US electric utility customer affordability: Utility affordability pressure is most acute in PJM, creating uneven regulatory risk across US utilities

Overview

Goldman Sachs introduces an affordability research series on US residential electric bills. The report explains the sources of bill increases, forecasts moderation in national bill inflation by 2029, and assesses how regional market structures and utility footprints shape affordability-related regulatory risk.

Core views

Goldman Sachs frames customer affordability as a central regulatory issue for US utilities after a year in which data-center demand, elevated utility investment and wildfire costs intensified attention on electricity bills. A typical bill has three components: supply, delivery and other customer charges. Supply reflects generation or wholesale-power costs; delivery recovers transmission and distribution investment; and other charges can include taxes, public-benefit programs, low-income assistance, clean-energy mandates and wildfire-related costs. Therefore, similar headline bill increases can arise from very different underlying drivers and have different implications for utility earnings and regulation. The report distinguishes regulated from deregulated markets. In traditionally regulated systems, a utility often owns generation, transmission and distribution, while state regulators approve an all-in revenue requirement that allows recovery of prudently incurred costs and a return on investment. Bill growth is consequently more linked to approved generation, grid and distribution investment, reliability spending and cost-recovery decisions. In deregulated markets, delivery utilities do not own generation and wholesale energy and capacity costs are passed through separately to customers. Goldman Sachs argues that tight supply-demand balances, coal retirements and rising load can raise competitive-market capacity prices quickly, creating more immediate affordability pressure. Nationally, Goldman Sachs forecasts residential bill inflation at a 3.7% CAGR through 2029, with growth decelerating from 5.9% in 2026 to 2.1% in 2029. In its bull-capex scenario, annual bill growth reaches 7.9% through 2029, illustrating the tension between investment needs and customer affordability. Although the firm expects electricity costs to decline from about 2.7% of disposable income in 2025 to about 2.6% by 2030 because disposable income growth outpaces bills, it sees near-term pressure as more acute: projected 2026 bill growth of 5.9% exceeds projected personal disposable-income growth of 4.7% and discretionary-cash-flow growth of 3.7%. The current bill level and regional dispersion reinforce that concern. The average monthly US residential bill was $171 on a trailing-12-month basis as of June 2026, versus $165 a year earlier, with bills ranging from $76 in New Mexico to $255 in Hawaii. Bills grew 6% year on year on the June 2026 trailing-12-month comparison. Goldman Sachs estimates that an average monthly 2026 bill requires 12.6 hours of work at minimum wage, but the burden ranges from 22.5 hours in Texas to 6.4 hours in Colorado. The report emphasizes that bill inflation is the principal measure of customer perception, while the share of disposable income can produce a different affordability ranking: Alabama, Mississippi, Hawaii and West Virginia show high bill burdens despite, in some cases, lower recent bill inflation. PJM is the report's focal pressure point. Three-year accumulated bill inflation from June 2023 to June 2026 reached 55.8% in DC, 43.4% in New Jersey, 40.0% in Maryland, 29.1% in New York and 27.4% in Ohio; every PJM state exceeded the national average. Goldman Sachs attributes this primarily to competitive-market supply and capacity costs. In customer-bill examples, generation represented about 73% of a JCP&L bill and supply roughly 70% of a PSE&G bill. It links a May-June 2026 year-on-year inflection in supply charges to an approximately 833% rise in capacity prices, from $28.92/MW-day to $269.92/MW-day. Its annual-average regression for June 2021 to June 2025 found an R-squared of 0.73 between JCP&L bills and capacity prices; including natural-gas prices lifted the six-year multi-variable regression R-squared to 0.88. For utility implications, Goldman Sachs argues that affordability concerns may reduce regulators' willingness to approve rate increases, allowed returns and incremental capital programs. This presents a potential constraint on the sector's multi-year investment upcycle, whose durability depends partly on customers' ability and willingness to absorb higher bills. ED and EXC, both Sell-rated in the firm's coverage, and Neutral-rated PEG screen as more challenged because of exposure to high-inflation jurisdictions. FE is also identified as facing geographic affordability exposure, despite its Buy rating. California and Connecticut demonstrate that low recent bill inflation does not eliminate pressure when absolute costs are high: California's bill inflation since 2023 was 12.0%, below the 13.8% US average, but its trailing-12-month June 2026 electricity rate was 33.2 cents/kWh and its average monthly bill was $160.16 versus $149.60 nationally. Goldman Sachs therefore says Neutral-rated EIX and Buy-rated PCG and SRE remain exposed to affordability pressure. Conversely, Goldman Sachs considers Buy-rated XEL, Neutral-rated SO and Not Rated NEE more favorably positioned because of exposure to relatively lower-pressure states including South Dakota, Minnesota, New Mexico, Colorado, North Dakota, Texas, Georgia, Alabama and Florida. XEL customer bills increased about 4% over the prior three years versus roughly 10% across its weighted state footprint; SO customer bills rose 11.1% versus a 12.0% weighted-footprint increase; and FPL customer bills showed 1% inflation over the three years. AEP is viewed as intermediate: 58% of its rate base is in above-average-inflation jurisdictions, but its larger commercial and industrial customer mix and large-load tariff structures may help absorb infrastructure costs. The firm also views commercial and industrial exposure and large-load tariffs as constructive because they can allocate more future infrastructure costs to large-load customers rather than residential customers. XEL, WEC and SO have particularly high commercial and industrial demand exposure, while SO, AEP, NEE, WEC, DUK, D, AEE and XEL have implemented or proposed such tariffs.

Analysis framework

Goldman Sachs decomposes residential bills into supply, delivery and customer-charge components; compares regulated and deregulated market structures; examines national and state-level bill inflation, bill levels and affordability burdens; and connects jurisdictional exposure to utility regulatory risk. It also normalizes selected PJM customer bills for usage to isolate supply and delivery-cost variation, and uses regression analysis to assess the relationship between bills, capacity prices and natural-gas prices.

Methodology notes

• Industry AnalysisSupply-demand framework

  Wholesale power and capacity-market supply-demand analysis

  The report attributes PJM supply-charge pressure to tight power-market balances, coal retirements and load growth, which lifted capacity prices and flowed through to customer bills.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Electricity-bill component and cost pass-through analysis

  The report traces generation, transmission, distribution, fuel, policy and storm-related costs through the utility billing structure to explain how they reach end customers.

• Other

  Usage-normalized customer-bill comparison and regression analysis

  Goldman Sachs holds usage steady in selected customer-bill examples and estimates correlations between JCP&L bills, PJM capacity prices and natural-gas prices to isolate non-usage cost drivers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Consolidated Edison (ED)

  More challenged by affordability pressure because of New York exposure.

  Weaknesses

  Customer bills are slightly above New York state-average bill inflation over the past three years.

  Comparison

  Exposure is linked to one of the highest-inflation jurisdictions.

  Risks

  Affordability-driven regulatory risk.

• Exelon (EXC)

  More challenged by exposure to high-inflation deregulated jurisdictions.

  Strengths

  EXC customer bill inflation was slightly below the weighted state-average inflation across its footprint.

  Weaknesses

  Large exposure to jurisdictions with elevated bill inflation.

  Comparison

  Screens less favorably than utilities concentrated in lower-inflation states.

  Risks

  Affordability-driven regulatory risk.

• Public Service Enterprise Group (PEG)

  More challenged by PJM and New Jersey affordability pressure.

  Weaknesses

  Customers experienced a 51% bill increase versus a 43% state average over three years.

  Comparison

  More exposed to high-inflation jurisdictions than lower-pressure regional peers.

  Risks

  Affordability-driven regulatory risk.

• Xcel Energy (XEL)

  Relatively better positioned through lower-affordability-pressure state exposure.

  Strengths

  Customer bills increased about 4% versus about 10% across its weighted state footprint; high commercial and industrial demand exposure.

  Comparison

  Screens more favorably than utilities concentrated in PJM or New York.

• Southern Company (SO)

  Relatively better positioned through lower-pressure geographic exposure and large-load tariffs.

  Strengths

  Customer bills rose 11.1% versus 12.0% across its weighted state footprint; notable commercial and industrial exposure.

  Comparison

  Screens more favorably than high-inflation PJM-exposed utilities.

• American Electric Power (AEP)

  An intermediate affordability case.

  Strengths

  Commercial and industrial customer mix and large-load tariffs may help absorb future infrastructure costs.

  Weaknesses

  58% of rate base is in jurisdictions with above-average bill inflation.

  Comparison

  Falls between the more challenged PJM/New York group and lower-pressure state exposures.

  Risks

  Affordability-related regulatory risk.

Key data

• Base-case residential bill inflation forecast3.7% CAGR through 2029Forecast bill growth moderates from 5.9% in 2026 to 2.1% in 2029.
• Bull-capex bill inflation scenario7.9% annually through 2029Illustrates the potential affordability effect of higher utility investment.
• Average US monthly residential bill$171Trailing-12-month basis as of June 2026, versus $165 as of June 2025.
• Highest three-year bill inflationDC: +55.8%June 2023 to June 2026; New Jersey was +43.4% and Maryland +40.0%.
• PJM capacity-price increase~833%, from $28.92/MW-day to $269.92/MW-dayAssociated with May and June 2026 year-on-year supply-charge increases.
• JCP&L bill regressionR-squared of 0.73 with capacity prices; 0.88 including natural gasAnnual-average analysis over June 2021-June 2025 and a six-year multi-variable period, respectively.

Impact & implications

The report says rising bills can become a regulatory constraint on utility rate increases, allowed returns and capital-investment plans. Exposure is most problematic where competitive-market capacity and wholesale-power costs have caused rapid bill inflation, while lower-inflation state footprints, commercial and industrial load, and large-load tariffs may mitigate residential affordability pressure.

Risks

• Rising customer bills may make regulators less willing to approve rate increases, returns or incremental capital-investment programs.
• Tight power supply-demand conditions, coal retirements and load growth can raise capacity prices and create immediate bill pressure in deregulated markets.
• Wildfire mitigation, storm recovery, fuel-cost deferrals, public-benefit charges and clean-energy mandates can add to customer affordability pressure.

What to watch

• The pace of residential bill inflation relative to disposable-income and discretionary-cash-flow growth.
• PJM capacity prices, wholesale power prices and natural-gas costs.
• State regulatory decisions on rate recovery, approved returns, capital programs and large-load tariff structures.
• Regional bill-inflation trends and absolute bill levels, particularly in PJM, New York and California.