Scott Aaronson spent 17 years at the Edison Electric Institute, the national trade association for investor-owned electric utilities, where he served as senior vice president for energy security and industry operations and as secretary of the Electricity Subsector Coordinating Council. He is the founder of Aaronson Resilience Advisors.
For nearly two decades, American electricity demand sat flat. Efficiency gains offset growth, the grid aged quietly, and on most days that was fine. That era is over. The United States is entering the steepest sustained load growth since the Eisenhower years — driven by AI and data centers, yes, but also by advanced manufacturing coming home, electrified transportation, and the electrification of the economy itself. The grid has to be built to meet it.
That reality is colliding with a political moment. Rising energy costs are dominating headlines and shaping agendas nationwide. Policymakers are paying attention, and they should be — affordability is a real concern, and low- and middle-income families are squeezed on every front. But many of the proposals now on the table are taking aim at utilities’ returns on equity and at their ability to invest in infrastructure, which would do lasting damage to the one system capable of delivering the grid we need on the theory that cutting both will bring bills down.
This gets the problem exactly backward.
The regulated utility model does two things at once that no other arrangement does. It lets a company raise enormous amounts of long-lived capital — through a mix of debt and equity — and it subjects every dollar of that spending to regulatory review for prudence, reliability, and cost. A return on equity is simply the price paid to attract the equity portion of that capital. Set fairly, a utility can borrow and raise money cheaply, building tomorrow’s grid at the lowest cost of capital available. Slashed below a just and reasonable level, and you don’t make the investment disappear — you make it more expensive. Investors demand more for more risk, borrowing costs rise, and customers pay for that, with interest, for decades.
Capital is not free, and pretending otherwise doesn’t lower the bill — it defers and inflates it.
There is a deep irony in the current attack. Critics argue that returns tempt utilities to overbuild by pouring capital into projects for the sake of the return. Set aside that regulators exist precisely to prevent imprudent spending; scrutinizing whether an investment is needed is the entire job of a utility commission. The deeper problem is that there is broad, bipartisan agreement that we need more investment, not less. Hardening the grid against hurricanes and wildfires, or manmade threats like cyberattacks. Building more transmission for more redundancy and access. Interconnecting the new load and generation waiting in years-long queues. We are, as a country, asking the grid to do more, and simultaneously weakening utilities’ ability to finance it when a modern grid would help all customers.
This matters most for resilience, and resilience is about far more than data centers. It’s the family in the path of a strengthening hurricane season. The community bracing for the next wildfire. The region that goes dark because an isolated market had no neighbor to call — or because it became a target for an adversary. The instinct behind virtual power plants and distributed energy resources is the right one — we should want every asset on the system we can get. But those resources are only as valuable as the grid they connect to. A distributed resource that isn’t part of a well-financed, well-operated network is half an asset, and a brittle one. Resilience has to be designed into the system, not bolted on after the storm, and that takes capital and the model built to raise it.
The regulated model also is the best vehicle we have for putting costs where they belong. It can ring-fence the cost of serving large new loads to the customers driving them, so a household in Cleveland or Charlotte isn’t underwriting a hyperscaler’s demand. It can steer federal cost-share toward transmission of genuine national significance, where the benefits are broad. That kind of disciplined cost allocation is a feature of regulation — not something a race to cut returns will ever produce. The recent “show cause” orders from FERC get this correct: this is a job for state regulators to tackle.
Here's what cutting returns won’t do: It won’t lower your bill next month. This is about the next decade and the one after it. Utility investments are long-lived; capital raised today is repaid over the life of assets that will serve our grandchildren. Short-term decisions to squeeze utility finances don’t vanish — they resurface as higher borrowing costs and a more fragile grid, long after the officials who made them have moved on. This is about whether we can build a grid that carries the economy for the next fifty years and what it costs us if we don’t.
The utility business model is best for affordability. Ensuring regulators work with utilities and other stakeholders to set reasonable ROEs at both the state and federal level is the right conversation to have. A conversation starting with arbitrary cuts aimed at a quick political win is not.
The industry has built infrastructure like this before. It’s how we got the original grid itself and electrified all corners of America — by deciding to invest and then doing it through the utility model. We are at a similar moment again. The tools to meet it already are in our hands: a proven business model, disciplined regulatory oversight, and a fair return that lets utilities build at the lowest possible cost while protecting low- and middle-income residential customers.
