There are several problems with the current market structure and regulation of America’s  investor-owned electric utilities, which provide electricity to almost 75% of Americans. [1] For the past 30 years, these electric utilities have overcharged American consumers by an  average of $5 billion per year. ^[2] They pay out hundreds of billions of dollars to shareholders [3] while systematically underinvesting in electric grid reliability, putting Americans at risk during severe storms and heat waves. And they exercise enormous influence over the state legislatures and regulators tasked with overseeing them, including by dedicating enormous  sums to lobbying and then charging ratepayers for those lobbying expenses.

Addressing these and other issues in the electric utilities market should be a top priority for federal and state policymakers. Better governance can not only substantially lower  costs for Americans on their electricity bills but also accelerate the transition to clean  energy and deliver improved grid reliability to save money and lives. This brief explains  how America’s electric markets operate, identifies several problems with our current approach to regulating these markets, and offers recommendations for reform.

[1] U.S. Energy Information Administration, “Investor-owned utilities served 72% of U.S. electricity customers in 2017,” Aug. 15, 2019,  https://www.eia.gov/todayinenergy/detail.php?id=40913.

^[2] Karl Dunkle Werner and Stephen Jarvis, “Rate of return regulation revisited,” Energy Institute WP 329R, Haas, Berkeley, April 2024,  https://haas.berkeley.edu/wp-content/uploads/WP329.pdf.

[3] Nicholas Lusiani, supra, p. 11.