Electric Utility Distribution Costs: Scoping Study on Trends, Drivers, and Possible Response Strategies

May 4, 2026

Lawrence Berkeley National Laboratory (LBNL) is pleased to announce the publication of a new study: “Electric Utility Distribution Costs: Scoping study on trends, drivers, and possible response strategies.” Its objective is to synthesize information that will help stakeholders understand the scope, scale, and drivers of recent increases in investor-owned utility (IOU) expenditures on local distribution power grids, while providing regulators and other decision-makers with potential strategies to keep electricity bills down.

The study includes five distinct components. Drawing first on data from FERC Form 1, it summarizes key trends in past and recent IOU distribution costs. Next, through a review of a sample of distribution-system plans, it characterizes material drivers of planned distribution expenditures. Ultimately, regulators must approve cost recovery for IOU expenditures, including those for the distribution system. The study therefore also: examines trends in utility requests and regulatory approvals related to changes in retail rates and return on equity; identifies areas where utility shareholder and customer incentives may be misaligned; and develops a menu of options that state regulators might consider to optimize distribution system expenditures.

As a scoping study, we welcome feedback on this work. LBNL will host a webinar summarizing aspects of the study on May 13, 2026: 12:00 -1:00 p.m. Eastern. Register here.

Some of the key findings include:

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IOU distribution spending at a national level has grown by 6%/yr since 2014 in real dollar terms, 4x faster than in the prior 20 years and consisting mostly of capital (not operating) expenditure.
On a per-kWh basis, increases in IOU distribution costs since 2014 represent over 30% of the overall national-average increase in retail electricity rates.
Regional spending growth has ranged from 2-8%/yr, with larger estimated rate impacts in CAISO, then NYISO & ISO-NE, and then the Southeast, MISO & PJM (see figure).
Some utilities are planning for significantly increased distribution system spending. Planned spending on managing the existing system (asset replacement, safety & reliability, and resilience are all important drivers) exceeds that for capacity expansion.
IOU rate increase requests ($18 billion in 2025) and public utility commission (PUC) approval levels (average of 64% of requested amounts from 2021-2025) have recently hit multi-decadal highs.
PUCs in New England and the Southeast have recently approved a greater fraction of rate requests (>75%, on average) than in other regions, while PUCs in California and the Southeast have generally authorized higher equity returns than in other regions.
Regulators have many tools to tackle potential misalignments between utility and customer interests and, more specifically, to optimize and reduce distribution costs. Shorter-term options include those related to return on equity, capital structure, depreciation, trackers, construction work in progress, and securitization. Medium-term options include performance-based regulation and a wide variety of planning-related requirements. All options embed important tradeoffs.

The new study builds on recent LBNL work on retail electricity price trends and drivers, and is part of a larger body of LBNL research on energy affordability.

For more information:

The scoping study can be downloaded at: https://emp.lbl.gov/publications/electric-utility-distribution-costs

We appreciate the support of the U.S. Department of Energy’s Office of Policy for making this work possible.