New Aii Report Finds Utility ROEs Have Trended Downward Over Two Decades, Challenging Claims That Returns Are Driving Electricity Bills

Why this matters

This report’s findings on declining utility return on equity (ROE) over two decades carry significant implications for institutional investors in US infrastructure and commercial real estate sectors reliant on stable utility services. The downward trend in utility ROEs challenges the narrative that rising electricity bills are primarily driven by outsized utility profits. Instead, it suggests that regulatory frameworks and politicized ratemaking may be constraining utility earnings, potentially limiting the capital available for long-term grid investments. For CRE investors, this dynamic underscores a growing tension between regulatory efforts to cap utility returns and the need for sustained infrastructure upgrades that underpin property operations and tenant demand. If blunt ROE caps persist, utilities may face pressure to defer or scale back capital expenditures, risking grid reliability and resilience—factors increasingly critical as CRE portfolios integrate more energy-intensive technologies and sustainability measures. Moreover, the report signals a complex policy environment where investor returns and customer protections are at odds, complicating capital allocation decisions in energy infrastructure adjacent to CRE assets. Allocators should monitor how these regulatory pressures influence utility credit profiles and the broader cost structure for commercial properties, as shifts here could ripple through financing costs and asset valuations.

Editorial analysis · AI-assisted

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