HARRISBURG, Pa. (AP) – The artificial intelligence boom is sparking battles among governors, attorneys general and others in some states over increasing public utility profits. protest against electricity price increases Cash-strapped residents say they are trapped in a broken system.
Officials and lawmakers in at least six states, including Arizona, Indiana, Maryland, New Jersey, New York and Pennsylvania, are taking new steps to block proposed rate hikes by power companies. Some utilities are pushing to completely change their financing models for major system upgrades.
The move comes in a midterm election year where affordability is a major theme. Democratic Party’s attempt This is to loosen Republican control of Washington.
Arizona Attorney General Chris Mays (Democratic), who is up for re-election this year, is challenging two utility rate increase requests before the state’s Utility Regulatory Commission.
“I felt it was more important than ever to take a stand against the blatant corporate greed of Arizona’s monopoly operating companies,” Mays said in an interview.
The fight is also drawing attention on Wall Street.
of greedy energy demand ‘s AI data centers have driven up electricity prices in some regions and sparked a construction boom in the lucrative energy sector.
For years, consumer advocates have tried to challenge the size of utility companies’ investment returns before regulators. But that’s probably not the case, consumer advocates say.
“We’re entering an era where energy is expensive and (demand) is growing, utility profits are at record highs, and utility costs are rising,” said Matt Kasper of the Energy Policy Institute, urging utilities to keep utility costs low and use renewable energy sources.
Utilities have long been seen as a stable haven for investors, with reliable revenue streams and predictable demand. Analysts say investment returns in the utilities sector are typically lower than in other sectors because of lower risks.
But utilities, many of which are owned by multibillion-dollar for-profit parent companies, have seen their stock prices perform particularly well during data center expansions.
While the investment returns utilities receive from regulators aren’t the only reason consumers’ bills are rising, researchers suggest it’s a contributing factor. In March, the Energy Policy Institute released a report showing that profits for 110 commercial companies rose from just under $39 billion in 2021 to more than $52 billion in 2024.
Mark Ellis, a former utility executive turned consumer advocate, said about 10% of a typical customer’s bill is what is known as “excess profits” of commercial utilities, above what is considered reasonable based on years of Supreme Court precedent.
Rather than regulators setting returns above market demands, Ellis said utilities should allow investors to buy cash at the lowest cost, just as someone would want the lowest interest rate on a loan.
Paul Ferraro, an economics professor at Johns Hopkins University, said targeting returns on utility investments is a political act, not an economic one.
“This is an action aimed at addressing the deep social disagreements we have about who should benefit from essential infrastructure,” Ferraro said. “But it does not address the major challenges facing the power sector.”
This includes investments in modernization, expansion, renewable energy and distributed generation, Ferraro said.
“Affordable prices” appear at corporate financial results briefings
Travis Miller, energy and utilities analyst at Morningstar, said on earnings calls that utility executives emphasized efforts to cut costs and protect residential customers from the cost of powering data centers.
“Affordability is probably the biggest issue that utility managers and investors are thinking about in the utility sector right now,” Miller said.
Miller said if interest rates aren’t currently affordable, there’s no way for utilities to achieve the rate hikes needed to increase returns and dividends for investors.
Utilities point to federal data showing that household electricity bills as a percentage of household income have declined over the past several decades. They argue that the investment returns provided by state regulators are critical to raising the funds needed to properly maintain the power grid and ensure reliability for millions of people.
They also warn that investors will simply send cash to utilities in other states that promise higher returns.
Critics call it fear-mongering.
Earlier this month, the New Jersey Public Utilities Commission launched what its president, Christine Goole-Sadoby, called “one of the most significant regulatory overhauls in a generation” to ask how utilities should “make money in the modern energy system.”
In the last few weeks, Pennsylvania Governor Josh Shapiro Pressured PECO, Exelon’s Philadelphia-area utility subsidiary, to reverse a 12.5% rate increase, or an additional $20 per month for the average residential customer. Mr. Shapiro, a Democrat who is seeking re-election this year, later sent a letter to utility executives harshly criticizing utility profits and saying, “The working model of the 20th century has collapsed.”
“Infrastructure development can no longer be driven by corporate profitability,” Shapiro wrote.
One analyst called it “Quaker sticker shock” in a note to investors, and the Pennsylvania-based utility’s owner’s stock lagged its peers in the days that followed.
Meanwhile, Exelon Corp., the Chicago-based parent company of Commonwealth Edison, PECO, Baltimore Gas & Electric and several other power companies, emphasized that it recognizes the importance of affordability.
Exelon President and CEO Calvin Butler told analysts during the company’s first-quarter earnings call on May 6 that the company is committed to justifying spending and keeping utility costs as low as possible. Butler said the decision to withdraw the request for rate hikes was made after conversations with “stakeholders,” who “would love to work with us in partnership to address affordability issues, but the timing is not the best right now.”
In Indiana, Republican Gov. Mike Braun has appointed a new public service commissioner tasked with stopping rate hikes.
Their first big test will be AES Indiana seeking a 10.1% increase from ratepayers, or $193 million a year, said Ben Inskeep, program director for Citizens Action Coalition, an Indianapolis-based consumer advocacy group.
As part of that, AES Indiana Inc., whose parent company will be taken private in a $33.4 billion deal led by private investment giant BlackRock, sought a cash return of 10.7%.
Inkeep said an 8% return instead of 10.7% would almost halve the proposed rate hike.
In Arizona, Mays objects to the proposed 14% increase, saying it could be dramatically reduced if businesses simply paid the cost of maintaining reliable service.
“It’s becoming unbearable for Arizonans,” Mays said. “And I think we have to fight back.”
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