In N. California, the folks who are fortunate enough to live with SMUD's territory (govt. utility) pay a fraction of the rates charged by PG&E (for-profit monopolist). For natural monopolies, I wonder if it would be better to replace these monopolists with govt.-owned utilities. There was a missed opportunity to do so when PG&E was in bankruptcy from the wildfire lawsuits.
On cost of capital, I would tend to think that a publicly-owned utility could borrow at even lower rates through municipal bonds (tax-advantaged and considered pretty low risk) than whatever the going rate is for the private-sector COE.
Coming from a PUC staffer, this was pretty accurate but missed one of the arguments that you'll often hear from utilities (I'm sure Mr. Daniel is well aware, it just never came up) and that's credit ratings. Our utilities are constantly arguing that if their ROE is too low, they'll be downgraded by Moodys or similar and that would raise their future cost of equity. The accounting/finance end of things is not my specialty so it's unclear how true that is, but it's certainly an argument you hear a lot.
The discussion was interesting, but it wasn't at all clear what affect lowering the ROE to 7% or so would be to electric rates? Would they go down 10% or 0.01% ?
Interesting. One note, speaking from experience: I was at the California PUC. You've left out the cost of corruption. In California, that was a fairly big cost.
Greetings, yes, I got a letter from my town . Applying my deposit to my next electric ⚡️ bill. I find this disgusting! The rates are way too high here in this town.
Regardless of return on capitol or return on investment rates, a deep problem with the current non-free market monopoly utilities is that they have little incentive for efficient spending. As a matter of fact they may be incentivized for inefficient spending. A real business operating in the free market works hard on limiting their internal costs. For PGE executives, and really all employees, extravagant spending on their various compensations is not penalized in the market. They simply spend more, enrich themselves internally, and then turn to the PUC and say, hey look how much this is costing to run, we need rate increases. That's my case. To what extent do you agree or not? What reigns in their spending?
Wouldn't standardizing ROE across states just create a free rider incentive? States more eager for new build-out could violate the agreement to become much more attractive to new investments.
Yes. Yes. Yes. This seems particularly important for getting good LCOE on wind and solar in vertically-integrated utilities. Here in CO, Xcel is supposed to farm some of that out to IPPs but also do some itself. I would be fine with them doing more, or doing the same for a bit less cost and more batteries now in particular, as we are reaching the "mid-transition," and each increasing VRE means either curtailment or battery/storage investment. And closing coal and having enough generation for the dunkelflaute.
Also, to the extent that utilities divested of generation in opened markets, they would naturally want more return on the smaller (at least initially) base of equity/capital for only T&D. But that's not a problem for vertically integrated and and as we expand T&D it seems like plenty of capital to earn a return on.
And yes, Matt Yglesias seems to have gone into some wormhole. Perhaps he feels the need to oppose anything some left coaster like Leah Stokes says. Whatever.
His piece in the NY Times on how Dems/Libs/Progs/Enviros need to love gas MORE was bizarre. Gas production has grown, gas for heating and industry is flat, gas generation has grown, LNG exports grown... How much more love do we need to show it???? There are 20,000 holes in my county.
If there has been any problem with messaging, it's not enough support for "unreliable" renewables from "centrists." Or maybe the centrists have just been listening to the Chris Wright channel so long they don't understand how the combination of solar, wind, storage and a slowly declining fraction of gas backup even works.
The rate disparity mentioned in this thread (SMUD vs. PG&E) isn't just a governance issue; it’s a Capital Efficiency Gap. The primary "pain" for the energy transition is the CapEx Trap: when an Investor-Owned Utility (IOU) is guaranteed a ~10% ROE, they are structurally incentivized to choose the most expensive path for the grid, not the most efficient.
This "markup" on infrastructure is the hidden tax stalling electrification. If utility rates are inflated to satisfy shareholder profit, the purchase decision for a heat pump or EV is no longer a financial inevitability—it’s a burden.
Regarding David Savage’s point on credit ratings: while utilities fear a downgrade, the greater empirical risk is Ratepayer Defection. As export rates drop and "Midday Crater" logic takes hold, traditional billing becomes a liability. Our research shows that many 2026 California solar bills contain an 88% penalty hiding in plain sight—effectively a "tax" on those who tried to help the grid.
The Research-Backed Remedy
We’ve mapped the correlation between utility hurdle rates and the $40,000 cost "cliff" currently facing homeowners. If you want to see the empirical breakdown of these penalties and our three-step protocol to claw that value back, I’ve published the comprehensive research here:
In N. California, the folks who are fortunate enough to live with SMUD's territory (govt. utility) pay a fraction of the rates charged by PG&E (for-profit monopolist). For natural monopolies, I wonder if it would be better to replace these monopolists with govt.-owned utilities. There was a missed opportunity to do so when PG&E was in bankruptcy from the wildfire lawsuits.
On cost of capital, I would tend to think that a publicly-owned utility could borrow at even lower rates through municipal bonds (tax-advantaged and considered pretty low risk) than whatever the going rate is for the private-sector COE.
Coming from a PUC staffer, this was pretty accurate but missed one of the arguments that you'll often hear from utilities (I'm sure Mr. Daniel is well aware, it just never came up) and that's credit ratings. Our utilities are constantly arguing that if their ROE is too low, they'll be downgraded by Moodys or similar and that would raise their future cost of equity. The accounting/finance end of things is not my specialty so it's unclear how true that is, but it's certainly an argument you hear a lot.
The discussion was interesting, but it wasn't at all clear what affect lowering the ROE to 7% or so would be to electric rates? Would they go down 10% or 0.01% ?
Interesting. One note, speaking from experience: I was at the California PUC. You've left out the cost of corruption. In California, that was a fairly big cost.
Greetings, yes, I got a letter from my town . Applying my deposit to my next electric ⚡️ bill. I find this disgusting! The rates are way too high here in this town.
Regardless of return on capitol or return on investment rates, a deep problem with the current non-free market monopoly utilities is that they have little incentive for efficient spending. As a matter of fact they may be incentivized for inefficient spending. A real business operating in the free market works hard on limiting their internal costs. For PGE executives, and really all employees, extravagant spending on their various compensations is not penalized in the market. They simply spend more, enrich themselves internally, and then turn to the PUC and say, hey look how much this is costing to run, we need rate increases. That's my case. To what extent do you agree or not? What reigns in their spending?
Wouldn't standardizing ROE across states just create a free rider incentive? States more eager for new build-out could violate the agreement to become much more attractive to new investments.
So useful. Than you! Folks might be interested in the new legislation we posted about recently. Let's test the theory that constraining ROC to POC will encourage not just lower rates but also investment in infrastructure capacity. https://solutionaryrail.substack.com/p/the-rail-and-highway-transmission?r=navx8&utm_campaign=post&utm_medium=web
This one was good!
Yes. Yes. Yes. This seems particularly important for getting good LCOE on wind and solar in vertically-integrated utilities. Here in CO, Xcel is supposed to farm some of that out to IPPs but also do some itself. I would be fine with them doing more, or doing the same for a bit less cost and more batteries now in particular, as we are reaching the "mid-transition," and each increasing VRE means either curtailment or battery/storage investment. And closing coal and having enough generation for the dunkelflaute.
Also, to the extent that utilities divested of generation in opened markets, they would naturally want more return on the smaller (at least initially) base of equity/capital for only T&D. But that's not a problem for vertically integrated and and as we expand T&D it seems like plenty of capital to earn a return on.
And yes, Matt Yglesias seems to have gone into some wormhole. Perhaps he feels the need to oppose anything some left coaster like Leah Stokes says. Whatever.
His piece in the NY Times on how Dems/Libs/Progs/Enviros need to love gas MORE was bizarre. Gas production has grown, gas for heating and industry is flat, gas generation has grown, LNG exports grown... How much more love do we need to show it???? There are 20,000 holes in my county.
If there has been any problem with messaging, it's not enough support for "unreliable" renewables from "centrists." Or maybe the centrists have just been listening to the Chris Wright channel so long they don't understand how the combination of solar, wind, storage and a slowly declining fraction of gas backup even works.
The rate disparity mentioned in this thread (SMUD vs. PG&E) isn't just a governance issue; it’s a Capital Efficiency Gap. The primary "pain" for the energy transition is the CapEx Trap: when an Investor-Owned Utility (IOU) is guaranteed a ~10% ROE, they are structurally incentivized to choose the most expensive path for the grid, not the most efficient.
This "markup" on infrastructure is the hidden tax stalling electrification. If utility rates are inflated to satisfy shareholder profit, the purchase decision for a heat pump or EV is no longer a financial inevitability—it’s a burden.
Regarding David Savage’s point on credit ratings: while utilities fear a downgrade, the greater empirical risk is Ratepayer Defection. As export rates drop and "Midday Crater" logic takes hold, traditional billing becomes a liability. Our research shows that many 2026 California solar bills contain an 88% penalty hiding in plain sight—effectively a "tax" on those who tried to help the grid.
The Research-Backed Remedy
We’ve mapped the correlation between utility hurdle rates and the $40,000 cost "cliff" currently facing homeowners. If you want to see the empirical breakdown of these penalties and our three-step protocol to claw that value back, I’ve published the comprehensive research here:
[Link: https://thesmartsolarguide.substack.com/p/ca-solar-export-penalty-2026]
Hi, I hope all is well. This was a very engaging and interesting. Thank you for sharing.
Yes. Texas is the only state which has it's grid, except So which based on geography works with NM.