You’re Not Paying More for Electricity — You’re Paying for Reclassified Infrastructure
How utilities use “reliability” labels to socialize costs you didn’t cause:
Most people assume their electricity bill reflects the cost of producing electricity.
That used to be true.
Today, retail bills are dominated not by the marginal cost of generation, but by the marginal cost of capital — specifically the financing of transmission expansions, substation rebuilds, wildfire hardening, undergrounding, EV infrastructure, and renewable integration.
And the most important — and least discussed — driver of rising electricity bills is this:
Utilities have learned that if they reclassify a project as a “reliability upgrade,” the cost can be socialized across the entire customer base.
Meaning:
Even if you keep using the same amount of electricity, from the same house, with no change in consumption…
…your bill rises to fund infrastructure required by someone else’s load growth or someone else’s policy objective.
The rule everyone forgets: cost-causation
Traditional utility regulation is built on a fair principle:
Those who cause a cost should pay the cost.
Example:
If a large customer (say, a data center or industrial plant) triggers the need for a new interconnection transformer, they pay for that upgrade directly.
This is how interconnection tariffs at ISOs/RTOs are supposed to work.
That’s cost causation.
But there is a second category — and this is where the escaping smoke starts.
The loophole: reclassification to “reliability”
When upgrades are labeled as:
“Direct assignment”
→ The load-causer pays.
But when the utility or ISO reclassifies those projects as:
“Regional reliability improvement”
or
“system benefit project”
→ All ratepayers pay.
And once costs enter the rate base, the utility earns:
depreciation recovery,
property tax recovery,
and a guaranteed return on equity (often 8–10%) on every dollar of un-depreciated capital.
For 30+ years.
This single classification decision is the difference between:
One sophisticated customer writing a check
andMillions of powerless retail customers paying higher bills for decades.
Why reclassification is the perfect end-run around cost-causation
Utilities do not profit from selling electricity (kWh).
They profit from building infrastructure and rate-basing it.
So, when confronted with a large new load:
Option A: Direct assignment (customer pays; utility earns nothing on capex)
Option B: “Reliability upgrade” (ratepayers pay; utility earns guaranteed return)
Utilities choose Option B far more often.
Because:
“Reliability” is the magic word that unlocks socialized cost recovery.
This isn’t theoretical — this is happening across the U.S.
Where consumers think the bill increase comes from:
data centers
crypto miners
industrial reshoring
EV adoption mandates
Where the bill increase actually comes from:
substations and transmission expansions labeled “reliability”
grid modernization with return on capital
policy-driven infrastructure pushed into rate base
The load-causer often pays millions in interconnection charges.
The rate base pays billions in region-wide “reliability” upgrades.
The utility profits on the billions.
The hidden shift: Retail prices are no longer tied to power generation
Wholesale power (marginal cost):
4–6¢ per kWh
Retail power (after infrastructure financing):
18–32¢ per kWh, depending on region
The divergence exists because:
Generation is cheap.
Infrastructure financing is not.
Your rate isn’t based on what electricity costs.
It’s based on what the grid financing mechanism requires.
Retail choice doesn’t protect you from this
In retail choice states, consumers can choose their power supplier.
They cannot choose their transmission and distribution utility.
Your bill is effectively:
Energy: competitive, falling
T&D + capex: monopoly, rising
Switch suppliers if you want.
You still fund the grid upgrades you didn’t cause.
You can shop for electrons.
You cannot shop for the grid.
Utilities didn’t necessarily ask to be the policy-finance vehicle
…but they benefit enormously from being used that way.
Legislatures and regulators like pushing policy costs through utility bills because:
Bills are not called taxes
Bills are mandatory
Ratepayers cannot opt out
California is the ultimate case study:
Wildfire costs → securitized through ratepayer charges
Undergrounding & hardening → rate-based
Renewable integration transmission → rate-based
Electrification upgrades → rate-based
All justified using the same word:
“Reliability.”
Not “cost causation.”
Not “user pays.”
Just “reliability.”
The uncomfortable conclusion
Consumers aren’t paying for electricity.
Consumers are paying for a financing mechanism.
Utilities have become the collection arm of energy policy,
and reclassification of projects to ‘reliability’ is the loophole that socializes costs.
Once inside the “reliability” bucket, infrastructure spending becomes:
non-contestable,
non-negotiable,
automatically recoverable,
and profitable for utilities.
What activists should be protesting
Not the data center.
Not the EV owner.
Not industrial reshoring.
The correct target is:
The reclassification process that bypasses cost causation.
Reform targets:
Require transparent cost-causation studies
Limit what qualifies as a “system benefit”
Require incremental loads to fund incremental infrastructure
Incent ROE based on efficiency, not capex volume
You don’t need to stop development.
You need to stop misclassification of cost.
Final thought
When activists ask:
“Why are our electricity rates going up?”
The answer is:
Because utilities figured out that if they call a project “reliability,”
they can socialize the cost — and profit from the financing.
Until that changes, the ratepayer will remain the involuntary banker of the grid.
This work is licensed under a Creative Commons Attribution 4.0 International License. CC BY 4.0
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