National residential electricity prices have increased, in nominal terms, by 33% since 2019. One-third of American households now dedicate more than 5% of their income to electricity bills, something that is a large contributor to the nation’s affordability crisis. Recent polling conducted in 62 battleground congressional districts shows that 90% of battleground voters think that there is something that Congress can do to bring down utility bills, and 41% of respondents described action to lower utility bill costs as either the top or second-highest priority that Congress should undertake.

Americans’ intuition that Congress can do something is correct. While the regulatory structure is complicated, at every level the rules are biased in favor of utility shareholders and against ratepayers. So, Congress can fix the federal component of the problem, while state legislatures will have to address costs jurisdictional to the states.

The vast majority of customers’ electricity bills are determined by three costs: generation, distribution, and transmission. How and who regulates each category varies. In accordance with the Federal Power Act of 1935, regulation of the United States’ utility sector is shared between states and the federal government. The federal government — through the Federal Energy Regulatory Commission (“FERC” or “the Commission”) — exercises jurisdiction over transmission planning, rates, and cost recovery approval for the lower 48 states, with the exception of Texas.

Given this authority, Congress can enact legislation that directs FERC to adjust aspects of its regulation of transmission utilities and power markets, things that would result in both immediate savings to customers while also initiating necessary longer-term structural reforms. Taking up just one of these recommendations to reform the way profit levels are determined for privately held, for-profit utilities could set in motion significant savings. A recent estimate by Economic Liberties suggests addressing excessive profits that accrue to utilities through bloated rates of return could save American families nearly $500 per year if tackled at both the state and federal levels.

The following issue brief offers a primer on state and federal regulatory authorities through the lens of a customer’s monthly electric bill, including background on FERC and recent developments in the transmission sector. It concludes with several federal policy recommendations.