The new politics of power: What's really driving up American electricity bills? And what can we do about it?

Speaker A: Over the next five years, utilities are planning to spend $1.4 trillion in capital expenditures. So to put that into perspective, if you took the Hoover Dam and you built that today using 20, $26, you need to build almost 2,000 Hoover dams to accumulate $1.4 trillion worth of spending.

Speaker B: I don't care about my electrons. I care about cold beer and hot showers. Like, that's what I care about. And fundamentally, very seriously, I care about myself and my family being SAF drones year round.

Speaker A: There's not really a way to make the math work where you have 1.4 trillion in capital spend, $31 billion in rate increase requests without just, you know, increasing rates another 40% of the next five years.

Speaker C: Hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm Ed Crookes, and on this show we're going to be talking about the price of electricity, uh, for the past four months or so, I guess you could say that's not been the top of everyone's agenda in terms of concerns about the price of energy. People have been worried about the, uh, price of gasoline for obvious reasons because of the conflict in the Middle East. But now, at the time of recording, we do seem to be moving towards a, uh, peaceful resolution to that conflict. Price of oil has been plunging, and so I think we're going to see the price of electricity come right back to the top of the political agenda again in terms of what people are worried about when they think about energy costs. So, uh, to discuss that, it's a great pleasure to welcome back Melissa Lott. Melissa is a partner for energy at, uh, Microsoft. Hello, Melissa. How are you?

Speaker B: I'm doing well. It's a beautiful early morning out here on the west coast right now as we're recording, um, and the birds are chirping. Going to be a beautiful day.

Speaker C: Lovely. Sounds great. Um, as ever, of course, we have to, uh, cite your standard disclaimer. Anything you say on the show is your own personal opinion, not an official statement from Microsoft. But your personal opinions are very well worth hearing, I think.

Speaker B: So it's, um, looking forward to the discussion today with the person you're about to introduce. I'm really excited about this.

Speaker C: Exactly. Yeah. Really, uh, exciting to welcome to the show for the first time Charles Hua, who is the founder and executive director of the nonprofit organization Powerlines. Hello, Charles. Welcome to the show.

Speaker A: Thanks so much for having me.

Speaker C: Yeah, thanks very much indeed for joining us. So before we get into, uh, the substance of our discussion, One of the things we always like to do when we have new people on the show is talk to them a bit about their careers in energy, how they first got interested in the subject, how they got to the roles they now hold. But before we do that, even I would like to talk to you just a little bit about power lines. I think, uh, probably some people in the audience may not be familiar with the organization. What is it, and what do you do?

Speaker A: Sure. So Powerlines is a national energy consumer education nonprofit we launched in 2024. And we're really focused on this question of the utility regulatory system and, uh, some of the key drivers around rising utility bills and the need to modernize our grid. And we've really focused on these state public utilities commissions. There's one in every state, and we affectionately call them the U.S. supreme Court justices of energy, because there's 200 of these commissioners across the country that oversee $200 billion a year in spending. And at a billion dollars a commissioner, they have a tremendous degree of power. And that, uh, really was the motivation behind us starting power lines is to bring some more concerted focus and policy guidance to some of these utility regulatory conversations.

Speaker C: Right. And, uh, do you have a particular kind of agenda, then? Do you have a particular end point you want to get to in terms of working with these commissions?

Speaker A: So our North Star is really making sure that we put consumers at the center of the decisions that the utility regulatory system and its multiple stakeholders make. Uh, we set up this framework over 100 years ago when we said, look, we've got a natural monopoly that has to be regulated by an economic regulator, in which case it's called the Public Utilities Commission. And their mandate was to advance what's called the public interest. And that's had various definitions and even degrees of definition over the years. But I think we really ought to interrogate what that means in this moment, where utility bills are rising, uh, much faster than inflation and where consumers fundamentally feel frustrated about these costs going up. And there's very little clarity as to why their utility bills may be going up in this moment.

Speaker C: Right, Absolutely. Yeah. And looking forward to discussing that with you through the course of this show. Then, uh, just in terms of your own background, then how did you get to Powerlines? I mean, what has your career been in energy?

Speaker A: Sure. So I've worked in the energy space around, uh, a decade at this point, most recently with the U.S. department of Energy and with Lawrence Berkeley National Laboratory, working on different questions around energy policy. But over the last few years, in particular, has been really oriented around the grid and how do we accelerate the deployment of some of the advanced grid technologies that you all certainly have talked about quite a bit on the show, which is anything from grid enhancing technologies to advanced conductors to HVDC transmission, to all these other solutions that our grid desperately needs right now, in a moment where demand is rising and where prices are rising. So one of the key bottlenecks that kept on coming up throughout a lot of that work was our regulatory system. I think it's become increasingly understood that there's a financing piece, there's a technology piece, but when it comes to the grid, a lot of those technologies are quite proven. And the biggest reason we found that some of those solutions aren't being deployed is anything from how we set incentives or the traditional utility business model. And, and I think there's really a moment for that right now. Um, at a period where again, demand is rising again and capital spending on new infrastructure is rapidly accelerating, there's now this moment where a lot of stakeholders are taking a step back and asking, what is that utility regulatory system on a going forward basis and how do we make sure that it's serving all the different stakeholders, especially consumers, uh, at the end of the day.

Speaker C: Right, yeah. Fantastic. So I want to come on to ideas about possible solutions bit later on, but first of all, let's maybe scope out, uh, the problem, if you like. I was very pleased to hear you say something just now. You said you talked about rising electricity bills and the fact that the public is concerned about that because bills are rising. It seems a useful contribution just to state what the facts are, because sometimes you'll hear people say, oh, well, you know, there's a lot of noise about electricity bills. They're not really rising all that much. If you look at what's happening in terms of, uh, inflation generally in the economy, it's just the case that the price of electricity is going up because the price of everything is going up. And actually the data don't really seem to bear that out. Actually there is something happening, and it depends partly what timetable, uh, timescale you look at. So if you look back on a kind of 20 year view, it is true that for a lot of that period, in real terms, in other words, adjusted for general price inflation, electricity prices were declining. But since about 2022, I think it is pretty clear that the rate of increase in electricity bills has been significantly ahead of the rate of general inflation in the economy. So there is something real there. As I say, it's not just people's kind of perceptions about electricity bills. There is a genuine real terms increase that people can point to, right?

Speaker A: That's right. And I think that's a really important distinction. And uh, I might break this down into two components. One is the actual reality of the energy affordability issue and then the other is the perception. And both of which I think matter quite a bit, perhaps in different ways, but starting with the reality of the data that we're seeing. Since 2021, residential electric prices have increased almost 40% to the point where uh, in this moment now, energy costs in general are some of the fastest and most, uh, significant upward pressures and drivers of inflation. And within that, as you pointed out in the introduction, there are now other factors driving energy cost increases. But really for the last year two years, electricity and gas prices were significantly rising and faster than inflation. There are other metrics to look at. We are uh, looking at two leading indicators in particular that go beyond the lagging indicator, which is backwards looking electric prices, and two that I would point you to. One is utility rate increase requests. So last year in 2025, investor and utilities requested $31 billion in rate increases. That was double the previous record at $15 billion. So it was double any other record. And this year we're continuing to track on a quarterly basis utility rate increase requests. And there's no immediate signs of relief to that number. I wish I had that chart in front of me, but it's sort of this hockey stick curve in terms of utility rate increase requests. So that's a forward looking leading indicator for where this trend might go. The other is capital spending. So uh, it's important to note that utilities earn a return on equity for capital spending, which I'm sure, uh, we'll continue to go into deeper. But over the next five years, utilities are planning to spend $1.4 trillion in capital expenditures. So to put that into perspective, if you took the Hoover Dam and you built that today using $2026, you need to build almost 2,000 Hoover dams to accumulate $1.4 trillion worth of spending. So that is a significant amount of spending that ultimately flows into the rate base that consumers will pay if that actually materializes. So that's yet another leading indicator for where the price trends may go. But all of that is the hard beta. I think it's also important to acknowledge the perception which is that uh, people don't inflation adjusts prices in their minds when they're paying their utility bills at the end of the month and they are seeing their prices Increase. I've seen countless anecdotes, whether on Reddit or Tik Tok or next door, where people are saying, I've moved from a two bed to a one bed. I turn off the lights all the time. I'm not even at home half the time, and my bills doubled. And I think people are no longer buying into the explanation that it's just a function of how much energy they personally consume and are trying to find what's the structural reason for that. And I think that's creating this condition where a lot of people are perhaps blaming data centers or other stakeholders on, um, the utility bill increase. But the reality, as you know, is a lot more complex.

Speaker B: And to what you said earlier, Charles, that confusion and desire to understand what is going on is leading to a moment for education around it. Okay, what's on my bill? How often do we actually look at it, y', all, even us who are energy nerds? How often do you actually pull up your electricity bill and look at it, and then when you look at it, how transparent is it? And how much can you understand quickly, especially if you don't study it day to day? And so that breaking down of what's actually in our bills and then understanding the drivers behind it. I think we're in a moment for education, y'. All. Tell me if you see it differently, but where people want to have that knowledge and are striving for it completely.

Speaker A: And one thing that I'll just say there is, it's not also just educating consumers, it's also educating policymakers, especially those who haven't been focused on energy issues, but suddenly now are hearing it from their constituents and are forced to take a position on XYZ energy policy? So this truly is a moment for education across the industry. And that sounds intangible and perhaps squishy, uh, in terms of impacts, but I'd actually argue that if you are making policy without a shared baseline understanding of how rate making works or how the grid functions, good luck trying to effectuate good policy.

Speaker C: I mean, to play devil's advocate here, does the industry actually want a more educated consumer base? I mean, is it possible that if people knew more about exactly what the drivers of their electricity bills were, they would be more concerned and actually protest, uh, more intensively and more energetically, that there's a kind of if just the bill is what the bill is, and as you say, very often people don't look at them. When they do look at them, often the different line items in your power bill are not entirely Clear. Perhaps there are people who would like to keep it that way.

Speaker B: Oh, Charles, you get to take the first pass on it. Because I've got thoughts I want to. Ed can see it on my face. Charles, you go first. I'll be right behind you.

Speaker A: Yeah, look, I think that's a great question. And the fact of the matter is that for the last several decades, consumers have been in the dark, ah, around how any of this works. And whether that was intentional or unintentional, I think doesn't matter in a moment where right now people are extremely frustrated. We had commissioned some polling with, uh, Ipsos just a few weeks back that found that four in five Americans feel powerless about these costs. And when you think about why they may be feeling powerless, I think from our point of view, it's a couple things. One is that it changes so much month to month. We consistently heard that almost unlike any other expense, it's hard to budget for. Two is you don't have a choice. You can't, in most jurisdictions, choose a different electricity provider. Uh, three to your point earlier, Melissa, it's a black box. You open up your utility bill and you have no idea what all these charges mean. You got dozens of surcharges, field charges, delivery charges, um, and that's just all confusing to folks. And I think right now people are expressing their frustration in a lot of different ways. One of which is around the development of data centers. Two is we are seeing, uh, really dwindling consumer confidence in their elected officials and their ability to manage the situation. In that same polling that I mentioned, within one year, uh, we went from 38% of consumers who felt like their state government officials were serving their interests as consumers down to 29%. So within the span of one year, almost a 10 point dip. And that's why this is now bleeding into the politics in which we call this a new politics. Electricity, where it's kind of like oil and vinegar. Those two words should not belong in the same sentence. They don't mix. But they are mixing M precisely because people don't know where to go. They don't know who has control over any of this. So I actually think it behooves the industry writ large for the public to be educated and understanding of who ultimately make the decisions that, you know, impact these, these concerns.

Speaker B: And I'll just add on that within, of course, we can never generalize every single group, Ed. Uh, you know, I'm gonna like, you know, pick it apart that way. But when I look at the conversations that I'M a part of and the conversations I'm engaged in. There is a desire to understand what the root cause is, and then there are discussions about what to do about it once you understand that. But that first step of what is actually driving these changing costs and, like, breaking that down, I will say in particular amongst those groups who are trying to affect change. And Charles, I'm curious if you have seen anything different but trying to affect movement. And it goes back to. Everything moves at the speed of trust. And if we can't have trust, if we don't have knowledge, and if we don't have a degree of transparency. And so when you're trying to figure out, okay, I've got this problem, what can I do beyond being frustrated by it? You gotta break it down. You have to go into the black box and shine some flashlights around and figure out what's happening in here and then be able to come up with solutions. So that's what I see generally in conversations. The tensions come with, okay, what do we do do as a result of this? Like, that's where I see tensions and conversations, but the sharing of knowledge and understanding. Um, even though I'm not a professor these days, I still have the calls of, help me understand this thing. Melissa, I trust you. What's going on here? Like, what do these numbers look like?

Speaker C: Okay, so let's just get into that then. What is going on here? And we can come back to the question of perceptions in a moment. But in terms of the actual facts about the electricity system in the United States and, and what is driving power costs higher, it seems like we have a pretty good understanding of that. The famous, um, Lawrence Berkeley laboratory study that everyone talks about from last year, I thought, set it out all pretty convincingly. I mean, what do you think, Charles? What's your sense of why bills are higher?

Speaker A: Yeah, good question. So, you know, there's generation, transmission, and distribution. And what has become very evident, especially the last five years, is that, uh, of particular importance is the distribution piece, the local poles and wires. That, uh, distribution capital spending in 2023, based on that LBNL study, was almost half of all utility capital spending. And while we're on the subject of capital spending, I think just to take a step back, and you've certainly talked about this on the show with other guests, but I think it's really important to put back into the center of this conversation the traditional utility business model that incentivizes and structurally rewards capital spending almost exclusively in pretty much most investor and utility territories. And there was good reason for that perhaps 100 years ago when we needed to find a way to incentivize private capital, uh, to be deployed to build the grid that we, that we have now. But you know, you've talked about underutilization of the grid. It's around 50%. And if you wanted to figure out a way to structurally incentivize, uh, increased efficiency of the grid, I think it comes down to the structural challenge where the current first instinct for utility companies is to build new capital. And to be absolutely clear, there is, uh, no shortage of capital that's going to be needed just to replace and repair and modernize aging infrastructure and grid infrastructure that's been battered by extreme weather events, two of which are key drivers that were called out in that LBNL report. But on a going forward basis, if just the asset replacement projects cost, however much they did, that would put significant upward pressure on prices, which only increases the urgency of getting as much out of the existing grid as you can. And that's where some of the kind of what I call cheat code, uh, solutions like grid Enhancer technologies, I also describe that as ibuprofen for the grid. It provides some really significant immediate relief to the system, to the pressures that it's currently facing at this point. Now that's a no brainer and there's no time for pilots. There's no time for incremental deployment of these technologies. That needs to be the first response because there's no shortage of capital deployment that's going to be needed. So I would argue that the traditional utility business model is one of the key drivers of rate increases.

Speaker B: So I want to back up just for a minute. So, um, for those of our listeners who live in the world that I don't live in as much so live in the oil and gas and fuels world, I want to just break down electricity really quick to what you're saying, Charles, when we talk about drought. Okay, let's think of all the components that you will see on your bill represented in different ways. We've got all the generation, all the places that electricity is generated, and you've got the wires that connect it. But to your point, it's not just the big, huge high voltage transmission lines, it's the millions of miles of distribution lines in this country that we have. So the small wires that actually bring that electricity to your house and then within it, you've got your meter and everything on your house and you'll see that on your bill as well. But within it, behind all of that is how efficiently we're utilizing our existing infrastructure and the health of that existing infrastructure. And those are two things that we were both seeing reflected in our bills today. So when you look at the overall utilization of it, we talk about, you know, peak and baseload all the time. And we talk about how the peak of our demand, so the highest demand we have in the course of a year, in the course of a season, is driving costs, how we're utilizing infrastructure as driving costs. And then also to your point, our investments in infrastructure and, uh, a lack or existence of systematic investment in that infrastructure can really drive costs because we are looking at responding to emergencies versus, you know, fixing things that go along. Kind of like, uh. What's a good analogy, Ed? Eating our vegetables and our protein and all of our healthy food versus, uh, you know, fixing the issue when we end up in the hospital, in the er. Is that the. I'm gonna go with that. We're gonna go with that for that.

Speaker A: No, it's fine.

Speaker C: No, I like it. I like it.

Speaker A: Yeah.

Speaker B: But all of these components really, really matter. And so when we talk about that transmission line or that distribution line, how much is it sitting half empty, how much is it sitting really full? Um, and then how efficiently are we moving all of our electricity through the system? It all drives pieces of our costs. So I just wanted to baseline the conversation for those who don't live in electricity world every day.

Speaker C: Yeah, no, thanks. I think that's really helpful and a great way to think about it. And then so to bring it down to that most basic question of are data centers driving up electricity bills for ordinary consumers in the U.S. i think it's fair to say that until now they haven't been particularly right. I mean, that's what the Lawrence Berkeley study concluded, as you say. A lot of it has been about, as you say, Melissa, the need to eat your vegetables, the need for the grid to invest in partly replacement. So I guess if you've been kind of unfit and, uh, you need to eat more vegetables. So I'm maybe, um, torturing this analogy more than it can bear. But you see what I'm saying here that, um, there's a lot of grid equipment that needed to be replaced. And also it was the case that the price of vegetables, grid equipment went up very significantly, um, particularly coming out of COVID And as demand rose, and so key transformers, prices of Those doubled between 2021 and 2025 and so on. So all that stuff loads a lot of extra cost onto the system. And so to your Point, Charles, as you say, you're spending that money. If you're, um, investing in all that equipment, that investment needs to be paid for somehow, and that leads to higher bills. So I think that's been the crucial, uh, driver of where we've got to now. I think. Then does that mean data centers won't put upward pressure on power bills in the future? Answer no, it absolutely doesn't mean that. It is very likely that. And we're starting to see some signs of this. I think maybe you could say in pjm, for instance, where, as we've talked about, the price of, uh, capacity in PJM has absolutely rocketed in the past few years. One of the issues that is driving that is that demand is growing. And we're probably going to see that in more different places around the country. And so even if data centers have not until this point been a major contributor to rising power prices, they could be in the future. And as you say, just generally part of that issue about increasing investment and that investment needing to be paid for. Do you think that's Fairchilds? Is that roughly how you see it?

Speaker A: Uh, look, this is in some sense the million dollar question on everybody's mind is what's the relationship between data centers and, uh, price? I think, taking a step back, actually, I don't think it's well understood in terms of a shared understanding of the relationship between supply, demand and price in general when it comes to our electricity system. And the thing that I think is really, uh, missing in that conversation is that it's a monopoly. And so you can't look at chapter one of your economics textbook, you need to look at chapter 13, because, uh, that's where the monopoly dynamics are such that for especially the vertically integrated markets, it's not as simple as saying that demand goes up and therefore price goes up, because it's not a perfectly competitive market. In fact, prices are set by those, you know, aforementioned public utilities commissions that are set by human beings and government bodies that regulate the utility companies. Now, there are chunks of one's bill, such as in pjm, that does have that traditional supply and demand and price relationship. And that's the capacity auction within PJM where, you know, obviously demand has risen, supply has decreased, and so prices did go up. But that's just one component of your bill. And I think that's important to understand because energy affordability undoubtedly is a very hot and common frame right now for whatever preferred policy or solution that you have going on. That does not necessarily mean that any given policy will actually improve that situation. And I think it comes down to understanding the relationship between supply, demand and price. So going back to that, now, if you take the fixed costs, in other words, the supply costs of the grid, and you spread it over more users, that's how you lower the per unit price of electricity. And that's generally possible in pockets of the grid where there is extra headroom available or slack electrons that can be tapped. And across most of the country, going back to that roughly 50% utilization metric, there is still some degree of available headroom, and that's going to vary by market. So, uh, North Dakota, for instance, which was a state that was called out in the LBNL report as having that available capacity, did see a dynamic where they made more efficient use of the grid and they spread fixed costs and more users and lowered price. That's not going to be true everywhere. But in general there is that availability. And so I think this is an opportunity where grid operators and utilities across the country should take a look at this moment and say we're going to get plenty of rate based capital expenditures just by replacing and repairing aging infrastructure. In order for us to actually have the social license to operate, though, five years from now, where we don't just blow through rates, we're going to need to maximize the efficiency of the existing grid. And it's not just from an affordability standpoint where that's desirable. It's also from a speed to power standpoint where you can deploy certain technologies like grid enhancing technologies, unlock available electrons and connect those resources. So if you approach it from that lens, that's how we can make sure that demand actually drives down price and not just minimize the increase or increase prices.

Speaker B: So let's go to a couple data points just to baseline off that. Florence, uh, Berkeley like their work around electricity prices. So first the high electricity. I didn't say energy electricity burden. Uh, the report flagged that one third of households in the US dedicate over 5% of their income just to their electricity bills. So just to like baseline everyone on what we're talking about when we talk about electricity burden specifically, but can we go through the top five, just the five biggest hits in terms of what was driving that year on year, um, increase in pricing. And then to your point, Charles, it's like, well, how does that play out in terms of what happens with pricing? And then what levers can actually be used to sort some of that pricing? So when I'm going through top five, I'll give them all real quick. You can't do Top three because you end up with some ties that I want to pull in number five. So I'll do that real quick. Number one on their list, um, fuel and wholesale supply. So the cost there. And they highlight what's been happening with natural gas prices in particular. And so over that they saw um, an increase, you know, across a bunch of different states. They actually saw a decrease in four different states. That's an aside. So talk about regional issues and regional impacts of all this. But then the next four were distribution costs, generation capex, uh, capital investment, generation, transmission costs, and then storm cost recovery. And so that's what I'm talking about, about the emergency. Okay, we gotta put a band aid on this sucker because we're recovering after a big event that's happened. But around that, in terms of how that's being felt at homes. What I'm hearing you say, Charles, is like talking about how each one of those plays in different ways and the opportunities and the challenges that coming from increasing demand from different sections of the economy, they actually play in all of those in different ways. Maybe storm cost recovery being the least that I can at least mentally lock in to, uh, that pricing. Did I hear that right when you're talking about those buckets?

Speaker A: Yeah, that's right. And to that point on storms that is regionally variant, not just in terms of the type of storm, obviously wildfires out west, hurricanes in the southeast, but also it's a function of the electricity mix. So more fuel intensive and fuel dependent, uh, power, uh, systems for instance in the Southeast have been hit extra hard by increasing fuel costs over the past few years, especially during the Russia Ukraine crisis. So North Carolina for instance saw a significant share of the price increases were actually due to those volatile fuel costs which generally get passed on on a one to one basis to consumers through these fuel adjustment clauses that sort of get automatically, quote unquote reimbursed for the utility. And that's a situation where arguably nobody comes out whole, neither the utility companies nor the consumer who do bear the disproportionate share of the risk of those price increases. So I think in this moment we really need to take a step back and say region by region, state by state, utility by utility, what are those drivers? And just sort of say, look, um, on a going forward basis, noting that there's going to be no shortage of capital deployment that needs to occur, what are the other ways that we can put some downward pressure on prices? Whether it's um, not being as fuel dependent or whether it's um, Improving the way that we do grid planning or load forecasting or even things like rate design reform. So, Ed, you asked about, do stakeholders want more education, less education? There are levers where the consumer can very much be part of the solution. So changing the way that we set rates, for instance, from a more, let's say, inflexible setup that we currently have, which is you pay the same price for electricity, generally speaking, regardless of the time in which you use it, to a more dynamic retentive use pricing model. One of the big barriers that has been cited by stakeholders across the industry is lack of consumer education. So to the point earlier about this being a golden moment to educate consumers who are motivated and want to interrogate what are possible solutions, especially ones that they can be a part of. I actually think it's a golden opportunity for all of us to take a step back and say, with the heightened interest from consumers and policymakers alike, what are the reforms and solutions that we've been talking about for the last several decades that haven't been, uh, on the table or have been elusive, that now suddenly there actually is an appetite to consider? And I think we ought to be having those conversations. But that's been somewhat missing because there's been a disproportionate share of focus on the question of data centers and whether they're playing a role. And I think, to your point, Ed, as the data shows, it's unclear over the last five years, um, that there has been any impact, uh, that's different on a going forward basis. But even then that's highly regionally dependent and electricity market structure dependent. And going back to the relationship between demand, supply and price, I think if people understood that they can be part of the solution there, especially because they represent the demand piece, then that's something that would be exciting for consumers to be a part of.

Speaker C: Right, so let's think about solutions then in a bit more detail. So, um, Charles, Melissa gave us her top five factors in terms of things that are driving prices. Maybe. I don't know if you've got your top five favored solutions. So you mentioned a few. So one is advanced technologies. So grid enhancing technologies, things like that, that can reduce the cost of getting more power onto the grid. You talked about different kinds of rate design, time of use, pricing, and making that more widespread. Would those be the main things you'd point to? I mean, as I say, what's your top five or top three if you want to give that.

Speaker B: Yeah. And just for clarification, Charles, before you jump in um, those top five were the ones from LBNL when they broke down. Like what's been driving the cost increase. That, uh, was their top five. Um, and there's some great summary reports online about it that break it down. But again, it was fuel wholesale supply, distribution cost, gen capex transmission cost, and storm cost recovery. That's what they listed as the top five drivers. And that was from 2024 to 2025 when they were doing that year. What drove it in that year?

Speaker C: Right, yeah. As you say, great point. Credit where credit is due. As you say. Those are the. Lawrence, you did a lot of work. Yeah, no, and I think it's great work as well as I think it's a really impressive study and well worth a look if people haven't seen it. Anyway, sorry, Charles. Back to you then. Uh, in terms of your favorite solutions, what are the answers, do you think?

Speaker A: Well, I'll give you three. So in no particular order. One is getting more out of the grid, two is modernizing the utility business model, and three is improving grid planning. Now what do any of those mean? And these are also, to be clear, not m mutually exclusive and in fact mutually reinforcing. So getting more out of the grid is increasing the efficiency of the grid through deployment of some of those technologies that we've been talking about, whether it's leveraging existing rights of way to deploy advanced conductors, or whether it's deploying grid enhancing technologies on the bulk power system or um, even regulatory mechanisms like rate design reform or uh, things like that. So that's a key piece, the business model piece is I think that in some cases we need to actually look perhaps outside the US So the UK has as you know, a pretty innovative regulatory model where they equalize returns on equity for uh, both capital and operational expenditures. So at least you're flattening the incentive structure so that you're not just rewarding capital deployment, but you're also, uh, creating opportunities for utilities to be able to earn a return on operational expenditures, which could be helpful in certain parts of the US where some of those solutions may be desired by the utilities but they're not able to currently earn a return on. So looking at innovative, uh, models like Totox ratemaking or other ways to address the CapEx bias piece I think is really important. And then on the grid planning piece, I think this is where there's a lot of things, you know, the way that we do integrated resource planning, it has integrated in the name, but arguably it is not integrated at all. Where oftentimes the transmission system is not really considered in the IRP process, um, or the distribution system or the demand side solutions that are on the table are often not considered in these IRPs. And if this is the anchor document where a lot of decisions about capital deployment are being made in dockets across the country, across utility jurisdictions, across state PC jurisdictions, we need to figure out a way to make it more nimble also because as you all know, the cost of procuring this equipment is a very dynamic situation where um, the assumptions that we're baking in for upfront costs of procuring, say a gas turbine or uh, or storage facility, those are changing on a month to month, if not even more dynamic basis. So by the time that the decision is made by the PUC for a different portfolio of resources, it's possible that those numbers are outdated. And that's where also load forecasting comes into play. How do we ensure more accurate and robust methodologies, perhaps even standardized methodologies around forecasting for load? Because if that again is the primary input, that is determining how much new supply utilities are looking to bring on board, that's a highly sensitive uh, situation where we need to make sure that the load forecasts are as accurate as possible. And I think that's not clear that they are. And even when the tech companies have pushed back against certain load forecasts, I think that raises some question around how can we open up the black box there, make it more transparent, improve the uh, methodologies around load forecasting so that we get more accurate grid plan. So those are just a few solutions to put on the table in this moment. And a lot of governors and legislators and regulators across states are actively looking at those different solutions as we speak.

Speaker C: Right. So I think that's very convincing. And uh, a lot of those ideas you mentioned do seem to make a lot of sense and it could certainly be very positive if they were adopted. I do have a kind of fundamentally pessimistic take on this though which is really take based on your numbers, I was looking on your website at your survey of investor owned utilities capital spending plans, very useful survey you do. You've got 41, sorry, 51 rather investor owned utilities, looking at how much they plan spending capex over the next uh, five years and it's the number I think you were citing earlier, $1.4 trillion, this huge amount and you're saying that that amount is up 21% from the equivalent kind of five year projection from a year ago. If you're making all that investment somehow that has to be Paid for. Right. You need, um, to get a return on that. And the way you get a return on that is you get customers to pay for it. So doesn't that inevitably lock in higher bills for consumers across the country, regardless of the various things you can do? And as you say, probably some of these very sensible kind of positive developments in terms of adopting a new technology, having new business models, doing better, uh, grid planning and so on, at the end of the day, those things can make a kind of a marginal difference. But if you've got this big amount of investment, it still has to be paid for.

Speaker A: So I think that 1.4 trillion or 2000 Hoover Dam statistic is, uh, it speaks to the urgency of these policy questions around. We need to take a step back, figure out what is and isn't working, and change the way that we, uh, do utility regulation. Because to your point, if that $1.4 trillion in capital expenditures actually gets approved, deployed and spent, yes, that would be significant potential upward pressure on prices for consumers. And history bears that out, by the way. If you look at the last decade, um, generally when utility capital expenditures have increased for a given year almost on a pretty linear one to one basis. So I do think that there is that concern. And so if, for instance, you recognize the fact that utilities are structurally incentivized to prioritize capital above all else, that's perhaps an Explanation for why 1.4 trillion is the top line figure. But the caveat to note is that that's just a plan. That's planned numbers that utilities have expressed to their shareholders. But there's a lengthy process that is much downstream of that before it flows into things like regulatory dockets, um, and integrated resource plans and ultimately get approved by Public Utilities Commission. So by no means is that an actual number for what will get spent. It's merely a planned spending amount for utilities over the next five years.

Speaker C: Right, yeah, I see what you mean. Yeah. So that is why that $1.4 trillion is such an important number. And it kind of really brings very sharply into focus the need to invest in these other technologies, make these business model changes and so on. Got it. So, Melissa, uh, what would you do then? The White House comes to you, says, we're really worried about rising electricity bills. We need solutions to fix this. What would your answers be?

Speaker B: How much time do we have today? Because I got a 57 second.

Speaker C: Very little, I'm afraid. Very little. We're almost out of time as it happens.

Speaker B: But anyway, so two different things. One, I would make sure that we're not losing focus on what is the end result. Um, can I do an Amory Lovins quote? Ed? I don't care about my electrons. I care about cold beer and hot showers. That's what I care about. And fundamentally, very seriously, I care about myself and my family being safe in our homes year round. So being cool enough in the summer and warm enough in the winter to not be in a compromised place from a health perspective. And so there is no way to solve this issue unless you go across it with many different sets of solutions to hit at these different places that get to that root issue, which is how do we make sure it's 5% of households are paying more than 5%. One third of American households are paying more than 5% of their income on electricity. So how do we actually think about that? And that is a very complex set of things. We don't have time to go into that in detail. And we've talked about it on other shows in detail, and we should come back to it another day. But at the core of it is. Okay, within that. So what is the answer? It's going at efficiency at the household level, going at efficiency at the end user level, but then also leaning into these opportunities that are coming with increasing electricity demand, because there are tons of opportunities. And so that's where I would actually take it. So one of my biggest fears, I think, Ed, uh, we've talked about this, is that we won't get used to this paradigm of increasing electricity demand fast enough to capitalize on the opportunities of it. And when I say capitalize, I don't mean. I'm not an economist. I don't mean it that way. I mean to take advantage of them and to say, wow, this is the thing we wished for. When I started my career 25 years ago was actually to have demand to help us pay for the upgrades that even 25 years ago we needed in the system. M. And so how do we think about that fundamentally differently, as an opportunity, not a challenge. Okay, that's the best I got, ed, in the 45 seconds I have today. I want an hour.

Speaker C: That is fantastic. Indeed. We should, uh, let you come back on again. Uh, and we should take that full out. Yes, please, let's. But I think that's great. I mean, I think that's a really good answer just in terms of summarizing what the issues are. And I think then. And this I'm going to put back to you, Charles, maybe just as a final thought in terms of the kind of principles and ideas that Melissa's just been setting out. And in terms of the things that you have been talking about, it seems like you have to make these changes across this very large and very complex system. One of the things that always sort of blows my mind when I think about the US power system is just how complex it is in terms of all the different interests, in terms of federal government and regulators and state government and regulators and m, the different utilities and the different localities. Very, very complex. You know, the RTOs, ISOs. Very, very complex interconnected system which does seem like it makes affecting change very difficult. And it's hard to make progress. It's hard to change things quickly, certainly. And as Melissa was saying, there is a need to kind of think about things quickly because the world is changing very quickly. How, how optimistic are you that you can bring about real change given the complexity of the system? I guess you're not going to say you're totally pessimistic, uh, and hopeless, otherwise you wouldn't be doing the job you're doing. But I suppose maybe to put the question another way, realistically, how much change do you think you can bring about?

Speaker A: Well, I've never been more optimistic because I actually think that all of this is pointing in one direction. There's not really a way to make the math work where you have 1.4 trillion in capital spend, $31 billion in rate increase requests without just increasing rates another 40% of the next five years. And if you think that has created frustrated, uh, consumers, try doubling rates again. And that would be serious, uh, in terms of the political backlash, if it's not already. But I'm also optimistic about the fact that policymakers who were disinterested in the topic of utilities and electricity have suddenly become m not just interested, but motivated to do something about it. And we didn't touch on this as much, but you take two states, Indiana and Pennsylvania, both in pjm, um, a Democratic governor in Shapiro and a Republican governor in Braun, both of whom have taken measures to tackle the issue of the utility business model. Governor Shapiro issued a letter saying that the 20th century utility business model is in need of repair. And Governor Braun signed legislation passed by the legislature that addressed the way that utility companies were compensated and regulated. And in this moment, where again, the policy reforms have been at this point reasonably well illuminated and understood over the last decade, decade plus, from folks like yourself and others who have really eloquently spoken on and pushed for certain reforms. But what's been missing is the political permission structure and the political will to actually get those reforms adopted. And part of that has come down to the fact that policymakers weren't interested or didn't have the political support to get that through. And I think now, in this moment, there hasn't been this level of support. And in a while, and on a going forward basis, I actually think that things will look very different five years from now, and people, in some sense, are betting on things looking the same. I actually think things will look drastically different. And the question is, what exactly does that future of the grid look like? I don't think any of us will fully know what will be the case five years from now, but I do know that it will look very different. And I think it's incumbent on all stakeholders involved to drive that vision of the future, where we return to the idea that consumers should be at the center of the grid, of the utility regulatory system, because we fundamentally invented and commercialized this technology to reach the masses, because it had that transformational impact, both macroeconomically speaking, in terms of powering our modern industries, but also microeconomically speaking, in terms of how it's just brought about greater prosperity and improved people's lifestyles. That's the opportunity here. But it will require us thinking outside the box, taking a step back and being more creative about what is a vision for what's possible and recognizing that the Overton Window is rapidly shifting on what reforms are now politically feasible.

Speaker C: Right. And that is a very exciting vision, certainly. And it's, uh, a great positive note to end on. Unfortunately, we do have to end it, though. Now. We are out of time. But, Charles, it's been great talking to you.

Speaker A: Thanks so much for having me.

Speaker C: Yeah, many thanks for coming on. Many thanks, Melissa.

Speaker B: Ah, thanks, Ed. Charles, I enjoyed this. I have fun. We will be talking offline. I want to discuss this further. I have so many thoughts and questions.

Speaker C: Yeah, no, it is a fantastic subject, as you say. I feel we've only scratched the surface, but. And definitely, Charles, we should get you back on again soon. And there's all sorts of aspects of this that we could dig into in more detail, and I hope we will do that in future shows. It would be great to do that. Many thanks to our producer, Molly Mowin, and above all, many thanks to all of you for listening. Really value your feedback. Please do keep that coming. And we'll be back very soon with all the latest news and views on the future of energy. Until then, goodbye.