New Analysis Finds Lower Utility Returns Risk Higher Long-Term Costs for Customers

Research from Concentric Energy Advisors examines the share of customer bills attributable to utility returns and how changes in authorized ROE can affect utilities' financing costs.

MARLBOROUGH, Mass., Nov. 5, 2026 /PRNewswire/ -- Concentric Energy Advisors, Inc. (Concentric), a recognized leader in management consulting services to the North American energy and water industries, today released a new paper examining how return on equity (ROE) affects customer bills and electric utilities' ability to finance investments in the grid.

Investor-owned utilities finance infrastructure through a combination of debt and shareholder equity. Regulators review utility costs and investments, set customer rates, and establish an authorized return on shareholder equity. This regulatory framework is intended to enable utilities to attract the capital needed to finance infrastructure while protecting customer interests.

The paper finds that policy-driven reductions in authorized ROE could increase utilities' cost of capital, outweighing the minimal near-term savings for customers.

Concentric's analysis highlights four findings:

• Outside investment enables regulated investor-owned utilities to deliver a public service. That framework is especially valuable now in building the infrastructure necessary to meet rising electricity demand, strengthen reliability and resilience, and connect new customers.
• The equity return associated with authorized ROE represents approximately 5 percent of the total electric bill in the analysis. A 100-basis-point reduction in authorized ROE would lower the typical customer bill by less than 1 percent. Even the largest ROE reduction modeled in the analysis would alter the typical customer bill by about 2 percent. These results indicate that changes in authorized ROE alone would have a relatively limited effect on the total customer bill. Larger and faster-growing cost drivers include wholesale electricity prices, capacity costs, and policy compliance costs.
• Changes in ROE and capital structure can affect utility financing costs. The paper examines how materially lower authorized ROEs and greater reliance on debt could affect credit metrics and the cost of debt and equity. If reductions in ROE are not accompanied by corresponding reductions in capital costs or utility risk, the analysis finds that some near-term customer savings could be offset by higher financing costs over time.
• Utility returns on equity are among the lowest compared to other industries. Electric utilities' earned returns and total shareholder returns are comparatively modest, despite being nearly three times as capital-intensive as the typical non-utility company. Utilities also must repeatedly access external capital because their investment needs exceed the cash they generate internally.

"Affordability is a significant concern, but reducing utility returns as a matter of policy would provide limited relief in the short term because they account for only a small portion of the bill and could increase costs or harm reliability in the longer term," said Joshua Nowak, Vice President at Concentric. "Effective solutions should focus on the actual drivers of rising customer costs, where savings can deliver meaningful relief, while preserving utilities' ability to finance essential infrastructure and serve customers over the long term."

The analysis is intended to isolate the role of authorized ROE within the broader affordability discussion. Customer bills reflect numerous factors that vary by utility and jurisdiction, while actual financing outcomes depend on market conditions, regulatory decisions, capital structure, utility-specific risk, and the timing of investment. The paper therefore evaluates changes in ROE as one component of customer costs and considers both their direct effect on bills and their potential implications for financing costs over time.

About Concentric Energy Advisors:

Concentric Energy Advisors, Inc., and Concentric Advisors ULC (together, "Concentric") specialize in management consulting, industry regulation, finance and M&A, resource planning, and depreciation and valuation services, with a focus on the North American energy and water industries. For more information, please visit ceadvisors.com.

Media Contact:

Wendy Preston
wpreston@ceadvisors.com

SOURCE Concentric Energy Advisors