Washington D.C. — Following yesterday’s unanimous passage by the Pennsylvania House of Representatives of the Return on Equity Bill, which would limit utility shareholder profits to help lower customers’ utility bills, the American Economic Liberties Project released the following statement:

“Utility regulation was always meant to be a surrogate for competition, used only where competition isn’t feasible. But regulators have relied on expert judgment to set utility profits even where a competitive alternative could exist, and that judgment has been systematically wrong,” said Mark Ellis, Senior Fellow for Utilities at the American Economic Liberties Project. “Authorized returns are set too high, which both directly inflates customer bills and gives utilities a powerful incentive to overinvest, compounding the harm.” 

“The Pennsylvania House just voted to fix this at the root, using the same competitive mechanism that already determines virtually every other cost utilities incur,” Ellis added. “Other states, and FERC, now have a template.”

Pennsylvania utilities have some of the highest rates of return on equity in America. Return on equity (ROE) is the guaranteed profit rate regulators allow utility shareholders to earn on infrastructure investments. Even small changes in that percentage can add or remove billions of dollars from customers’ utility bills. Indeed, just last year, 13 Pennsylvania utilities requested $975 million in higher rates after already earning a total $1.4 billion in profits in 2024. Over the past five years, Pennsylvania households have faced average utility bill increases of 60%. Meanwhile, electricity shutoffs rose 21.3% from 2024 to 2025, impacting more than 414,000 Pennsylvanians — the highest level on record. 

The Return on Equity Bill would replace Pennsylvania’s current utility profit-setting system with a default, market-based ROE, while allowing companies that want a higher return to prove it through a competitive auction process rather than relying on regulators to approve higher shareholder profits.

This bill’s passage follows pressure from Pennsylvania Governor Josh Shapiro who issued a letter last month to 24 state utilities demanding that they: clearly demonstrate that proposed investments and rate hikes benefit customers rather than shareholders; favor lower-cost debt financing for their equity; and justify shareholder profit rates through a competitive market standard tied to actual capital costs.

This bill and Gov. Shapiro’s letter align directly with reforms recommended in AELP’s issue brief, “Rate of Return Equals Cost of Capital: A Simple, Fair Formula to Stop Investor-Owned Utilities from Overcharging the Public,” which found that utility returns on equity are routinely set well above the market cost of capital.

Read our breakdown of how excessive ROE raises costs — “Rate of Return Equals Cost of Capital” — here.

Read about how federal action can reduce utility costs here.

Learn more about Economic Liberties here.