MarketClear Utility Policy Research

Americans are overpaying for electricity. Utilities are allowed to charge a built-in profit as part of every bill, and regulators have set that profit far higher than any real market would allow.

MarketClear Utility Policy Research is a nonprofit working to change that. We advocate for competitive auctions to determine utility profit rates, replacing a process tilted in utilities' favor with one that produces a transparent, market-based answer.

Every utility customer pays a built-in profit to their utility company as part of their bill. The size of that profit is not set by a market. It is decided through a regulatory proceeding, a costly and technical process that utilities dominate with teams of lawyers and expert witnesses. Consumer advocates are vastly outgunned and rarely prevail. The result is that utilities have been able to extract far more profit than any competitive market would grant them.

The proof is in the stock price. The average U.S. utility holding company trades at more than twice its book value. If allowed profits truly reflected the real cost of capital, utilities would trade near book value. Trading well above it is market evidence, not theory, that utilities are earning excess returns at their customers' expense. And unlike most industries, utilities face no competitive pressure that would ever force those excess profits to come down.

We estimate the total cost to American utility customers at over $65 billion per year in excess profits, roughly $500 per household annually.

MarketClear pursues its mission through four core activities:

• 1
  Research and analysis. We produce original research on the magnitude of utility overcharges, the mechanics of competitive equity auctions, and the legal and regulatory framework for reform.
• 2
  Model legislation. We draft and refine model state legislation implementing a competitive equity auction for utility return on equity, including the Fair Authorized Investment Returns (FAIR) Act and similar frameworks, which have been introduced in multiple states.
• 3
  Regulatory engagement. We submit written comments, testify, and engage directly with state public utility commissions considering reform.
• 4
  Stakeholder education and coalition building. We publish explanatory materials for policymakers and the public, brief lawmakers, and work to build coalitions among the groups who share a common interest in lower utility rates.