Dive Brief:
- Investor-owned utilities’ profit margins widened last year, according to an analysis by the nonprofit Energy and Policy Institute. IOUs kept as profit an average of 14.6 cents of every dollar they collected from customers in 2025, up from 12.8 cents of every dollar from 2021 to 2024, EPI said Thursday.
- Utilities in the Southeast, which operate outside organized wholesale power markets, have higher average profit margins than utilities in organized wholesale power markets such as the PJM Interconnection, EPI found. The gap is “large enough to warrant scrutiny of whether vertically integrated monopolies operating outside of RTOs are consistently extracting more profit from captive customers than is necessary,” EPI said.
- EPI’s data shows IOUs earning significantly more than the allowed returns on equity set by regulators. Dani Marx, a spokesperson for the Edison Electric Institute, which represents investor-owned utilities, said in an email that EPI “took a simple but analytically weak and insufficient approach” that deviates from standard utility profit calculations “to intentionally mislead” its audience.
Dive Insight:
EPI reviewed public financial reports from 110 investor-owned operating electric utilities between 2021 and 2024. Seventy-nine of those utilities provided financial data for 2025 in time to be included in the report, which tallied more than $200 billion in net income over the entire five-year period.
The report said some utilities “consistently operate at significantly higher margins than the average.”
The five utilities with the highest average margins between 2021 and 2024 were MidAmerican Energy (27.22%), Florida Power & Light (23.51%), Nantucket Electric (23.24%), Empire District Electric (22.45%) and Florida Public Utilities (20.35%), EPI said.
In 2025, Southern California Edison (26.11%), Georgia Power (22.57%), and AEP Texas (22.19%) took positions three, four and five as Florida Power & Light (27.44%) and MidAmerican Energy (27.16%) swapped spots at the top.
To calculate each investor-owned utility’s profit margins, EPI divided its net income by its annual operating revenues. For combined electric and gas utilities, the calculation included data only from the electric business wherever possible, EPI said.
It’s a “deliberately straightforward calculation” that does not analyze true cost of service or “purport to determine whether a given utility is earning exactly its allowed rate of return or over- or under-earning relative to that benchmark,” report authors Daniel Tait, Shelby Green and Sue Sturgis write. Instead, they aim to answer a simple question: How much of each dollar an IOU collects from its customers stays in its pocket?
In a Thursday webinar about the report, Tait said EPI’s methodology shows higher utility profits because a utility’s equity base — the denominator for regulators’ return-on-equity calculations — is generally larger than its annual operating revenue.
A representative for Xcel Energy, one of the utility companies mentioned in EPI’s report, questioned the nonprofit watchdog group’s objectivity.
“The analysis from this group is significantly flawed and paints an unreasonable picture of investor-owned utilities because the authors and supporters of this research fundamentally oppose for-profit companies,” Theo Keith, an Xcel spokesperson, said in an email.
Xcel’s vertically-integrated electric utilities serve parts of seven states in the Midcontinent Independent System Operator and Southwest Power Pool territories, plus parts of Colorado. Xcel kept about 17 cents of each ratepayer dollar in 2024 and about 15 cents of each dollar in 2025, according to EPI.
Keith said it shouldn’t be surprising that “vertically integrated, fully regulated utilities like us” should have higher margins than competitors that don’t own their own generation. Vertically-integrated utilities spend a significant amount of revenue on capital projects eligible to earn a regulated rate of return, he said, whereas non-integrated utilities spend more on third-party power purchases that aren’t.
But utilities in some parts of the country are overbuilding infrastructure to keep up with “this wild speculation around data centers,” Brionté McCorkle, executive director of Georgia Conservation Voters, said at Thursday's webinar.
The regulatory model Xcel’s Keith described ensures utilities “are incentivized to build even if the demand for energy never manifests,” McCorkle said. “If we end up not building as many data centers, or the technology becomes more efficient and they [end up] using less electricity … it just doesn’t matter.”
Advait Arun, senior associate for energy finance at the nonprofit Center for Public Enterprise, told Utility Dive recently that utilities may underestimate the risk of lower-than-forecast demand for the services data centers provide. The risk is particularly acute for “neocloud” companies like CoreWeave, which provide computing capacity — including for emerging AI products — to more well-known tech companies like Google.
AI inference is “a business model that hasn’t exactly proved it can generate revenue or have a stable core to its demand,” Arun said. If the market corrects, “it’s very possible the data centers that have promised” to pay for new generation “will end up crashing out of their tariff arrangements,” he added.
