Photo by Billy Joachim on Unsplash
Electricity is getting more and more expensive, and there’s much more to it than simply increased demand, though that's bad enough. The worst part is utility companies are guaranteed a profit for a bad business model that never reduces their returns, no matter how badly they screw up. Think about that for a second. The majority of power companies get to earn ten or eleven percent return on equity just for existing. Not for innovation, not for efficiency, not for keeping the lights on during an ice storm. Just for owning stuff.
I've spent 30 years watching my electric bill go up, while seeing utilities fight tooth and nail against every innovation that might threaten their cozy monopoly. The Texas freeze in 2021 killed 246 people because utilities couldn't be bothered to weatherize their equipment. But did they lose money? Nope, they made billions off the crisis while pipes froze, businesses suffered, and families froze to death. That's not a market failure, that's the system working exactly as designed.
The fundamental scam works like this: utilities earn their profits based on how much capital they deploy. Literally – the bigger they are, the bigger the profit. Bloat is the profit driver. Build a billion-dollar power plant? Great, you get to charge ratepayers eleven percent returns on that billion forever.
Meanwhile – profits are averse to efficiency. Install smart meters that reduce consumption? Well, that cuts into sales, so why bother? This isn't conspiracy theory stuff, this is literally how rate-of-return regulation works. I sit in meetings where solar developers openly discuss how renewable energy threatens certain utilities, so it’s a lot harder to build in those areas.
And here's where it gets really twisted. We've created this fiction that everyone should pay the same rates regardless of where they live. Sounds fair, right? Except it costs maybe fifty bucks to connect an urban apartment to the grid and ten thousand to run lines out to a rural farmhouse. Urban customers massively subsidize rural service, but nobody talks about it because admitting the real costs would shatter the political coalition that keeps this whole racket running.
The rural-urban divide isn't just about money though. It's about who gets screwed when things go wrong. When storms hit, rural customers wait days or weeks for power restoration while urban areas get priority. One real life example is Oakland County Michigan, which gets hit my monster ice storms pretty often. Live in Royal Oak, Birmingham and the others down by 8 Mile Rd, and when you power goes out you’ve hardly got time to put on a sweater and find the matches and candles. But up in Rose and Springfield Twp, between Pontiac and Flint, you either get out the generator or drain the pipes and go to grandmas house in town.
Rural communities also host the coal plants that poison their air and water, then watch helplessly as those plants close and take the tax base with them. They get to watch the rural commons eaten up by solar farms, windmills and power lines that supply data centers and urban demand. Meanwhile, wealthy urban neighborhoods slap solar panels on their roofs and opt out of paying their share, leaving everyone else to pick up the tab.
California's watching this play out in real-time. PG&E literally killed 84 people in the Camp Fire through criminal negligence, declared bankruptcy, and came out the other side still earning guaranteed profits. The state's solution? Let wealthy communities form their own "Community Choice Aggregations" to buy cleaner power while still using PG&E's wires. Sounds great until you realize it's just more class enrichment, where the wealthy are abandoning the cost-sharing pool, leaving poor and rural customers holding the bag.
The good news is across the nation, people are figuring out that the utility monopoly model is broken. Many smaller jurisdictions have already implemented real alternatives. The solutions aren't theoretical anymore, they're happening right now, and some of them are working brilliantly.
Take performance-based rates, which Hawaii pioneered after getting tired of having the nation's highest electricity costs. Instead of paying utilities based on how much stuff they build, you pay them for actual results. Reduced outages? Great, the company gets a bonus. Integrate more renewable energy? Another bonus. Help customers use less energy? Bonus again. Suddenly utilities have incentives aligned with what customers actually want. This is just one of many obvious fixes. Why aren’t they rolling out across the country?? The answer, of course, is that utilities hate it and lobby ferociously against it.
The UK's gone even further, transitioning their utilities into "Distribution System Operators" that don't sell electricity at all. They just manage the grid platform, like how your phone company provides service but doesn't care whether you're calling your mom or ordering pizza. This completely eliminates the perverse incentive to sell more power and build unnecessary infrastructure. The utilities become neutral platforms for whatever energy solutions work best, whether that's rooftop solar, community wind, or traditional generation.
Vermont's taken a different approach with efficiency-first mandates. Before any utility can build new generation, they have to prove they've exhausted all efficiency options. Turns out when you force utilities to actually look, they find that investing in insulation and efficient appliances is way cheaper than building power plants. Green Mountain Power's gone all-in on this, even subsidizing Tesla Powerwalls for customers to create a distributed virtual power plant. Their customers have lower bills and better reliability than neighboring states still stuck in the old model.
Then there's municipal power, which Nebraska's had for over seventy years. The entire state runs on publicly-owned utilities and guess what? They have some of the lowest rates in the nation and excellent reliability. When you remove the profit motive, it turns out you can focus on actually providing good service at reasonable cost. Who would have thought?
The path forward isn't rocket science, but it requires acknowledging some uncomfortable truths. First, we need to stop pretending that electricity is a free market when it's actually a regulated monopoly. Second, we need to admit that the current system socializes all the risks while privatizing all the profits. Third, we need to recognize that rural and urban areas have fundamentally different infrastructure needs and costs.
If we really want a roadmap towards a solution, here’s my pie in the sky plan. Start with the easiest win, which is performance-based rates. State utility commissions can implement this right now without new legislation. Set clear metrics for reliability, efficiency, and clean energy integration, then tie utility profits directly to hitting those targets. Watch how fast utilities suddenly discover innovation when their bonuses depend on it.
Next, enable Community Choice Aggregation everywhere, but with a twist. Instead of letting wealthy communities cherry-pick the best deals, require them to include a certain percentage of low-income and rural customers in their aggregation. This maintains the cost-sharing that makes universal service possible while still enabling local clean energy choices.
For rural areas, flip the entire model. Instead of maintaining thousands of miles of vulnerable distribution lines, invest that same money in distributed solar-plus-storage systems. A rural home with solar panels and a battery bank is more reliable and ultimately cheaper than maintaining power lines through ice storms and wildfire zones. The technology's here, we just need the regulatory framework to make it happen.
Phase in a carbon price that actually captures the health and environmental costs of fossil generation. This isn't some liberal fantasy, it's basic economics. When you dump pollution into the air, someone else pays the cost in medical bills and climate damage. Make the utilities internalize those costs and watch how fast coal plants become uneconomical.
Long-term, we need to seriously consider public ownership, at least for the transmission and distribution infrastructure. The grid is a natural monopoly and public infrastructure, just like roads and water systems. There's no reason private investors should be extracting guaranteed profits from something everyone needs to survive. Start with cities that want to municipalize, learn from their experiences, then expand successful models.
The utilities know their time is up, which is why they're fighting so viciously against every reform. They're pushing laws to kill rooftop solar, block municipal takeovers, and prevent Community Choice Aggregation. They're spreading propaganda about reliability disasters and job losses. They're buying off politicians and captured regulators to maintain their stranglehold.
But technology and economics are against them. Solar and batteries get cheaper every year. Microgrids and virtual power plants prove that centralized generation isn't necessary. Climate disasters demonstrate the current system's failures too dramatically to ignore. And most importantly, people are waking up to the scam.
The question isn't whether we'll reform the utility monopoly structure. The question is whether we'll do it proactively through smart policy or reactively after the next crisis kills more people. It’s time to quit pretending the current system is fixable with minor tweaks.
We need fundamental reform that acknowledges electricity as essential infrastructure, aligns utility incentives with public benefit, and stops the legalized racketeering that passes for utility regulation. The solutions exist, the technology works, and other places have proven it's possible. What we lack is the political will to tell the utilities their game is over. But with every wildfire, every blackout, and every rate hike, that will is building. The only question is how many more people have to die or go bankrupt before we finally act.
The utilities want you to believe reform is impossible, that we're stuck with them forever. They're wrong. We broke up AT&T, we can break up the power monopolies too. It just takes enough people understanding the scam and demanding better. The lights don't have to go out when we change who owns the switch.
