Every utility board and commission is wrestling with the same tension right now: bills are going up, and the reasons keep piling up faster than customers can absorb them.
Grid hardening after another rough storm season. Transmission and distribution upgrades that were deferred for a decade. And now, for some utilities and co-ops - a wave of new customers — data centers, EV charging hubs, crypto miners, electrified industrial plants — all wanting hundreds of megawatts of new capacity, fast.
None of that is optional spending. But none of it is free, either. The question every utility finance and rate team is being asked right now is simple to state and hard to answer: who pays, and how much can customers actually absorb before "reasonable rates" starts to mean something different for different people?
Why This Moment Feels Different
Affordability pressure isn't new — utilities have always balanced infrastructure needs against customer bills. What's different now is the size and speed of the newest driver. A single large-load customer can add more incremental cost to a utility's system in eighteen months than a decade of normal residential growth. If that cost gets spread across the whole rate base the way ordinary growth is, existing customers end up subsidizing infrastructure built for one company's benefit.
That's why rate design work focuses toward isolating large-load costs rather than socializing them — dedicated infrastructure riders among them, minimum-bill and take-or-pay provisions, and cost-recovery structures built specifically so growth pays for growth. Done right, this actually protects affordability for everyone else. That is what much of the reporting ignores. But, done poorly it can quietly shift real cost onto residential customers who never signed up for it.
The Other Side of the Same Coin
At the same time, rate design itself is under scrutiny for its own affordability effects. The long-running debate over fixed vs. volumetric rate structures isn't just an engineering question — it determines whether a low-usage household or a fixed-income customer ends up paying a fair share or an outsized one. Lifeline rates, LIHEAP coordination, and targeted low-income rate design exist precisely because "average" affordability numbers can hide real hardship for a meaningful slice of customers.
What This Means Going Forward
There isn't a single fix here, but there is a common thread across the utilities handling this well: they're treating cost causation seriously. Large loads that drive new infrastructure are being asked to fund a meaningful share of it directly, rather than relying on general rate base recovery. Rate structures are being reexamined with an explicit eye toward who actually bears the burden of fixed cost recovery. And regulators are asking harder questions earlier in the process, rather than discovering affordability problems after rates are already set.
None of this makes the underlying math easier — the infrastructure still has to get built, and someone still has to pay for it. But utilities that are deliberate about matching costs to the customers who cause them are in a much stronger position, both with regulators and with the public, than utilities hoping the averages work out.
This is a topic we'll keep coming back to as large-load growth accelerates and affordability stays in the headlines. If your utility or co-op is navigating either side of this — large-load cost recovery or rate design for vulnerable customers — it's worth getting ahead of it now rather than reacting to a rate case later.
About the Author
Russ Hissom, CPA is a principal of UtilityEducation.com, a firm that provides power and utilities rate and expert witness services, and on-demand professional education classes in co-op and utility accounting, finance, ratemaking, artificial intelligence, and management.
Russ was a partner in a national accounting and consulting firm for 20 years. He works with electric investor-owned and public power utilities, electric cooperatives, and gas, water, and wastewater utilities. His goal is to share industry best practices to help your business perform effectively and efficiently and meet the challenges of the changing power and utilities industry.
Contact Russ at [email protected]
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists, LLC or UtilityEducation.com. You should seek formal advice on this topic from your accounting or legal advisor.