The Regulatory Machine Pushing Up America’s Electricity Prices

Most Americans don’t think about electricity until the monthly bill arrives.

It comes once a month, often quietly, but lately it’s landed like a thud. Heating your home now costs hundreds more a month than it did just a few years ago. You use the same appliances. You flip the same switches. Nothing in your daily life has changed – except the price. [some emphasis, links added]

Why?

When one looks inside the electricity system, the experience is less like analyzing an immense machine than being fed into one, resembling the immortal scene in “Modern Times” where Charlie Chaplin’s factory worker is swallowed by the equipment he’s working on.

The American electricity market is not guided by an “invisible hand” of supply and demand, but an accumulation of misaligned rules laid down over decades.

Layer upon layer of regulation, subsidy, mandate, and accounting rules to a point where the system became fixed in an upward, inflationary tilt, impervious to efforts to change.

There are at least a half-dozen federal environmental regulations that have more to do with rising electricity prices than tariffs or the data-center buildout, and a good example to start with is called Construction Work in Progress (CWIP).

As a new issue brief makes clear, it helped change who pays for America’s infrastructure.

Chief among these contrivances was the quiet transfer of financial risk from investors to the public. Before the 1970s, utilities had to finish building a power plant before they could charge customers for it.

If a company wanted to build something, it had to take the risk. Investors would put up the money. If the project succeeded, they earned a return. If it failed, they paid the price.

But during the inflation crisis of the 1970s, power plants — especially nuclear plants —became vastly more expensive to build. Utilities argued they couldn’t afford to wait years to recover their costs.

During a moment of civic weakness, state regulators started allowing utilities to charge customers while the plants were still under construction.

CWIP permanently shifted investment risk away from investors and onto ordinary people. Today, you can open your electric bill and pay for projects that don’t exist yet and may be canceled in the future.

No banker in his right mind would accept such terms voluntarily. Yet millions of Americans are compelled to do so every month if they’re served by an investor-owned electric company.

This system could have operated below the waterline indefinitely had it not collided with the renewable energy revolution of the last 15 years. Wind and solar generation increased fourfold between 2011 and 2020, reaching record output by 2024.

These sources have advantages. But they also have a basic limitation: they don’t produce power all the time.

So utilities must build backup systems. Extra transmission lines. Extra capacity.

None of this redundancy is free. Every mile of wire, every idle backup turbine, every overpriced and underutilized battery storage unit will eventually, without fail, appear on a customer’s bill.

And thanks to rules like CWIP, they can charge you while you wait.

Many of these policies came from a sincere place. Beginning in the 1970s and accelerating in the decades that followed, a network of public-interest law firms and environmental advocacy groups gained enormous influence over how infrastructure gets approved.

Their goal was to protect the public.

But over time, something else happened.

They built a system where stopping projects became easier than building them. Where delay became a strategy. Where lawsuits became routine.

Each delay added to costs. Each cost increase justifies charging customers sooner. Each increase made the next one easier to accept.

Even writers like the New York Times’ Ezra Klein — hardly a critic of environmental goals — have begun to acknowledge the problem. He has argued that well-intentioned rules have made it far too hard to build the infrastructure society needs.

People think this is an important admission by Klein and his ilk, but it is not.

These ‘well-intentioned rules’ were simply created by an earlier generation of Ezra Klein “Abundance” types who set up the public interest lawfare firms and NGO indulgences system in the first place.

Klein’s autopsy revealed only that the Left promotes things that make themselves feel better while making the world worse, yet their slobbering idealism protects them from feeling the shame of failed responsibility.

There is a Kafkaesque process at work, filled with Orwellian word games that stymie everything. It’s a dirty, soiled, can’t-do spirit masquerading as something more noble and dignified.

Because the issue isn’t whether the goals were noble. Noble intentions don’t matter. It’s that the results are what matter, and the results are failures.

There is, however, a remedy — not a technological breakthrough, but something far better (albeit rarer) in Washington: legislative clarity.

One promising approach is legislation such as Representative Troy Balderson’s “Affordable, Reliable, Clean Energy Security Act.” The bill seeks to establish clearer definitions of key terms like “affordable,” “reliable,” and “clean,” ensuring that investment risks are limited to cost-effective infrastructure projects only.

By recognizing the role of dispatchable resources such as natural gas and nuclear power, the legislation would also help ensure the grid maintains the reliability necessary to support modern life, all while meeting the standards of the Clean Air Act.

These reforms would not eliminate electricity price increases overnight. But they would begin to address one of the root causes: a system in which incentives increasingly misalign and diverge from the interests of customers.

Electricity is not a luxury. It is a necessity that underpins economic growth, public safety, and household stability.

Ensuring its affordability requires more than promises. It requires policies that encourage efficient investment, allocate risk appropriately, and maintain reliability.

Most of all, it comes from remembering a basic principle that once guided American growth: You should pay for things when they work.

Not before.

Until that principle returns, electricity bills will continue their quiet climb upward, and Americans will continue to wonder why modern life feels harder to afford than it used to.

Read more at RealClearEnergy