Jigar Shah blames the wrong target for rising electricity bills

Guy Caruso is a retired administrator for the Energy Information Administration. He was formerly with CSIS.

With over forty years in energy markets, policy and security, including as administrator of the U.S. Energy Information Administration, I have learned a key lesson: When electricity prices rise, policymakers should rely on data, not slogans.

I have devoted my career to prioritizing credible data for energy and electricity policymaking. Given this background, it’s come to light in recent years that regions with deregulated electricity markets have demonstrated a comparatively worse performance record on affordability than vertically integrated regions. I’ve come to this conclusion after examining the objective data on these matters.

Jigar Shah is correct that data centers alone did not “jack up” every family’s electric bill. However, his broader claim in an August Newsweek column that “utility greed” is to blame misdiagnoses the issue and misguides policymakers.

Utilities cannot build projects without public oversight. They earn returns only on investments state regulators deem prudent, useful and in customers’ interest. Major capital projects undergo public rate case reviews, where consumer advocates, regulators and intervenors can challenge costs. This is regulated investment, not profiteering.

A recent Alliance for Innovation and Infrastructure report, Ratemaking for a Reliable Grid, makes clear what Shah’s piece blurs: Both requested and authorized utility returns on equity have trended downward over the past two decades, not upward. And authorized ROE is an opportunity to earn a regulated return that has been carefully calibrated for customers and is subject to oversight — it is not a guaranteed profit. Understanding these points is central.

The data simply does not support a national “utility greed” narrative. A Charles River Associates analysis earlier this year also found that recent residential rate increases are concentrated in specific regions, especially California, the Northeast and parts of the Mid-Atlantic, while most states have seen stable rates or even rates that are below the national average. In parts of the PJM Interconnection, where states like Pennsylvania and New Jersey rely on forward-looking capacity auctions and unregulated suppliers rather than utility-owned generation, customers face volatile capacity prices and ongoing supply shortages.

This is the larger issue Shah overlooks. PJM customers already face the costs of volatile wholesale markets, while new generation has struggled to come online. Allowing regulated utilities to build generation would maintain oversight, as state regulators would still determine whether projects are prudent and if cost recovery is justified.

This approach also provides a hedge for customers. If a utility-owned plant earns revenue in the PJM market, those earnings offset customer costs. This differs from relying solely on independent power producers, who reap profits from wholesale market outcomes and scarcity pricing, unconstrained by regulated returns or an obligation to serve customers.

Shah encourages readers to question utility incentives, which is reasonable. However, he does not address whether today’s market gives the unregulated power producers those utilities buy their power from an incentive to benefit from prolonged supply shortages and higher wholesale prices. The data shows that publicly traded energy corporations — exempt from the same regulation as utilities — have made record profits over the last few years without building the new power needed to keep up with demand. Companies that can, have waited until these supply shortages became apparent before announcing “press releases” about build new generation.

Furthermore, utilities already use demand response, energy efficiency, advanced grid management, time-of-use rates and other tools to maximize existing infrastructure. Ultimately, meeting unprecedented demand requires building new infrastructure, including generation, transmission, substations and distribution upgrades.

Families need lower bills, but they also need reliable power. While blaming utilities may be politically convenient, ensuring adequate electricity supply is the real solution to the affordability crisis.