Utility Profits vs. Consumer Revolt: The Unraveling of a Broken System

The artificial intelligence boom has brought unprecedented growth in energy demands, driving up electric prices and sending shockwaves through the utility sector. Governors, attorneys general, and lawmakers across six states – Arizona, Indiana, Maryland, New Jersey, New York, and Pennsylvania – are rallying against proposed rate increases.

Affordability has become the defining theme of the midterm election season, with Democrats seizing on this issue to challenge Republican control in Washington. However, the fight extends far beyond party politics, confronting the stark reality of a system where utilities reap record profits while consumers struggle to make ends meet.

Arizona Attorney General Kris Mayes is taking a leading role in challenging utility rate increases. “We’ve entered an era where expensive energy and growth are driving up costs,” she says, echoing concerns shared by consumer advocates. For years, regulators have been criticized for allowing utilities to reap excessive profits. The current crisis demands more than just tweaks to the existing model.

The explosion of AI-fueled data centers has created a voracious demand for electricity in certain regions, fueling a boom in energy construction and sending prices soaring. Utilities – often owned by multibillion-dollar parent companies – have seen their share prices perform exceptionally well during this period. The profits of 110 for-profit utilities rose from $39 billion in 2021 to over $52 billion in 2024.

Consumer advocates argue that utilities should shop around for the lowest-cost investor cash, rather than relying on regulators to set returns. However, targeting utility investment returns is a complex issue. Paul Ferraro, an economics professor at Johns Hopkins University, counters that this approach is a political action, not an economic one.

The Energy and Policy Institute has highlighted the stark contrast between utility profits and consumer affordability. Mark Ellis, a former utility executive turned consumer advocate, estimates that 10% of typical customer bills are “excess profit” above what might be considered reasonable under Supreme Court precedent.

During corporate earnings calls, executives emphasize efforts to cut costs or protect residential customers from data center-related expenses. However, will these measures be enough to address the systemic issues driving rising rates? Travis Miller, an energy and utilities analyst at Morningstar, notes that investors will simply send their money to utilities in other states offering higher returns.

Utilities argue that they need high investment returns to maintain electric grids and ensure reliability. Critics label this fearmongering, pointing out that investors will find alternative opportunities. The regulatory reviews launched by New Jersey’s Board of Public Utilities and Pennsylvania Governor Josh Shapiro’s efforts to pressure PECO into withdrawing a rate increase have sent shockwaves through the industry.

It’s clear that the traditional utility model is no longer tenable, with Shapiro declaring it “broken.” Exelon’s emphasis on recognizing affordability concerns rings hollow in light of its own lobbying efforts. As this battle plays out, one thing is certain: the stakes are high and the implications far-reaching.

If policymakers fail to address the core issues driving rising rates, consumers will continue to bear the brunt. The time has come for a fundamental rethink of the utility sector – before it’s too late for those who can least afford it.