Overcharged: The Rules Of The Electricity Affordability Crisis

Nearly a quarter of adults in the US—or over 52 million people—cannot pay their power bills. The need to decarbonize and build a climate-resilient grid are bound to make their electricity more expensive. But this is due in part to the deeply unjust existing utility paradigm, as most utilities are privately owned and focused on making profits for shareholders over providing access to clean, affordable and reliable energy for ratepayers. 

Our review of how utility rates for working people are set shows the following issues:

• Restructuring and privatization: most efforts to reform the US power grid within the past several decades have focused on liberalizing energy markets and privatizing ownership of energy infrastructure, leading to a byzantine and uncoordinated energy grid.
• Private profit over public benefit: despite rhetoric of increasing competition, technocratic liberalization 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.
• Threadbare grid vulnerable to climate change: the emphasis on creating new markets and incentivizing private profits over public ownership has led to a grid where private utility owners are reluctant to pay for grid upgrades to safeguard against climate extremes that do not yield high profit margins, and working people are forced to pay a premium for any climate investments that can prevent wildfires or blackouts during extreme temperatures, or add more energy capacity like renewables and batteries.

It is clear that making the utility system a business instead of a universal public service makes the investments for the grid the most expensive they can be, instead of affordable for everyone. The corporations who own the grid will not, by design, put our needs before their profits.

To restore and expand the public’s control over crucial energy systems in an age marked by extreme cost of living and climate crises, we recommend:

1. Year-round protections from utility shutoffs and close coverage gaps should be implemented to protect people with low incomes—especially the elderly, the disabled, and families with children, all of whom are at greatest risk of illness or death during extreme temperatures.
2. Public utility commission staff and commissioners should be required to evaluate a baseline for all costs of needed grid investments with a zero percent rate of return on equity premium, as if the investments were made under public ownership.
3. State powers are established to capitalize new investment funds, like public banks or other public finance authorities, which can be used to support termination of privately held franchise agreements and buy back the grid for public ownership and local control.
4. State and local public service commissioners should compel utilities to advance a just and equitable transition under existing utility regulation authorities.
5. Elected officials like state governors and city mayors should direct their utility regulators to review history of approved rates of return on electric grid investments and evaluate the total excess costs to their communities above the actual cost of capital secured by private utilities.
6. State consumer advocates and attorneys general should establish new practice areas that focus on least-cost grid planning to protect state economic interests and consumer rights, such as estimating public ownership of the entire energy system including generation, transmission, and distribution system investment and operation costs.