ICYMI: New Analysis Finds Lower Utility Returns Would Increase Risks and Long-Term Costs for Customers

ICYMI: New Analysis Finds Lower Utility Returns Would Increase Risks and Long-Term Costs for Customers

WASHINGTON (November 05, 2026) — A new analysis from Concentric Energy Advisors finds that reducing electric companies’ authorized return on equity (ROE) would provide minimal near-term savings on customers’ monthly bills while potentially increasing the long-term cost of financing investments in the energy grid.

According to Concentric, the equity return associated with state-authorized ROE represents approximately 5 percent of a customer’s total electric bill in the analysis. Even the largest ROE reduction modeled in the analysis would alter the typical customer bill by only about 2 percent, using a PJM sample. A 100-basis-point reduction would lower the typical bill by less than 1 percent.

 


The report also cautions that materially reducing authorized returns without a corresponding decline in financing costs or business risk could increase borrowing costs and make essential infrastructure more expensive to finance.

“America’s electric companies are focused on real solutions that address the underlying drivers of rising costs and help keep customers’ bills as affordable as possible,” said Drew Maloney, president and CEO of the Edison Electric Institute. “This report shows that sharply capping electric company returns would provide little relief on customers’ bills while making it harder to attract the capital needed to provide affordable, reliable electricity to 250 million Americans."

The paper identifies the larger and faster-growing cost drivers across the country, including wholesale electricity prices, capacity costs, and policy compliance costs, noting that electric companies often do not control these costs.

“Affordability is a significant concern, but reducing utility returns as a matter of policy would provide limited relief in the short term because they account for only a small portion of the bill and could increase costs or harm reliability in the longer term,” said Joshua Nowak, Vice President at Concentric, in the firm’s news release. “Effective solutions should focus on the actual drivers of rising customer costs, where savings can deliver meaningful relief, while preserving utilities’ ability to finance essential infrastructure and serve customers over the long term.”

The report explains that investor-owned utilities finance infrastructure through a combination of debt and shareholder equity. State regulators review utility costs and investments, set customer rates, and establish an authorized return on shareholder equity. This framework is intended to enable utilities to attract the capital needed to finance infrastructure while protecting customer interests.

The report concludes that this approach has enabled long-term grid investment while balancing the need for affordable, reliable electricity.

Read the full analysis here and the executive summary here.

 

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About EEI

EEI is the association that represents all U.S. investor-owned electric companies. Our members provide safe, reliable electricity for nearly 250 million Americans, and operate in all 50 states and the District of Columbia. Collectively, the electric power industry supports nearly 7 million jobs in communities across the United States and drives economic growth and prosperity. EEI also includes hundreds of industry suppliers and related organizations as Associate Members.