As much as I appreciate your write-ups and information, they do get me angry about the absolute waste that has occurred. And I wonder, now that the IPCC has admitted they lied about the catastrophic future if CO2 keeps rising, will states end these mandates? I fear too many politicians still make too much money from them for that to happen
What I usually see when politicians become involved in telling businesses how to operate is that the politicians will usually focus on only one factor; in this example, the residential customer's bill. There is no attempt to understand any of the elements that go into the customer's cost on their bill. So we get to hear the jawboning about the customer's bill being too high, without an understanding of what the components of their rate base are. And this is after those same politicians forced the utility companies to install new facilities, like those related to the Green New Scam (carbon-free energy).
As we know, most politicians have very limited knowledge of high-school-level economics. But they do have knowledge of how to scare voters while promoting insane ideologies.
Paying attention and making meaningful changes are not mutually inclusive in this case of energy and fiscal illiteracy. Typical progressive play book, pass incredibly stupid policies, then make a government program to fix it. Obama care……. Now health care is the worst and most expensive it’s ever been. They’re using the same playbook for electricity production.
Thanks for the analysis, EBB. Weather dependent sources are ideal for increasing utilities’ rate base. The lower the natural capacity factor, the more needs to be built and the more can be charged. The effort to “firm” these unreliable sources requires overbuilding and curtailment. Ever more building with less output. Is there anything more perfect to earn money? Oh yeah, let’s give them a monopoly.
Nice analysis. Of course, the opening question gave the answer. Democrats, by definition, make everything more expensive because their default answer to every problem, real or imagined, is more government intervention, more rules, and more regulations, all of which means more grift.
You can dig in on the rate base, or you can dig in on the effective tax rate brought down by the PTC and ITC. Isn’t the latter even cleaner, with NextEra running a ~6% effective federal rate in 2024 against 21% statutory and Berkshire’s energy arm posting a negative rate five years running? And since the old AMT that used to trap these credits was repealed in 2018 (with the IRA’s new minimum tax written to keep PTCs/ITCs usable), doesn’t that make the subsidy the more quantifiable target?
Tax credits are very familiar territory to me, but rate base is a mystery. So, it will be a joint project! Incentives direct behavior and capital flows.
Regulated utilities are allowed to make money when they do what they are told by Public Utility Commissions, which are often directed by state governors and their energy offices to pursue their policies. The real culprits behind rising electricity rates are state officials who ask the Public Utility Commissions to authorize expensive generation and grid improvement projects (often with questionable benefits) by issuing orders to the regulated utilities. We really need state governments to conduct rate impact studies and justify these investments to the public before proceeding. This should be a major issue in the upcoming elections. Governors and elected officials should be challenged to provide a more visible and justifiable process to control the growth of electric rates. Given the broad interest in affordability, this issue should be a major concern for voters and attract bipartisan support. Utility profits benefit from these state interventions, but the utilities are only doing their jobs. Regulated rates of return should be re-evaluated from time to time to consider business risk and the need to attract equity investors.
This needs to be shared with all GOP members at every level. Particularly at local GOP meetings, county and state. Share it with your Congress People all across the USA. Great analysis of where the blame for Dems "affordability" lies and RINOs lying about climate change and extreme weather.
Nice article addressing one of the widely mis-understood issues in the Investor Owned Utility industry space. It explains why utility executives have been more than happy to align with political pressure to drastically increase renewable generation at the expense of customer bills and long-term grid reliability.
One point to emphasize is the rate base magnifying impact of decreasing renewable Effective Load Carrying Capacities (ELCC's). Using solar's 7% ELCC in CAISO, the real capital cost of solar is $24,457/kW versus a combustion turbines $2,527/kW (using a 90% ELCC). Solar produces and initial capital investment / rate base that is ~10X that of a combustion turbine in the southwest.
Potentially adding to this is rate base developed by the need to add additional transmission lines to connect more remote solar and or wind to the grid. The FERC ROE for transmission is 10.75% versus our commission approved 9.55% for generation and distribution assets. This ROE differential (and an annually updated formula rate reducing regulatory lag) makes it very attractive for utilities to add renewables and the associated transmission.
One approach to optimizing utilities ROE (earnings) is trying to minimize the average cost of capital (debt + equity). A ROE that is too low and results in deteriorating credit metrics will increase the cost of debt, which in turn increases revenue requirement. A low ROE may also incentivize more PPA's versus utility owned resources. While PPA costs are a pass through and do not added to utility rate base / earnings, they do tend to be more expensive driving up customer rates.
A potentially opportunity to manage rate base growth may be to focus on ensuring cost effective execution of capital projects. This includes both projects for new resources as well as sustaining capital for existing resources. In the current environment, a capital project that is over budget causes some discomfort from a budgeting perspective. However, the long term impact is to increase rate base and therefore equity earnings. This may explain the reduced focus on cost relative to an un-regulated business. Customer would benefit for some mechanism to curb the impact of cost over-runs resulting from poor project execution, understanding there would be some challenges to implementing this.
Utility profit is an oxymoron when it comes from built-in taxpayers funding of unreliables per federal government wind solar batteries 🪫 scam which helps China 🇨🇳 and hurts Americans energy affordability … btw who do you think wins from the “no data center” movement? You got it 🇨🇳
Thank you for providing these well done references. I have no platform, but I hope they act as a source for folks who can get the word out that rising utility rates are (mostly) not caused by building data centers, but are a lagging effect of the vast wind/solar/battery build out subsidized by the Biden Administration and Obama to a lessor extent.
There's nothing wrong with opposing data centers, but it should be for the right reasons and not give cover to the flaws and faults of wind/solar/battery.
It is especially important to get this message out as the expiration of the wind/solar, etc subsidies approach. There is certain to be another push to renew them.
As regulated by some government agency (a PSC or PUC usually) one would think that the only way a utility could generate a profit is through the return on the rate base the PSC allows.
However, the process of setting utility rates involves a certain amount of guesswork. First the rates to be set in a general rate case apply to future years. So there is some amount of guesswork in what the expenses of delivering service will be then (the amount of guesswork is one argument against using a future test year to show that rates, guessed at, will be just and reasonable). Then a complicated schedule of rates is assembled that hopefully keeps one category of customers from subsidizing another. The amount of service (volume of the service) to be delivered is then estimated so that revenues can cover costs. So if volume estimate is low, which raises rates, but the actual volume sold is greater, then even cost of operation can generate a profit.
In addition, as the Bad Boys point out, our rates have included the residual value of some closed coal plants and hydroelectric utilities that got shoved into reserve accounts to be amortized, and more maddening is that some wind plants were "repowered" but had residual value that ended up in amortizing reserves too. They were effectively rebuilt in ten years to take better advantage of the PTC.
What goes in rate base and return on rate base are big issues. There was a time when the capital expenditures purchased assets that were used most of the time -- capacity factors of 80% anyway. But now generating assets are weather dependent and not only have a poor capacity factor (25% at best for solar) , but a capacity factor that involves probability, and when given priority on the network, will lower the capacity factor of all generating assets. We will also require a lot more transmission and distribution assets with poor capacity factors.
One example is South Dakota, the present poster child for how "we can run our grid on wind". EIA data shows gas turbine plants backing up some of the wind plants have had capacity factors below 10% for a decade.
All this is being done because people think it is what they want and politicians view what people want as opportunity for them.
Thank you Isaac and Mitch for including Berkshire Hathaway's Mid-American in your Green-Plating analysis. Here's what Berkshire Hathaway's CEO Warren Buffett said regarding the wind PTC in 2014:
"For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit."
"Big Wind's Bogus Subsidies - Giving tax credits to the wind energy industry is a waste of time and money." By Nancy Pfotenhauer, Contributor | May 12, 2014, at 2:30 p.m US News & World Report
Similarly, I appreciate your contributions to this December, 2025 IER report, "Blue States, High Rates - Electricity Prices: Elections have Consequences," Institute for Energy Research. https://www.instituteforenergyresearch.org/wp-content/uploads/2025/12/Blue-States-High-Rates.pdf I look forward to your analysis of the most populous state, California. This Democratic Party stronghold typically has the highest residential electricity rates in the continental United States - More than twice the national average. California has the greatest amount of solar, a very large amount of wind, and likely the greatest quantity of grid-scale batteries. Per https://www.caiso.com/documents/key-statistics-apr-2026.pdf As of 5/13/26,
California has 22,702 MW Solar, 8,681 MW Wind and as of 5/1/26, 16,251 MW of Batteries. (California is nearly tied with Texas for batteries.)
As much as I appreciate your write-ups and information, they do get me angry about the absolute waste that has occurred. And I wonder, now that the IPCC has admitted they lied about the catastrophic future if CO2 keeps rising, will states end these mandates? I fear too many politicians still make too much money from them for that to happen
No chance the mandates get ended so long as they are politically popular
It’s easier to fool someone than to convince someone they’ve been fooled.
Just hopeful
What I usually see when politicians become involved in telling businesses how to operate is that the politicians will usually focus on only one factor; in this example, the residential customer's bill. There is no attempt to understand any of the elements that go into the customer's cost on their bill. So we get to hear the jawboning about the customer's bill being too high, without an understanding of what the components of their rate base are. And this is after those same politicians forced the utility companies to install new facilities, like those related to the Green New Scam (carbon-free energy).
As we know, most politicians have very limited knowledge of high-school-level economics. But they do have knowledge of how to scare voters while promoting insane ideologies.
Fully agree that politician's ill-advised decisions/mandates contribute to higher customer bills:
a) Clean energy mandates
b) Net metering at rates well above the utilities incremental cost
c) Energy efficiency mandates - benefits a very few customers
d) Overly broad summer shutoff shut-off restrictions - customers stop paying bills as there meter will not be shutoff until well into the fall
All good things to point out, too bad the country is so corrupt nothing will change. The numbers are alarming, the fact it continues is more alarming.
I think the tide is starting to turn. People were not paying attention before but they are now giving things more scrutiny
Paying attention and making meaningful changes are not mutually inclusive in this case of energy and fiscal illiteracy. Typical progressive play book, pass incredibly stupid policies, then make a government program to fix it. Obama care……. Now health care is the worst and most expensive it’s ever been. They’re using the same playbook for electricity production.
The fact that the populace eagerly fell for it in the first place was the first alarm.
Did no one learn any physics nor chemistry in High School? (Rhetorical, we all know the answer...)
Thanks for the analysis, EBB. Weather dependent sources are ideal for increasing utilities’ rate base. The lower the natural capacity factor, the more needs to be built and the more can be charged. The effort to “firm” these unreliable sources requires overbuilding and curtailment. Ever more building with less output. Is there anything more perfect to earn money? Oh yeah, let’s give them a monopoly.
Nice analysis. Of course, the opening question gave the answer. Democrats, by definition, make everything more expensive because their default answer to every problem, real or imagined, is more government intervention, more rules, and more regulations, all of which means more grift.
Comment:
You can dig in on the rate base, or you can dig in on the effective tax rate brought down by the PTC and ITC. Isn’t the latter even cleaner, with NextEra running a ~6% effective federal rate in 2024 against 21% statutory and Berkshire’s energy arm posting a negative rate five years running? And since the old AMT that used to trap these credits was repealed in 2018 (with the IRA’s new minimum tax written to keep PTCs/ITCs usable), doesn’t that make the subsidy the more quantifiable target?
Absolutely. I feel like I still have a lot to learn in that space so I’ll be checking out your posts.
Tax credits are very familiar territory to me, but rate base is a mystery. So, it will be a joint project! Incentives direct behavior and capital flows.
Regulated utilities are allowed to make money when they do what they are told by Public Utility Commissions, which are often directed by state governors and their energy offices to pursue their policies. The real culprits behind rising electricity rates are state officials who ask the Public Utility Commissions to authorize expensive generation and grid improvement projects (often with questionable benefits) by issuing orders to the regulated utilities. We really need state governments to conduct rate impact studies and justify these investments to the public before proceeding. This should be a major issue in the upcoming elections. Governors and elected officials should be challenged to provide a more visible and justifiable process to control the growth of electric rates. Given the broad interest in affordability, this issue should be a major concern for voters and attract bipartisan support. Utility profits benefit from these state interventions, but the utilities are only doing their jobs. Regulated rates of return should be re-evaluated from time to time to consider business risk and the need to attract equity investors.
This needs to be shared with all GOP members at every level. Particularly at local GOP meetings, county and state. Share it with your Congress People all across the USA. Great analysis of where the blame for Dems "affordability" lies and RINOs lying about climate change and extreme weather.
Nice article addressing one of the widely mis-understood issues in the Investor Owned Utility industry space. It explains why utility executives have been more than happy to align with political pressure to drastically increase renewable generation at the expense of customer bills and long-term grid reliability.
One point to emphasize is the rate base magnifying impact of decreasing renewable Effective Load Carrying Capacities (ELCC's). Using solar's 7% ELCC in CAISO, the real capital cost of solar is $24,457/kW versus a combustion turbines $2,527/kW (using a 90% ELCC). Solar produces and initial capital investment / rate base that is ~10X that of a combustion turbine in the southwest.
Potentially adding to this is rate base developed by the need to add additional transmission lines to connect more remote solar and or wind to the grid. The FERC ROE for transmission is 10.75% versus our commission approved 9.55% for generation and distribution assets. This ROE differential (and an annually updated formula rate reducing regulatory lag) makes it very attractive for utilities to add renewables and the associated transmission.
One approach to optimizing utilities ROE (earnings) is trying to minimize the average cost of capital (debt + equity). A ROE that is too low and results in deteriorating credit metrics will increase the cost of debt, which in turn increases revenue requirement. A low ROE may also incentivize more PPA's versus utility owned resources. While PPA costs are a pass through and do not added to utility rate base / earnings, they do tend to be more expensive driving up customer rates.
A potentially opportunity to manage rate base growth may be to focus on ensuring cost effective execution of capital projects. This includes both projects for new resources as well as sustaining capital for existing resources. In the current environment, a capital project that is over budget causes some discomfort from a budgeting perspective. However, the long term impact is to increase rate base and therefore equity earnings. This may explain the reduced focus on cost relative to an un-regulated business. Customer would benefit for some mechanism to curb the impact of cost over-runs resulting from poor project execution, understanding there would be some challenges to implementing this.
Utility profit is an oxymoron when it comes from built-in taxpayers funding of unreliables per federal government wind solar batteries 🪫 scam which helps China 🇨🇳 and hurts Americans energy affordability … btw who do you think wins from the “no data center” movement? You got it 🇨🇳
https://youtu.be/aK89bntEg5w?si=tcIpUm33VfWuTNuT
Thank you for providing these well done references. I have no platform, but I hope they act as a source for folks who can get the word out that rising utility rates are (mostly) not caused by building data centers, but are a lagging effect of the vast wind/solar/battery build out subsidized by the Biden Administration and Obama to a lessor extent.
There's nothing wrong with opposing data centers, but it should be for the right reasons and not give cover to the flaws and faults of wind/solar/battery.
It is especially important to get this message out as the expiration of the wind/solar, etc subsidies approach. There is certain to be another push to renew them.
As regulated by some government agency (a PSC or PUC usually) one would think that the only way a utility could generate a profit is through the return on the rate base the PSC allows.
However, the process of setting utility rates involves a certain amount of guesswork. First the rates to be set in a general rate case apply to future years. So there is some amount of guesswork in what the expenses of delivering service will be then (the amount of guesswork is one argument against using a future test year to show that rates, guessed at, will be just and reasonable). Then a complicated schedule of rates is assembled that hopefully keeps one category of customers from subsidizing another. The amount of service (volume of the service) to be delivered is then estimated so that revenues can cover costs. So if volume estimate is low, which raises rates, but the actual volume sold is greater, then even cost of operation can generate a profit.
In addition, as the Bad Boys point out, our rates have included the residual value of some closed coal plants and hydroelectric utilities that got shoved into reserve accounts to be amortized, and more maddening is that some wind plants were "repowered" but had residual value that ended up in amortizing reserves too. They were effectively rebuilt in ten years to take better advantage of the PTC.
What goes in rate base and return on rate base are big issues. There was a time when the capital expenditures purchased assets that were used most of the time -- capacity factors of 80% anyway. But now generating assets are weather dependent and not only have a poor capacity factor (25% at best for solar) , but a capacity factor that involves probability, and when given priority on the network, will lower the capacity factor of all generating assets. We will also require a lot more transmission and distribution assets with poor capacity factors.
One example is South Dakota, the present poster child for how "we can run our grid on wind". EIA data shows gas turbine plants backing up some of the wind plants have had capacity factors below 10% for a decade.
All this is being done because people think it is what they want and politicians view what people want as opportunity for them.
Thank you Isaac and Mitch for including Berkshire Hathaway's Mid-American in your Green-Plating analysis. Here's what Berkshire Hathaway's CEO Warren Buffett said regarding the wind PTC in 2014:
"For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit."
"Big Wind's Bogus Subsidies - Giving tax credits to the wind energy industry is a waste of time and money." By Nancy Pfotenhauer, Contributor | May 12, 2014, at 2:30 p.m US News & World Report
https://tinyurl.com/Buffett-Wind-Scam
Therefore, Buffett's party preference is unsurprising. "Warren Buffett says 'I'm a Democrat,' and would have 'no trouble' voting for Bloomberg," By Jonathan Stempel, February 24, 2020, Reuters. https://www.reuters.com/article/business/warren-buffett-says-im-a-democrat-and-would-have-no-trouble-voting-for-blo-idUSKCN20I1ZE/
Similarly, I appreciate your contributions to this December, 2025 IER report, "Blue States, High Rates - Electricity Prices: Elections have Consequences," Institute for Energy Research. https://www.instituteforenergyresearch.org/wp-content/uploads/2025/12/Blue-States-High-Rates.pdf I look forward to your analysis of the most populous state, California. This Democratic Party stronghold typically has the highest residential electricity rates in the continental United States - More than twice the national average. California has the greatest amount of solar, a very large amount of wind, and likely the greatest quantity of grid-scale batteries. Per https://www.caiso.com/documents/key-statistics-apr-2026.pdf As of 5/13/26,
California has 22,702 MW Solar, 8,681 MW Wind and as of 5/1/26, 16,251 MW of Batteries. (California is nearly tied with Texas for batteries.)
👏👏👏
“Facts, facts, stupid facts. Don’t bother me with the stupid facts.”
quote from second ex-wife…
P.S. Thanks for your scholarship and for providing great facts, You Bad, Bad, Bad Men.
Forget Nuclear, Bloom Energy Has the AI Datacenter Energy Solution for Now
https://sigmanomics.substack.com/p/forget-nuclear-bloom-energy-has-the