In September, the Clearwater City Council authorized an appraisal process to further evaluate the viability of a consumer-owned utility. (We Stand for Energy, a utility front group backed by the Edison Electric Institute, promptly blasted the idea in a social media ad campaign.)
“The electricity system connects all of us to one another in the country, no matter who you are or where you live, which makes it an incredible site for building back our relationships and our social fabric,” Sevier said. “We have to rebuild trust and to demonstrate that our infrastructure can serve a public good, not a private profit.”
This article appears in Dec 2025 Issue.