TOPIC #1
Utility Themes
Energy utilities remain in the headlines as they balance growth and capital demands.
Strong Prospects for the Sector
The energy utility sector is experiencing strong growth, driven by utility investments, large load demands, and regulatory support, with a focus on power generation growth, grid modernization, and infrastructure expansion.
- At S&P’s 2026 CERAWeek conference, power and utility sector CEOs noted that the industry faces regulatory, permitting, and supply chain challenges but remained optimistic about technological advancements, nuclear revival, and private capital support, while managing risks of oversupply and macroeconomic disruptions.
- Utilities are expected to grow EPS above historical rates through at least 2030, supported by electric demand, large load growth, and regulatory policies. Many sector participants project EPS compound annual growth rates of 6% to 8%+, with some utilities targeting 8% to 9% or higher.
Utilities are mindful of issues of customer affordability, reliability and resilience, and execution of planned infrastructure buildout, which are discussed in some of the sub-sectoral and investment analyst comments later in this section.
Key Takeaways
Utilities continue to experience unprecedented load growth driven by data centers, AI, and industrial expansion, prompting massive upward revisions to capital expenditure plans for new generation and transmission.
To meet new and large around-the-clock demand reliably, companies are pursuing “all-of-the-above” generation strategies, heavily investing in new natural gas facilities, nuclear uprates, and grid modernization.
To protect existing ratepayers, utilities are implementing operational efficiencies and designing new large-load tariffs and electric service agreements to ensure fair cost allocation. They are also pursuing rate strategies that reduce lag given the pace and level of needed investment.
FIGURE 1
Selected Utility and Other Equity Index Performance (Jan. 2, 2021—July 6, 2026)
Source: S&P Capital IQ
Many themes have become common across energy and utility subsectors, but there are variations in emphasis, depending upon scale, geography, commodity, and value chain participation.
Many themes have become common across energy and utility subsectors, but there are variations in emphasis, depending upon scale, geography, commodity, and value chain participation.
Acquisition Activity Remains Steady with Varied Drivers
According to S&P Global, there were 67 asset or corporate acquisitions in the United States and Canada announced between the beginning of 2025 and mid-May 2026, excluding acquisitions of minority stakes.
- Those acquisitions include both energy (gas and electric) utilities (totaling 38 deals) as well as power assets, both thermal and renewable.
- Of those, disclosed transaction values ranged from $200,000 to $48 billion.
As described in the sector summaries above, there are several strategic drivers for this M&A activity:
- Asset repositioning and strategic focus (e.g., UGI electric business spinoff, Spire sale of Mississippi gas business, CenterPoint sale of Vectren Ohio).
- The desire to strengthen balance sheets for capital needs (e.g., AES purchase by private investors, Black Hills/NorthWestern Energy merger, NextEra/Dominion merger) (see Fig. 2)
- Acquisitions of gas and other generation assets to serve growing load and reliability needs (e.g., LS Power acquisition of Constellation PJM generating assets, Constellation acquisition of Calpine), including private capital.
Continued Activity Expected
Globally, power and renewables M&A activity is expected to remain robust, although the potential effect from geopolitical developments (e.g., the Iran war) remains to be seen. The real question will be the impact of rising interest rates on funding both capex and transactions.
One analyst notes that there may be increasing interest in funding alternatives outside of capital markets, including partnerships and joint ventures (with minority stakes given) of investments.
FIGURE 2
Overview of Proposed NextEra/Dominion Merger
Sources: S&P Capital IQ; NextEra Energy, Dominion Energy 8-Ks, press releases, and joint investor call
A Busy Rate Case Season
Per S&P’s Regulatory Research Associates, gas and electric utilities started 2026 with approximately $14 billion of rate increase requests. This compares with $21 billion in rate increase requests in 2025. Of those outstanding at the beginning of the year, 84% of cases were among electric utilities.
Adding to this activity, 55 rate cases have been filed this year (through early May 2026). Utilities are seeking rate increases totaling nearly $6.3 billion and an average requested return on equity (ROE) of 10.46% (see Fig. 3).
- U.S. electric and gas utilities have filed more new rate cases in May and June, seeking rate recovery of their recent infrastructure investments and increased operating costs.
- Common drivers for cases include grid modernization, new generation, new technologies such as battery storage and advanced metering, storm damage remediation and resilience infrastructure, and rising demand.
- Inflation is increasingly cited as a driver of increasing operating costs.
A Busy Rate Case Season
Per S&P’s Regulatory Research Associates, gas and electric utilities started 2026 with approximately $14 billion of rate increase requests. This compares with $21 billion in rate increase requests in 2025. Of those outstanding at the beginning of the year, 84% of cases were among electric utilities.
Adding to this activity, 55 rate cases have been filed this year (through early May 2026). Utilities are seeking rate increases totaling nearly $6.3 billion and an average requested return on equity (ROE) of 10.46% (see Fig. 3).
- U.S. electric and gas utilities have filed more new rate cases in May and June, seeking rate recovery of their recent infrastructure investments and increased operating costs.
- Common drivers for cases include grid modernization, new generation, new technologies such as battery storage and advanced metering, storm damage remediation and resilience infrastructure, and rising demand.
- Inflation is increasingly cited as a driver of increasing operating costs.
Political Pressure Builds on Ratemaking Processes
As shown in Figure 4, electric rate case activity continues an upward trend as does the rate change amounts requested and awarded.
In some jurisdictions, pressure from constituents regarding affordability has led to legislative and policy interventions that intervene with traditional regulatory processes and ratemaking approaches. For example:
- Legislation in Alabama expanded PSC seats, created a new cabinet-level executive director position, and limits Alabama Power rate increases through 2028.
- Pennsylvania governor submitted a general letter to utility executives in late April that informed them that his administration would “vocally and forcefully oppose rate case requests” that did not comport with “three commonsense practices” that he articulated (see Fig. 5). Gov. Shapiro also appointed a Special Counsel for Energy Affordability to advance administration policy vis-à-vis utilities.
- In New Jersey, Governor Mikie Sherrill signed Executive Orders Nos. 1 and 2 on January 20, 2026, declaring New Jersey’s electricity affordability crisis an emergency and directing the Board of Public Utilities to freeze electricity supply rate increases for residential customers to provide short-term relief.
FIGURE 3
Pending Energy Rate Cases (as of Apr. 28, 2026)
Source: S&P Capital IQ/Regulatory Research Associates
FIGURE 4
Electric Rate Cases, Rate Change Amounts ($ Millions), and Average Authorized Return on Equity (2010-2025) (with Trendlines)
Notes: Rate cases with ROE determinations are a different and smaller population than all rate cases reflected above. *Average authorized
Source: S&P Capital IQ
FIGURE 5
PA Governor Shapiro's Desired Rate Request Practices
In late April 2026, Gov. Josh Shapiro (PA) announced principles that his administration will evaluate for potential intervention in rate cases. Utilities must:
To the extent that these principles differ from traditional ratemaking processes (e.g., competitive bidding to establish fair market cost of equity) and statutory constraints, the impact of these is unclear whether and how the public utilities commission will proceed.
FIGURE 5
PA Governor Shapiro's Desired Rate Request Practices
In late April 2026, Gov. Josh Shapiro (PA) announced principles that his administration will evaluate for potential intervention in rate cases. Utilities must:
To the extent that these principles differ from traditional ratemaking processes (e.g., competitive bidding to establish fair market cost of equity) and statutory constraints, the impact of these is unclear whether and how the public utilities commission will proceed.
What Investment Analysts are Saying
Analysts are generally bullish about the utility sector because of growth and modest valuation compared with the rest of the market. Some thematic issues are summarized in illustrative comments below:
Implications
To capitalize on the ongoing historic growth trend in energy demand, utilities must be able to rapidly, effectively, and efficiently execute massive capital plans, while mitigating supply chain and labor risks. Strategically, utilities should proactively engage regulators and other stakeholders to ensure affordability, fair allocation of costs, and timely and adequate recovery of infrastructure investments that benefit customers.
Operationally, utilities should consider tools and technologies that will drive down operations and maintenance costs and enhance grid resilience, including AI and smart grid technologies. Other execution strategies include strategic partnerships with engineering, procurement, and construction companies and proactive ordering of long-lead equipment. Ultimately, speed-to-market in both generation and transmission development will be a key differentiator for success.
CONTACT OUR EXPERTS
On Utility Themes
Justin Stevens
PARTNER
justinstevens@scottmadden.com 404.814.0020
Marc Miller
PARTNER AND ENERGY PRACTICE LEADER
MDMiller@scottmadden.com 404.814.0020
RECENT INSIGHTS
Available at scottmadden.com
ScottMadden posts energy and utility industry-relevant content and publications on a regular basis. The list below is a sample of recent insights prepared by our consultants.
