Protesters angry over high electricity costs disrupted a Las Vegas conference of executives from the nation's largest investor-owned utilities last month, according to a report from Utility Dive. The incident highlights growing public anger that's forced the industry to defend its legally guaranteed profit margins as affordability concerns drive political pressure. Several states have moved to lower utilities' return on equity through regulatory or legislative action, with experts telling the outlet that the combination of electricity's vital role in modern life and its rising cost could mark a turning point in what's considered an acceptable level of utility profits.
National average electricity prices have outpaced inflation, and a March Pew Research poll found 85% of respondents saw utilities "wanting to make more money" as a reason for increased home energy prices. Reports from the Lawrence Berkeley National Laboratory show that prices charged by investor-owned utilities, which represent roughly 70% of national electricity sales, are higher and have climbed faster than public utilities without strong profit motives. The reports also found that IOU revenue requests totaled $18 billion last year—higher than they've been in decades—and that regulators have approved an average of 64% of the dollar value of these increases over the past five years, compared to 52% over the previous two decades. Utility profit margins are set by regulators around the country and averaged 9.7% in 2025, while fluctuating from 9% to 10.5%, according to Synapse Energy Economics.
Mark Ellis, a former chief of strategy and economics with Sempra who now works as an independent consultant, told the outlet that reducing utility profits "saves all electricity users money on their bills." In his view, today's utility profits are "an unjust enrichment of utility investors at the expense of customers." Utilities counter that their profit margins must be set high enough to attract capital at low interest rates, which saves ratepayers money long-term while allowing utilities to maintain grid reliability. Robert Leming, vice president of regulatory policy and strategy for Pepco Holdings, said that if a utility's authorized returns "are below those of comparable utilities, its ability to attract capital is at risk."
The current Pepco rate case in Maryland offers an example of the debate's state. The utility proposed an ROE of 10.5%, up from its current 9.5% allowed ROE, while the Maryland Office of People's Counsel proposed 7.7%. David Lapp, head of the OPC, argues that high utility ROEs create a perverse incentive because they bias utilities toward expensive investments that add to a utility's base of financed costs earning ROEs and increasing rates. Consumer advocates also point to a financial strategy called "double leveraging," where they contend Exelon's lower cost debt is being used by Pepco as higher cost equity, raising the total ROE and customer rates. Karl Rabago, a former Texas utilities commissioner, said "the original focus on balancing cost-of-service and earnings anticipated regulators would substitute for the forces of competition, and that has been lost."
California regulators lowered the ROE for its three largest investor-owned utilities by 0.3 percentage points each in December, and several states including Pennsylvania are weighing legislation to tie utility ROE to 10-year Treasury bonds. Ellis proposes "competitive direct equity" as a structural solution that would replace administratively set ROEs with a supply and demand-determined cost of equity through a competitive auction, fundamentally changing the utility incentive structure. In today's rate cases, he argues, ROE determination "is a charade that is not calculated consistently or accurately"—the utility proposes one number, the consumer advocate proposes another, and regulators split the difference. A ruling on Pepco's ROE is expected in August, which could signal whether the political momentum against utility profits translates into regulatory action.