A series on American electricity institutions · October 2026
The natural monopoly narrowed.The rules didn’t.
Electricity can be cheap to make and expensive to deliver, because the rules were written for one company doing the whole job. Those rules can be changed, and states can start without Congress.
The argument
How the deal that built the grid became its bottleneck
The deal that built the grid assumed one company had to do everything. Technology made four of its five jobs separable from the wires, and most of the rules kept them together.
1
The deal worked for a world of scarce generation
When electricity was new, it took a large plant to make power cheaply, and running competing sets of wires down the same street wasted money. So states made a deal with the utilities. Each company got a territory to itself, had to serve everyone in it at prices the state approved, and earned a regulated return on the investments the state approved. In most places, one company made the power, moved it, and sold it. Under that arrangement, electricity spread from a few city blocks to nearly every building in America.
The deal rested on one fact: a single large company could do every part of the job for less than several smaller ones could. For most of the job, that has stopped being true. Solar panels and batteries come in any size, so almost anyone can make power and store it, close to where it is used. Customers can produce their own and shift when they use it, and software can show everyone how much room the grid has. Only the poles, wires, and substations still work best as a single network.
Reform did happen. Starting in the 1990s, access and prices on the biggest power lines were separated from ownership across much of the country. That reform stopped at the substation. On the local wires, and in regions without an independent operator, the company that owns the wires still decides who may connect to them and keeps most of the information about where the grid has room. Almost everywhere, it still earns its return on what it builds. Later rounds of reform changed the procedures for connecting and planning faster than they changed what the utility is paid for or who controls access, so each new procedure ended up run by a company with a financial reason to prefer its own projects. Nobody has to act in bad faith for this to happen. It takes only people following the incentives they are given.
A new solar farm, battery, or factory has to ask permission to connect, one project at a time, and an answer can take years. While cheap power waits in that line, the utility meets growing demand the way it is paid to: by building. A new substation earns it a profit for decades. A cheaper fix, such as a battery contract or fuller use of the lines already in place, earns it nothing. The cost of what gets built lands in the delivery charge on every electric bill.
A new agreement fixes it, and every principle already works somewhere
The fix is to update the deal. The utility is paid for results, such as reliable service and timely connections, so the cheaper option is the one that pays. Someone with no financial stake in the outcome has the final say on who connects, and the rules for connecting are published along with a map of where the grid has room. Each of these principles is already in use somewhere, and most of the mechanisms have close precedents. Britain pays its networks for performance, independent operators run access to the largest power lines across much of the United States, and Texas connects new generators first and manages congestion afterward. One piece has only partial precedents: Britain has begun separating the operator of its local wires from the wires business, but the company that owns the wires still has the final say on who connects.
The power itself, and the standby capacity that keeps the lights on at the peak. New power is cheap to make: solar with batteries, which can cover the evening peak, cost $87 per MWh unsubsidized in 2024, against $144 to $276 for a gas peaker.
Why it runs high
Cheap power cannot compete until it connects, and projects finished in 2025 had waited a median of more than five years. Big new customers arrive faster than supply can. In PJMThe grid operator for 13 states and Washington, D.C., serving about 67 million people., the largest US power market, the yearly cost of capacity rose from $2.2 billion to $16.4 billion in four years.
What would lower it
Let cheap power connect. Make big new customers pay their own way.Publish where the grid has room and the rules for using it, so new supply gets a fast answer and competes to serve you. A data center that needs new capacity brings it or pays for it.
Poles, wires, substations, and transmission, plus the utility’s allowed return on them. It is the fastest-growing part of many bills: from 2003 to 2023, distribution spending rose about 160 percent and transmission spending nearly tripled.
Why it runs high
The utility earns that return on what it builds and nothing on most alternatives, and it also judges whether an alternative will do. In Brooklyn and Queens, about $200 million of local resources deferred a planned $1 billion grid project, once regulators let the utility earn on the saving.
What would lower it
Pay the utility for results, not for building. Let a neutral party compare the options.The utility earns no more for building than for buying, so the cheaper fix wins. A referee with no financial stake checks whether a battery or a flexible customer can do the job, and that resource gets paid for it.
This proposal tackles the biggest reasons electric bills are rising
Eight forces move those two lines, and this program directly targets three.
What moves the electric bill
Direction
Addressed here
The cost of generating power
Rising
No, determined by the market
Network capital spending
Rising sharply
Yes: pay for performance, connect by rule
The cost of financing that spending
Rising
Indirectly
Wildfire mitigation
Rising
No, protected within the proposed framework
Storm hardening and asset replacement
Rising
No, protected within the proposed framework
Capacity purchases
Rising sharply
Yes: big new customers pay their own way
Equipment and skilled labor scarcity
Rising
Indirectly
Delay, study, and withdrawal cost
Rising sharply
Yes: separate the referee, connect by rule
The three forces targeted here compound: capital earns for forty years, capacity charges recur annually, and delay multiplies both. A growing share of system cost is now set by network constraints and the institutions that manage them.
The old monopoly bundled five functions. Four can now be separated from owning the wires. Most of the rules still bundle them.
What the old monopoly bundled
What it is now
Generation and storage
Competitive. Almost anyone can build them.
Customer power and flexibility
Open to customers. They can make power, store it, and get paid to flex.
Information about the grid
Can be shared. Everyone can see the same map.
Access to the grid
Can be governed. No single company has to decide who connects.
Poles and wires
Still a natural monopoly. Poles, wires, and substations work best as one network.
How the grid itself changed
Power used to be made in a few large plants and flow one way. Now it is made and stored at every level, and it flows both ways.
Green: new since thenAmber: the wires, still a natural monopoly
ThenThe grid most rules were written for
Large power plants
The big wires
The local wires
Customers
NowThe grid we have, under mostly the same rules
Large power plants
Wind and solar farms
Big batteries
The big wires
Community solar
Local batteries
The local wires
Rooftop solar
Home batteries
Customers
Why the utility spends to build and what it could do instead
Cost-of-service pays a return on deployed capital, so capital is what gets deployed. No bad faith required at any step.
Today: cost-of-service
Utility builds a capital asset
The asset enters rate base
Utility earns a return on it, for decades
Capital spending favored over cheaper alternatives
RepeatRate base grows, bills follow, and the next overloaded feeder gets a substation rather than a battery contract.
Reformed: performance-based
Utility delivers outcomes
Revenue capped and benchmarked against peers
Utility retains a defined share of verified savings
Outcome delivered with lower cost option
RepeatThe allowance holds, the savings are shared, and the next overloaded feeder gets whichever solution actually costs less.
The fix
What would fix it
A new agreement with new terms: complete the market where competition can work, and strengthen regulation where monopoly remains.
What this is not. No nationalization, no forced retail choice, no elimination of vertical integration where states prefer it, no technology mandates or subsidies, and no relaxed reliability standards. The wires stay a regulated monopoly; what changes is how it is regulated.
Stances and evidence
StancesPreferredour recommendationViableanother route to the principleDeferredrevisit trigger statedDe-prioritizedranked below, reason statedRejectedfails the principleAdoptedalready absorbed
EvidenceOperating evidence: running at scale.Narrower application: a real but limited record.Partial analogue: inference from an adjacent mechanism.
Whydoes the owner of the wires act?
PRINCIPLE 1State
Pay for performance
A utility should earn on outcomes delivered, not on capital deployed.
Cost-of-service pays a return on approved capital and passes most operating costs through at zero margin, so a wires solution and a service solution are never compared on one financial footing. The principle sets no revenue level; it changes what revenue attaches to. A return on prudent investment stays. What goes is the extra reward for building over buying.
Who orders itState commission order, plus enabling legislation in some states
Electric bill lineDelivery
What we prefer. Total-expenditure (totexTotal expenditure. The utility gets one allowance covering both what it builds and what it buys, so it earns the same either way.) regulation: removes the bias.
Mechanisms evaluated
Our stance
Evidence
Total-expenditure allowance with yardstick benchmarkingRemoves the incentive for building over buying.
Preferred
Operating evidence: Britain since 2013; Hawaii since 2020
Performance incentives layered on cost-of-serviceWorkable where totex is unavailable; pays a bonus against the bias it leaves intact.
Viable
Operating evidence: PIMs in many US states
Shared savings for non-wires alternatives aloneA narrow entry point; fixes one decision at a time, not the formula behind all of them.
Viable
Narrower application: BQDM, with contested accounting
Competitive procurement thresholds for distribution capitalThreshold rules get beaten by splitting programs into sub-threshold pieces.
De-prioritized
Partial analogue: Order 1000’s record
Reducing the allowed return on equityDoes not change the bias; raises financing cost and changes no build-or-buy decision.
Rejected
—
What changes. Today the utility proposes a substation and earns on it for forty years. Under these reforms it tests whether the required service can be procured for less, and keeps a share of the difference. Totex changes the economics of build-versus-buy; benchmarking and independent review determine whether it works.
The company that owns the wires shouldn’t be the only one deciding who may connect to them.
The wires owner today runs the queue, holds the hosting data, and profits from the capital alternative to whatever is asking to connect: a referee with a stake in the score. The wires owner keeps engineering, safety, construction, and operations. What moves is the final say on access where ownership creates a conflict.
Who orders itState legislation or commission order, plus a utility filing
Electric bill lineDelivery, and Supply indirectly
What we prefer. An independent operator where the conflict is material; a ringfenced affiliate as the transition.
Mechanisms evaluated
Our stance
Evidence
Independent distribution system operatorFullest separation of access, data, and flexibility procurement from network ownership.
Preferredwhere conflict is material
Narrower application: UK DSO transition
Ringfenced affiliate under a code of conductWith published conditions under which full separation becomes mandatory.
Preferredas transition
Narrower application
Extension of an existing ISO or RTO downwardBorrows governance and systems that already exist; suits states inside organized markets.
Viable
Operating evidence: at transmission voltage
State agency, or a competitively rebid contracted operatorFits states that will not staff a standing institution; the least discussed option and often the best fit.
Viable
Partial analogue
Divestiture of wires ownershipA decade-long fight, and no evidence that ownership rather than access administration is what binds.
Rejected
—
What changes. Today the wires owner decides who connects and how long it takes. Under these reforms an independent administrator runs the queue and the data; the wires company stays builder-of-record but no longer writes the access rules.
Where and when a resource operates should affect what it earns.
Retail prices carry almost no information about when or where the grid is strained, so flexibility that could relieve a constraint has nothing to respond to. The signal must be real; the revenue can stay hedged, contracted, or administered.
Who orders itCommission order, plus metering and telemetry investment
Electric bill lineDelivery
What we prefer. A maturity ladder (data, then standing offers, then rates) rather than a leap to distribution markets.
Mechanisms evaluated
Our stance
Evidence
Published hosting capacity and avoided-cost valuesThe prerequisite for everything else, orderable as a reporting requirement.
Preferredstep 1
Operating evidence: state hosting-capacity mandates
Standing locational offers and operating envelopesLocation and timing reach the resource without building a market first.
Preferredstep 2
Operating evidence: GB flexibility procurement; Australian dynamic envelopes
Time-varying default rates with a hedged alternativeTwo decades of US rate-design evidence, with the equity design attached.
Preferredstep 3
Operating evidence
Administratively set successor tariffsWorkable while markets mature; New York’s nine years and its continuous adders are the caution.
Viablebridge
Narrower application: VDER since 2017
Distribution-level locational marginal pricingTransaction costs likely exceed benefit at current volumes; revisit when metering coverage and participation justify it.
Deferred
Partial analogue: nodal transmission markets
What changes. Today a battery earns the same on a strained feeder as an empty one, and a household pays the same at 2am as 6pm. Under these reforms both get paid for when and where they help, with automation doing the response and a hedged product always on offer.
Access should follow published rules, not case-by-case permission.
Serial, project-specific study made sense when a handful of large plants connected each year; it cannot clear two thousand gigawatts of applicants. Published limits stay engineering-grade, and constrained connection replaces exclusion, inside limits the operator can enforce.
Who orders itFERC rulemaking for bulk resources, commission order for distribution
Electric bill lineSupply
What we prefer. Standardized pathways against published limits, connect-and-manage where operating rules support it, and a reconductor-first showing on the portfolio.
Mechanisms evaluated
Our stance
Evidence
Standardized pathway against published operating limitsScreenable, envelope-bounded, below the reliability screen, and reversible.
Preferred
Operating evidence
Connect-and-manage where operating rules support itUses existing capacity while the system learns where permanent expansion is justified.
Preferred
Operating evidence: ERCOT; GB; entering the organized markets
Reconductor-first portfolio showingApplied to a rolling portfolio rather than project-by-project, with no categorical exemption.
Preferred
Narrower application
Cluster studies with readiness gatesFERC Order 2023 did this; necessary, and not sufficient on its own.
Adopted2023
Operating evidence
Firm-access auctions and capacity-rights tradingAdds a market layer before the data layer exists.
De-prioritized
Partial analogue
Unrestricted connection without an operating envelopeThe caricature opponents attack, and unsafe in fact.
Rejected
—
What changes. Today a small project waits years for a study it may fail. Under these reforms it gets an answer in days and can connect under a limit the operator can adjust, and a large one gets a firm answer with a deadline attached.
Incremental system costs should sit with those who create them.
One new campus can require as much peak capacity as a small city, while the bill for standing that capacity up spreads across every household in the region. Costs should be reasonably attributed, and socialized transparently where necessary.
Who orders itFERC tariff approval, RTO design work, state large-load tariffs
Electric bill lineSupply (capacity), and Delivery upgrades
What we prefer. The large-load tariff first because it moves fastest, obligations phased behind it with the auction as residual backstop.
Mechanisms evaluated
Our stance
Evidence
Large-load tariff assigning incremental costMoves in 12 to 18 months at a state commission, needs no new authority, and has a direct attributable effect.
Preferredfirst
Operating evidence: state large-load tariffs, spreading since 2025
Obligation-based adequacy, phasedFour stages, with the centralized auction as residual backstop until coverage is demonstrated.
Preferredstaged
Partial analogue: LSE obligation constructs
Longer forward procurement in the centralized auctionHelps financeability while keeping the commodity framing that causes the problem; PJM itself proposes it.
Viablepartial
Operating evidence: forward capacity auctions
Bring-your-own-generation mandates for large loadsForecloses cheaper system solutions and invites bypass.
De-prioritized
Partial analogue
Continued socialization of incremental capacity costOn PJM’s own numbers: $2.2B to $16.4B a year, spread across 67 million people.
Rejected
—
What changes. Today the cost of getting ready for a new data center is spread across every household in the region. Under these reforms that reliability is under contract years before the load arrives.
The sequence matters. Principle 1 comes first because it changes the utility’s payoff before anything changes what the utility controls. Meanwhile, Principle 4 can bank early wins. Reforms that shift control before incentives change get fought harder and implemented worse.
Evidence
Where has it worked?
Where
What it proves
What it does not prove
Great BritainPerformance regulation since 2013Shows: Pay for performance
One allowance for building and buying, with performance targets, can run at national scale for a decade without starving networks of capital. British networks kept investment-grade credit and earned about 9 to 10 percent real on equity.
That fifty jurisdictions can compare utilities across state lines. Britain has one regulator, and its first period let companies earn more than intended.
TexasConnect and manage for generators, for close to two decadesShows: Connect by rule
Speed. Texas brought 14.2 GW online in 2021 and 2022 against 5.6 GW in PJMThe grid operator for 13 states and Washington, D.C., serving about 67 million people., a grid more than twice its size.
That the whole Texas market design should travel. The 2021 failure traced to weatherization and fuel supply, which no interconnection study prevents, and Texas’s own timelines have lengthened as its queue has grown. In August 2026 the state paused its large-load studies to audit the queue, so the approach is proven for generators and not yet for fast-growing demand.
Sterling, MassachusettsA city utility’s battery since 2016Shows: Pay for performance
A small city-owned utility chose a $2.7 million battery that avoids about $400,000 a year in charges, with no rate case. With no return on capital to protect, the cheaper option won.
That the numbers transfer line for line. A city utility’s financing and taxes differ from an investor-owned utility’s.
FERC Order 1000Competition ordered for transmission in 2011A caution
A rule that polices the owner’s conduct while leaving its payoff intact gets absorbed. About 98 percent of transmission investment still goes ahead outside any competitive process.
That competition cannot work. Winning competitive bids came in about 40 percent below estimates.
Most of the old deal still applies in most of the country. Independent operators and locational prices are standard on the big wires in the organized markets and in Texas. On the local wires, pay for performance, pay for grid value, and large-load tariffs have started, and no regime yet separates the referee.
Missing the old deal still applies
Emerging tested or ordered, not yet the rule
Started adopted, far from finished
Done standard practice
1 Pay for performance2 Separate the referee3 Pay resources for what they do for the grid4 Connect by rule5 Make big new customers pay their own way
Where each principle stands: the five principles in each regulatory regime
1Pay for performance
2Separate the referee
3Pay resources for what they do for the grid
4Connect by rule
5Make big new customers pay their own way
The big wiresHigh voltage, long distance. Mostly under federal rules.
Utility-run regionsThe Southeast and parts of the West, with no independent grid operator
Missing
Missing
Emerging
Missing
Missing
Organized marketsSix regional grid operators: PJM, MISO, SPP, New York, New England, and California
Missing
Done
Done
Emerging
Emerging
Federal power agenciesBonneville and the Tennessee Valley Authority
Missing
Missing
Emerging
Missing
Started
TexasERCOT, regulated by the state
Missing
Done
Done
Done
Started
The local wiresThe lines to homes and businesses. Under state commissions, city councils, and co-op boards.
Utilities that own power plantsInvestor-owned
Started
Missing
Started
Emerging
Started
Wires-only utilitiesInvestor-owned, in states with retail choice
Started
Missing
Started
Emerging
Started
City utilities and co-opsOwned by a city or by their members
Missing
Missing
Missing
Missing
Emerging
Texas wires companiesOncor, CenterPoint, AEP Texas, and TNMP
Missing
Missing
Emerging
Missing
Missing
By regulatory regime and voltage, as of October 2026. Typical practice; individual states and utilities vary.
Speak up at your utility’s next rate case. It takes about 20 minutes, and anyone who pays an electric bill can do it.
When a utility asks to raise its rates, it goes through a public process called a rate caseThe public process a utility goes through when it asks to raise its rates. A state utility commission reviews the request and takes public comments.. Your state’s utility commission takes public comments. Ask for three things:
Pay the utility for results, not for building.
Let someone neutral decide who connects.
Publish the map and the rules to connect.
Served by a co-op or a city utility? Ask its board. The same three asks apply.
How to speak up
Find your state utility commission. Most are called a Public Service Commission or a Public Utilities Commission.
Find your utility’s open case. Search the commission’s site for the utility’s name and “rate case,” and note the case number.
Send a comment or speak at a hearing. A few sentences in your own words are enough.
Ask a neighbor to do the same. Many customers in their own words carry more weight than one form letter.
Aren’t data centers the reason electric bills are rising?
They add to it, and the pattern predates them: the line to connect and the climb in delivery charges were both visible before the current wave of demand. A data center that needs major new infrastructure can add costs for everyone. One that uses room the grid already has spreads fixed costs over more electricity. A large-load tariff decides which, by putting the cost of new capacity on the customer that needs it.
Only if designed carelessly, and today’s flat rate already moves money from those who cannot shift usage to those who can. Defaults ship with hedged flat products, transition bill protection, and targeted low-income rates.
No. The wires stay a regulated monopoly. What changes is how it is regulated: more tightly, with revenue caps, peer benchmarks, and published performance. Competition opens only where no monopoly exists; generation has been competitive at wholesale for thirty years.
True. Transformers, corridors, and crews are scarce, and no rule repeals that. The program targets the scarcity rules created, institutional permission, which is the portion reform can actually recover.
Mostly, yes. Of seventeen tools that see, use, flex, and build grid capacity, three are standard practice and eleven more are in service somewhere. The Department of Energy found that 7 percent of investor-owned utilities’ grid investment in 2023 went to advanced grid solutions like these. What they lack is rules, not invention.
Some elements, yes, which is why Principle 1 changes what utilities earn on before anything changes what they control. Transmission open access was fought in the 1990s, imposed anyway, and is now defended by its old opponents.
Britain has run the framework since 2013: investment-grade credit throughout, and returns the auditor criticized as too generous. The documented failure mode is utilities earning too much. Hardening and replacement are funded in full; the building-over-buying preference is not.
American transmission has run separated since 1996, and nobody proposes going back. The wires company keeps the poles, the trucks, and the storm response; what moves is the access decision, wherever the decider has a stake in the answer.
Concentrated in Principle 5, and designed against: registered published positions, standardized products, physical backing, independent verification, and telemetry-settled performance with penalties above the value of non-performance. California’s crisis came from banning forward hedging; this program mandates it.
The 2021 failure traced to weatherization and fuel supply, which no interconnection study prevents. Texas is evidence about connection speed (14.2 GW added against PJM’s 5.6), not proof its whole market design should travel.
What is borrowed is a payment formula, not a culture: a revenue cap tied to measured outputs works the same in Honolulu as in Birmingham, which is why Hawaii adopted it. Every step runs on existing US authority.
Yes, and that failure designed this program. Order 1000 policed conduct and left the payoff intact, so recategorization beat it. A total-expenditure allowance removes the gain from recategorizing, and a peer benchmark cannot be recategorized at all.
Public power is evidence for this diagnosis: utilities paid no return on rate base show no capital bias, and munis can adopt these reforms fastest, by board vote. Ownership does not touch the binding constraint; a muni waits in the same queue. When data centers arrived, prices rose most at investor-owned utilities and far less at public ones.
It moved bulk study to clusters with readiness gates: real progress the program builds on. Study reform alone does not solve network expansion, cost allocation, operating limits, or distribution-level access.
No. Each principle carries a menu with stated stances; a jurisdiction reaching the same function by another route has done the same thing. ERCOT already performs several of these functions through merchant institutions.
Mostly yes: Principles 1 through 3 are state distribution matters everywhere, Principle 4 has a non-RTO federal pathway, and Principle 5’s vehicle is the large-load tariff Southeastern utilities are already building inside the resource plan.
Utilization is a fine metric and an insufficient reform: a new number evaluated by an under-resourced regulator against a mis-incentivized monopoly changes nothing until the payment formula changes. That is Principle 1’s argument.
Gas leads PJM’s reopened queue precisely because a slow queue favors whoever can afford to wait. Rules-based access is technology-neutral and rewards whoever builds fastest: today, storage and solar-plus-storage, now nearly half of queued solar.
The problem in one dashboard, the principles and preferred mechanisms, first moves by role, the first 100 days, the scorecard, sample language, and objections answered.
The roadmap on two tracks from 2027 to 2035, the measures that prove each stage, a toolbox of seventeen technologies and the rules they depend on, what to copy and from whom, and how the transition is kept fair.