Electric utility regulators in the United States are once again considering rate increases in 2024 as utilities seek to fund necessary system maintenance and expansion. These increases aim to cover the costs of improving transmission and distribution lines, particularly in the face of more severe weather events and wildfires, and to prepare for the growing demand for electricity as states implement clean energy policies. Utilities requested rate hikes in recent years to manage these challenges, and many have been granted, according to data from S&P Global Market Intelligence Capital IQ Pro.
In 2023, state utility regulators approved $9.7 billion in net rate increases, which was more than double the $4.4 billion authorized in 2022. This figure represents $10.3 billion in total authorized rate hikes, offset by $0.6 billion in decreases. A significant portion of these increases—over one-third—came from two California utilities, Pacific Gas and Electric and Southern California Edison, as they sought to protect their grids from the growing risk of wildfires. These measures included undergrounding power lines and managing vegetation to reduce fire risk.
As of mid-August 2024, regulators across the U.S. have approved 58% of the net rate increases requested by electric utilities, with projected increases for the year potentially reaching $8.9 billion, adjusted for inflation. In states where all parts of an electric bill are regulated, utilities need approval from state regulators to increase rates. Some states, however, allow competition for the supply of electricity, meaning energy suppliers set competitive prices for power generation. In these states, only the charges for delivering electricity over transmission and distribution lines remain regulated.
When regulated utilities, particularly investor-owned utilities (IOUs), anticipate that their operating and maintenance costs will surpass their expected revenue under existing rates, they file a rate case with state regulators. IOUs are typically reimbursed for their allowed costs and investments and earn a regulator-approved profit. Cooperatives and government-owned utilities, which are non-profit entities, are not regulated in the same manner.
In 2023, over one-third of the total U.S. rate increases came from California. Pacific Gas and Electric received a $2.5 billion rate hike, while Southern California Edison saw nearly $1 billion in increases, largely to fund wildfire protection efforts. The Illinois Commerce Commission approved a $759 million rate increase for ComEd, aimed at grid development to comply with the Illinois Climate and Equitable Jobs Act, which seeks to transition the state to 100% clean energy by 2050. This includes promoting electric vehicle adoption, which is expected to double electricity consumption.
New York’s Public Service Commission authorized a $442 million increase for Consolidated Edison to help the state meet its renewable energy goals by 2030 and achieve zero emissions by 2040. Duke Energy Carolinas received a $436 million rate increase from the North Carolina Utilities Commission, which will fund system investments for cleaner energy and cover costs from the COVID-19 pandemic and storm-related expenses.
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