InvestMacro

By Conor Harrison, University of South Carolina 

A corporate merger that would form the largest electric utility in the United States is underway. It’s just one of many recent utility mergers and acquisitions as electric utilities enter a period of rapid growth.

On May 18, 2026, NextEra Energy announced it would buy Dominion Energy for US$66.8 billion.

What’s driving this deal and others like it is not an increase in residential electricity demand. Rather, it’s based on rising demand for power to data centers for artificial intelligence systems and a desire to increase corporate profits.

As a scholar of the electricity industry, I seek to understand how and why the electricity grid and the companies that run it are changing. In my book “Brokers of Power” I explain that a primary force in the industry is not the desire to improve service for the rate-paying public, nor even for industries that want to use more electricity. Rather, stock market investors and Wall Street businesses are changing how electric utilities make money in the U.S.

A variety of electricity suppliers

In every state, the majority of companies that distribute and deliver electricity to homes and businesses over the wires are regulated monopolies with specific geographic service areas. But where that electricity comes from varies widely.

Many cities, some quite large, get their power from a municipally owned utility. Many rural areas get theirs from membership cooperatives. These organizations are nonprofits whose general goals are to serve their customers with reliable, affordable power.

However, around 70% of U.S. households get their electricity from private companies. Most are controlled by large holding companies, such as NextEra Energy, which customers know through subsidiaries such as Florida Power and Light and Dominion Energy, which operates local subsidiaries in Virginia, North Carolina, South Carolina and Utah. These companies’ main goal is to make money for their shareholders.

Regulated and unregulated markets

How a for-profit electric utility company makes money depends on where it operates.

In 28 states, electricity markets are traditionally regulated, meaning that the utility is a monopoly that owns everything it needs to make electricity – from the generators, wires and poles to the meter on the side of your house. Customers in these states cannot choose their provider, but the prices they pay are set by a state regulator based on negotiations with the company. Those prices are set so the utility can earn a profit on the money it spends improving the electricity system – a margin that is generally around 10%.

The other 22 states are considered deregulated markets, in which profits are not capped, but neither are potential losses. In those markets, companies that own power plants compete to sell electricity on a wholesale market. In 14 states, a middleman company buys the power and competes to find customers, in effect providing households with a choice of electricity providers. In the rest, distribution companies buy the power from wholesalers and deliver it to their customers.

Since states began electricity deregulation in the late 1990s, utilities that historically operated in a single state have expanded to other states, both with and without regulated markets. The result is holding companies with complicated corporate structures and various ways of earning profits. In my research, I have found that investors prefer utilities that have mastered four overlapping ways of making money.

1. Monopoly operations

First, utilities need to operate successfully in monopoly territories.

In general, utility companies in monopoly markets aren’t allowed to make any profit on just selling electricity. Rather, their profits depend on their investments in the infrastructure to generate and distribute electricity. For example, if a company builds a $100 million power plant expected to last 30 years, utilities can add that cost plus an additional $10 million – their 10% profit – to customer bills over the next three decades.

Utilities therefore have a financial incentive to predict that electricity demand will rise much faster than it actually does. They can use those predictions to justify overspending on new equipment, such as wires, transformers and substations, to handle those future loads. The ratepayers pick up the tab, and the company makes its 10% profit, even if the new equipment ends up being unnecessary.

For investors, monopoly utilities are not typically considered growth stocks, but they deliver reliable profits and returns for investors.

2. Deregulated markets

Wall Street also likes utilities that can succeed in deregulated markets, in which utilities are allowed to earn profits if they can generate electricity cheaply and sell it at high prices. In reality, utilities see periods of rapid demand growth and resulting high electricity prices, followed by the collapse of both.

This volatility is attractive to investors who are comfortable with risk, such as private equity firms, which use borrowed money to buy shares in companies.

As states such as California began deregulating in the late 1990s, many utilities saw the opportunity to make more money by trying to time the sale of electricity to maximize revenue, as well as timing the purchase and sale of power plants themselves in order to stay ahead of changes in the market that either raise or lower electricity prices. Most companies that tried this approach failed.

NextEra, however, has succeeded in deregulated markets by developing large renewable-energy projects that deliver cheap energy into markets with rising demand for renewables. The company uses long-term contracts that mimic regulated returns, avoiding the fluctuations customary in deregulated markets.

3. Mergers and acquisitions

Buying and selling power plants themselves is part of the third way electricity utilities can make profits: mergers and acquisitions. That’s what’s behind NextEra’s acquisition of Dominion.

NextEra’s success in deregulated markets has introduced more risk than its investors are keen to bear.

The company hopes that buying a regulated company like Dominion, which holds a monopoly over providing electricity in what some call northern Virginia’s “data center alley,” will rebalance its risk, improve its credit rating and help it raise money to build the next round of profit-generating infrastructure to support the data center boom.

4. Controlling regulations

For all this to work, NextEra and Dominion need to excel in the final way that utilities make profits – dominating the regulatory arena. In Florida, NextEra famously employed one lobbyist for every two legislators.

Crucial to electric utilities’ profitability is their power to win regulators’ approvals for their rate-increase requests, get lawmakers to pass laws that increase their guaranteed profit margins and – as with the massive NextEra-Dominion deal – gain approval of mergers by convincing policymakers they will not harm existing customers.

As the data center building boom and its growing demand for electricity roll along, utilities are jostling for prime position to benefit. For many companies, that means trying to become larger companies with more market and lobbying power. But whether bigger is better for residential customers is another question entirely.

About the Author:

Conor Harrison, Associate Professor of Economic Geography, University of South Carolina

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Sanya Carley, University of Pennsylvania; Alexandra Klass, University of Michigan; Alison L. Knasin, University of Pennsylvania; David Konisky, Indiana University, and Shelley Welton, University of Pennsylvania 

For many Americans, energy bills are becoming increasingly unaffordable.

Energy prices increased approximately 30% on average from 2021 to 2026. In some places, the rates of increase have been much steeper. In the Mid-Atlantic and eastern Midwest region where several of us live, the regional electricity grid is run by PJM Interconnection, and power prices in the first quarter of 2026 were 76% higher than the same period in 2025.

These rising utility costs are a shock to many people, including those already having a hard time paying for the energy they need. In 2024, 1 in 3 American households reported struggling to pay their energy bills, and 15.1 million homes were disconnected from their electricity or gas services because the residents couldn’t pay their bill. Energy insecurity is a pervasive and potentially dangerous predicament for these millions of households, and a growing challenge for America as energy bills rise.

Energy markets, which we study, are famously complex. But many parties in these marketplaces, from the federal government to individual consumers, have opportunities to help provide Americans with affordable energy. Some may not be obvious to the casual observer, or even to savvy energy wonks.

Federal programs

The Low Income Home Energy Assistance Program helps households with lower incomes afford energy, particularly for heating in the winter and cooling in the summer. Historically, the funds provided by Congress – totaling about US$4 billion in 2025 – have not been enough to help everyone in need. Yet in his last two budget proposals, President Donald Trump has proposed eliminating all of the program’s funding, though Congress has so far preserved the funding.

Another federal effort, the Weatherization Assistance Program, provides around $370 million a year to help people conserve energy by sealing gaps around windows and doors and increasing insulation in their homes. This program serves approximately 32,000 homes, saving each household an average of $372 in direct energy expenses each year.

Entities that run the electricity grid

The Federal Energy Regulatory Commission and state public utility commissions jointly regulate the nation’s electricity grid. Federal law requires them to ensure that electricity prices and practices are “just and reasonable.” They can use their authority to ensure that the grid is built and run efficiently, that utilities do not earn outsized profits, and that electricity markets are producing fair electricity prices for consumers.

In most U.S. regions, nonprofit organizations collectively called “regional transmission organizations” are the front-line managers of the nation’s electricity grid. Under federal supervision, these utilities make rules for how to connect new power plants or other electricity generation equipment to the grid, how electricity markets run, and how transmission lines are planned and paid for.

These rules directly affect how much customers pay for power. Their implications have become clearer, as data center electricity demand has caused regional wholesale electricity market prices to soar. Research suggests that better regional planning, accelerated permission for connecting new-generation sources, and updated market design could save consumers billions of dollars.

State governments

Many states prevent utilities from disconnecting residential customers’ electricity, even if the bills aren’t paid. In Virginia, for example, utilities can’t cut power during periods of extreme hot or cold weather. In Montana, the restrictions cover specific months when cold weather is common. Pennsylvania prevents power cuts if someone in the home has a certified medical condition that makes them dependent on electricity – such as needing an oxygen tank, which can increase electricity bills by hundreds of dollars per year.

Many states, such as Maine, also run programs to weatherize homes and improve home efficiency. Illinois helps pay to install solar panels or battery storage systems in homes. These efforts lower energy bills either by directly reducing a home’s energy use or by offsetting some of that use.

These services and technologies lower energy bills by either reducing the total energy that a household needs to consume or offsetting their energy with a zero-fuel cost option. Some of us were a part of a team that in 2025 found low-income households across the United States that recently installed residential solar were 44% more likely to report being able to pay their energy bills relative to similar households that did not have solar.

Other states more directly supervise utility bills to ensure they remain within the household’s budget. For instance, Illinois offers bill discounts for many low-income households that range from 5% to 84% savings on a customer’s gas bill. And other states, like Massachusetts, require utilities to partially forgive consumers’ debt after they make some number of on-time payments that also include some repayments of what is owed.

Utility companies

Utility companies can adopt billing and repayment policies that accommodate customers’ household budgets. They can also provide detailed, public information about these programs to their customers. Often, states place specific requirements on utilities’ policies, but companies can also choose to set their own billing practices.

Utilities can identify their customers most at risk of disconnection by analyzing customers’ payment data and consumption patterns, and offer to switch them to these plans, while also steering them toward bill and weatherization assistance. Some states, like New Jersey, automatically enroll customers who are either past-due or have been disconnected into utility payment plans.

Local communities

County and municipal governments can help their residents by spreading the word about federal, state and utility assistance programs and by identifying specific people or families who may be most in need. As two examples, they can use information about households’ use of other aid programs or examine data on who is calling 311 for local nonemergency assistance.

Many communities also operate warming or cooling centers for people who cannot afford to turn on their air conditioning or heating during times of extreme temperatures. These spaces can also be safe locations for people during power outages.

And local nonprofits can support people who need help with energy costs find other support, such as food banks and low-cost transportation, which can help relieve other sources of financial stress.

Local organizations can also couple energy aid with other housing and social services, including job training, for more holistic supports for struggling households and communities.

Residents and customers

Consumers themselves have a key role in energy affordability too. First, they can avoid wasting energy by turning off lights and rarely used appliances, or washing clothes with cold water and hanging them to dry. But that isn’t likely to make a significant difference. So they can seek out help from the government, utility companies and local nonprofits.

If people have some money available, they can also invest in technologies or services that will help them keep their bills lower, such as weatherization, efficient appliances or residential solar panels.

No entity can single-handedly solve the energy affordability crisis. U.S. energy markets are highly decentralized, and high prices are the result of many factors, only some of which can be addressed through government and corporate policies and programs. We believe, however, that complexity cannot be an excuse for inaction, because energy is essential for people’s health and well-being.

About the Authors:

Sanya Carley, Presidential Distinguished Professor of Energy Policy and City Planning, University of Pennsylvania; Alexandra Klass, James G. Degnan Professor of Law, University of Michigan; Alison L. Knasin, Lab Manager, Energy Justice Lab, University of Pennsylvania; David Konisky, Lynton K. Caldwell Professor of Public Affairs, Indiana University, and Shelley Welton, Professor of Law and Energy Policy, University of Pennsylvania

This article is republished from The Conversation under a Creative Commons license. Read the original article.