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Latitude Media, covering the new frontiers of the energy transition. Hey, it's Stephen. I hope you all had a wonderful end to your summer. We were intending to be back on our normal fall schedule this week, but the influenza virus had different plans for me, and I needed to trade my microphone for a hospital bed for a bit. Get your flu shot this year. This one's a doozy. I am recovering, and we will be back next week. But in the meantime, we've got a conversation about a storyline dominating so much of our energy discourse, electricity prices. We are less than two months away from the U.S. midterm elections, and it's fair to say that electricity is shaping politics in unprecedented ways. Could this be the first election at the national scale in U.S. history where utility bills and electricity costs specifically could be a defining issue at the ballot box? And frankly, I struggled to find a historic parallel. That is Charles Walsh. He's the founder and executive director of Power Lines. He was speaking on stage at Latitude Media's Transition AI conference earlier this year. Power Lines is an organization working to make utility regulation more transparent and accessible, and it's been closely tracking the historic utility spending and rate increases. And in this conversation, Charles talks with Latitude Media editor Lisa Martine Jenkins about the very small window of opportunity to get this spending right. And the answer runs through regulators. And if you want more conversations like this, come to our Flex Summit in Austin, Texas on October 14th and 15th. We're bringing together the top voices and experts who are turning flexibility into vital grid infrastructure. And our listeners get 10% off their tickets. Follow the link in the show notes to Flex Summit and use the code PODS10 when you check out. And now, on to the show. So electricity prices in the U.S., they've been increasing to the point where, as Stephen himself said on Open Circuit last year, they're the new price of eggs in political politics. That's the rhetoric. And even though these rising rates have many contributors, there's transmission and distribution costs, there's extreme weather recovery, data centers have become a bipartisan punching bag, especially in PJM. This all came to a head in January, when even the White House realized that having hyperscalers pay their own way for infrastructure costs could win them points with voters. But as our next speaker knows better than anyone, the decisions that actually inform electricity rates come from the regulators. But in the last couple of years, those regulators have been caught largely unprepared for load growth. As one of my colleagues said this week, they're basically like deer in the headlights. They don't want to be seen as stymieing economic activity that's associated with AI, but they also have a pattern historically of just saying yes to whatever the utilities want. But that has clearly led to record high rates and an angry public, and so things have gotten a little complicated, both for the regulators themselves and for the developers that are trying to get things built. So here to parse this for us is Charles Hua. He's the founder and executive director of Powerlines, which advocates for modernizing the utility regulatory system. Thanks for being here, Charles. - Thanks for having me. - So I'd love to start by zooming out a little bit. In 2025, utilities requested a combined $31 billion in rate increases across the US, and it really feels like this year, things have reached a fever pitch. How did we get here? Can you walk us through the things that have led to this intense focus on affordability? - Sure, well thanks again to the Latitude Media team for hosting this wonderful convening. Look, just to start and level set, utility affordability has always been an issue. 80 million Americans based on Census Bureau data have been struggling to pay their utility bills. They're trading off food, groceries, rent. Sometimes we're even seeing folks' utility bills larger than their mortgage payments. So this is a very significant challenge that frankly has always been an issue, and certainly now it's entered our political discourse, and that's reshaping the ways in which we're talking about energy affordability. And there's a couple reasons for that, one of which is the new elephant in the room, which is data centers and the role that they could be playing or not playing in driving up bills. But certainly there's a perception among the public that that's a key cause. And we're also now seeing the middle class engage on these issues because they're feeling the pressure point around utility bills. And we're seeing elected officials and politicians talk about this because they're feeling the pressure from the voters. So that's creating the storm where energy affordability, as we've been talking about, is reshaping the entire energy landscape. So what actually drives up bills? There was this great analysis last year by the Lawrence Berkeley National Labs, which one analyst said at the time, which I really loved, it found that surging electricity prices are like Tolstoy's unhappy families, each unhappy for their own reasons. Can you help me parse precisely what that means, like what actually is driving up rates as far as we can tell so far? Yeah, great question. And just to start, I think there's often a conflation in the political and media discussion around what has driven up bills over the last five years versus what could drive up bills over the next five years. And it's sort of hard to parse through for consumers that are experiencing this in real time. But if you just look at the last five years, long before data centers even really entered the scene to the extent that they are now, it's three boring things. One is an aging grid that is in desperate need of modernization, replacement, and repair. Second is extreme weather events. They're battering our grid infrastructure, particularly hurricanes in the southeast, winter storms across Texas and New England, and wildfires out west. And lastly, it's volatile fuel costs. During the Russia-Ukraine crisis, when prices spiked, that impacted domestic utility bills and costs therein. So that is the boring stuff that I worry about. I worry if we over-index on this shiny new thing with data centers, and even within that, there's a lot of nuance as to the role that they're playing around utility bill trends. I worry that we're gonna lose sight of these fundamental, boring structural factors driving upward pressure on rates. And if we don't corral that spending, we are going to face some serious challenges going forward to connect new load. - And on that note, going forward, power lines, I understand, put out some new research just this morning. about what rate increases look like in the next five years. Can you walk us through what you guys found? - So this is, you all are getting the, not sneak peek, but first preview, first live setting where we're debuting this research, which finds that utilities are planning to spend $1.4 trillion in CapEx by 2030. And that is a year-over-year 21% increase over last year's roughly 1.1 trillion figure. That is a, that is a tremendous amount of spending. I don't have the exact numbers in front of me, and I like the way that Shale on stage yesterday broke down different models of CapEx. But if I remember correctly, it's like three interstate highway systems worth of spending. It is thousands of Hoover dams worth of spending. So that is a lot of money. And a significant chunk of that capital will definitely need to be spent just to replace poles and wires that are reaching the end of their useful life. We don't know because there's so little transparency and regulatory accountability, is what chunk of that 1.4 trillion is truly the necessary stuff that if you don't spend it, the system's gonna break, versus what's the nice-to-have stuff that may or may not actually be in the interest of the, not just the residential consumers that are footing the bill ultimately, but also the data center customers, as well as the large industrial customers. So we put out that research, got picked up in the Wall Street Journal this morning. That is now the benchmark for what utilities are telling their investors as to how much they're looking to spend. And I think at a moment where affordability is top of mind for all stakeholders and where utilities requested a record $31 billion in rate increases last year, we are all about leading indicators at Powerline. So you can look at the backwards looking data around price increases, but in terms of leading indicators, 31 billion, a lot of that has yet to hit consumers' wallets. 1.4 trillion, that is what they're planning to spend. And I think that raises some serious questions around whether we're prioritizing the most cost-effective solutions like grid enhancing technologies, demand flexibility, distributed energy resources, a lot of the solutions that we've been talking about. But what stands in this way is ultimately a regulatory paradigm that systematically and structurally rewards CapEx over OpEx, and rewards the build out of new infrastructure over the optimization of existing infrastructure. And happy to dive into that further, but that is the top line. Takeaway from that analysis released this morning. - Open Circuit is brought to you by Energy Hub, the flexibility platform for the modern grid. More than 230 utilities trust Energy Hub to build and operate virtual power plants, delivering 3.6 gigawatts of flexible capacity. - As the resources grow, okay, this is really great. This is an amazing resource. I can use it. It's really valuable. But here's what I really need to do to make it as good as or better than my existing conventional capacity. - Paul Heinz is the chief scientist at Energy Hub, where his team develops the algorithms that turn millions of DERs into flexible capacity utilities can stake their grid planning on. - My team is working on the algorithms that allow us to meet the utilities goals for shaping these virtual power plants. - Machine learning keeps raising the ceiling on what VPPs can deliver. Energy Hub's platform is trained on years of data from millions of devices, optimized for utility needs across every season, and every grid condition. - We're working with utilities, not to just enable that capacity, also make it more flexible so that utilities can use it more times per year for longer events in ways that are valuable to both customer and utility. Later in the show, Paul explains how Energy Hub's platform helps utilities scale VPPs for their unique needs as grid demands evolve. Learn more at energyhub.com. OpenCircuit is supported by Everyday Electric. You might know them by their former name, Renew Home. We are at a pivotal moment. Energy demand is growing faster than the grid was designed for. Everyday Electric believes we need to start at home with savings before jumping to new expensive infrastructure. They already run the country's largest residential VPP, coordinating over six gigawatts of capacity. And now they're expanding partnerships with energy providers and OEMs so that products like thermostats, EVs, and batteries can help households save money and support the grid. That's home energy as it should be. Learn more at everydayelectric.com. What if you gave your climate donations the same due diligence you gave your investments? That's what Giving Green does. Giving Green researches the strategies and non-profits best positioned to unlock the next big climate breakthrough and sends 100% of every dollar donated to the Giving Green fund directly to them. Maximize your impact per dollar. No cuts or guesswork. Make your first gift before the new year and it will be matched up to $500. Go to givinggreen.earth.circuit. And in your conversations with regulators, you're probably talking to them far more than anyone else in this room. What is the tenor of those conversations specifically when it comes to their preparedness for these rates going up? Yeah, look, it's a great question. So first off, who are these people? We like to call the public utilities commissioners the U.S. Supreme Court Justices of Energy because there's 200 of them. They oversee $200 billion a year in utility spending, although with our new research, we might need to- ratchet up that number. But at a billion dollars a commissioner, they are incredibly powerful. They set retail electricity rates. They oversee that at least. They oversee the build out of new infrastructure, the siting of transmission lines and other energy infrastructure. So these guys are so powerful, yet they need to hear from everybody in this room in terms of what the pain points and bottlenecks are that different folks in this room are experiencing. And really the two things that are on their minds, are the same things that are on all of our minds, which is load growth and affordability. And how do I meet new demands? And how do I do so with affordability top of mind? But just to peel back the curtain a little bit, you know, most of these commissioners are appointed by the governors. So whether or not they're in name independent agencies, they often feel some degree of, you know, the governor looking over their shoulders. And the governor's top job is economic development. Now, though, it is also affordability. And as we talked about, the only way to advance both economic growth in this moment and affordability by connecting new load is by getting more out of our grid, squeezing more electrons out of our existing infrastructure. And so that's where actually I think the incentives between the governors and PUCs can be increasingly aligned because historically the governors haven't necessarily focused on utility affordability. And so they've got that to consider. But the other thing that I'll just say is most of these PUCs, they are working grueling hours around the clock, 60, 78 hours a week, many of them. I shouldn't say most, many of them. And they're often doing so with teams of staff of double digits, you know, 30, 40, 50 folks. They have to regulate not just the electric companies, but also the gas, the water, the telecommunications, rail safety, pipeline safety, public transit in some instances. So their jobs are incredibly difficult. And I don't think they've been resourced enough to be able to meet this moment. And so I what's the psychology of a regulator and to engage effectively? And that's a call for everybody in this room is to engage with your PUC. The FERC chair recently said at CERA week that she wants to see data center companies, developers engage more with FERC. And I think there's a critical opportunity for that. Yeah, that's something I've heard echoed in the last two days. There's definitely room for more conversation with regulators. When it comes to grappling with load growth from data centers specifically, how are regulators thinking about that? Like, does that feel to them like a completely new problem for them? Or is this just more load across the board? I don't know if this is going to be provocative, but I think that we are all thinking way too small in terms of this opportunity set, which is you have a grid, the 1.4 trillion figure alludes to this. You have a grid that is desperately in need of investment. Just to replace, repair, modernize, build basic poles and wires, it's going to cost a lot of money. And suddenly, you know, who comes onto the scene is a customer that desperately wants to invest in that resource. And five, 10 years from now, if we can't figure out a way to put those two puzzle pieces together, we will have failed. It is not that complicated at a macro level. Now, to be very, very clear, in the weeds, that is where the complexity lies. And we are seeing various efforts in terms of large load tariff design, especially in the upper Midwest, clean transition tariffs in Utah and Nevada. There's a lot of efforts going on in different jurisdictions. But what I'm encouraged by is that in this moment, policymakers and regulators across the board are suddenly paying way more attention to this issue. I mean, the fact that Bad Bunny talked about the grid in the Super Bowl halftime show, the fact that President Trump talked about it in the State of the Union, the fact that President Trump called for commissioners, the most important people in America, not one of the most important, but the most important people in America, speaks to the fact that these guys, these 200 U.S. Supreme Court justices of energy, 205 plus the first commissioners, these are the folks that will have an outsized influence in shaping how the direction of this all goes. And if we can't figure out a way to square that circle, then we'll have failed. And are there any places in the country that you think are handling this particularly well? And alternatively, particularly badly? The short answer is no. Nobody's doing it well. As in, everybody has an opportunity to ratchet up both the level of ambition and the strength of these. And I don't mean to say that too flippantly. There's a ton of effort being happened by a variety of stakeholders. So I want to be very, very clear about that. But I think that electric prices have increased 40% of the last five years. The fact that utilities requested 31 billion in rate increases last year, the fact that they're looking to spend 1.4 trillion over the next five years speaks to the fact that we have fundamentally lost sight of the reason why we built the utility regulatory system that we have now, which is that we invented and commercialized electricity as a resource that we said was so important to powering our modern economy that every consumer should be able to access it. And the fact that you have one in three Americans, 80 million Americans, that are struggling to pay their utility bills, which are seen as such a small expense, suggests the fact that across the board, we are not meeting the moment as much as we need to. There's a couple examples that I would point to, though, in terms of signs of optimism. So in Indiana, Governor Braun recently signed into legislation, he signed into a bill that would change the way that utility companies are compensated based on performance, based on outcomes, not just on how much they're spending, which is something that a lot of folks wouldn't have had on their bingo card last year. Governor Sherrill's first action was an executive order looking at utility business model reform. And if we don't address the root cause of this challenge right now around CapEx spending, there's a risk that we're going to blow through consumer rates. And if you think that the consumer sentiment right now is bad, and the political pressure right now is bad around electricity, which has gone up 40% in the last five years, if they go up 40%, or even double over the next five years, I don't think any of us can imagine what that would do in terms of not just the new politics of electricity, but also the new markets around electricity. And we're coming up on the midterms. Do you think that either candidates or other lawmakers are looking to what the governor of Indiana is doing, what Mikey Sherrill is doing in New Jersey and saying, this is something that I should also be leaning in on? Or are these kind of one-off efforts? I recently got asked this question. history where utility bills specifically, not energy affordability, not oil and gas, what you pay the pump, but utility bills and electricity costs specifically could be a defining issue at the ballot box? If anybody knows one, I would welcome that. But I don't know if that's ever happened. And this year with 36 elections with many, many congressional races, we are seeing candidates from mayor to state legislator, to attorney general, to governor, to member of Congress, PUCs, commissioners in states that elect them. They are all talking about this issue. And there's some states where it's very clearly becoming a major flashpoint. I would point to Michigan and the governor's race. I would point to Wisconsin and the governor's race, Nevada and the governor's race, some key Senate elections like in Maine. And some states where it's very clearly becoming a major flashpoint. I would point to So I expect this to be a hotly contested issue. this is a moment where policymakers and elected officials have the opportunity to demonstrate their leadership to their voters, to their consumers, as to what they're going to do on this. And we're going to be putting out some polling in the next few weeks, an update to our 2025 polling showing where consumer sentiment is at now relative to a year ago. And I will just say as a preview, there are some statistically significant changes even in the last year on that. And I want to drill in specifically into data centers. You've surveyed the entire country on this. What is real in terms of what data centers are doing to influence these rates? So I think one of the common misconceptions is centers around Econ 101 around this, which is there's this idea that rising demand automatically means rising prices, because that's what you're taught in Econ 101. But what Econ 101 also teaches you is that if there's a monopoly, that that paradigm does not exist. And that is what we're talking about and dealing with, which is a monopoly utility structure. So what actually is a driver of cost, especially in vertically integrated regions, is the supply side. And what are we doing? That's the new CapEx spend. Now, to be clear, there are definitely instances where demand does impact price, the most prominent being PJM and the capacity auction market, which is not your entire bill, but is a component of your bill. And so in that case, what we saw was, you know, there's a lot of demand, there's a lot of constraint supply, rising demand led to this rupture, such that capacity auction prices significantly spiked and consumers felt it across the 67 million consumer footprint. But that's key, because particularly across the rest of the country, load growth, based on the Lawrence Berkeley National Lab study, has actually been shown to reduce rates, or at least correlated with a reduction in rates. And the general idea there is that if you can take the fixed cost of the grid and spread it over more consumers, you can actually reduce the cost of the grid. And so if you can take the fixed cost of the grid and spread it over more consumers, you can actually reduce the cost of the grid. And so that fraction, which is your electricity price. I've got customers that have time of use rates. We need to make sure we respect that. I need to pre-cool during these hours. Maybe there's some hours that have a lot of solar power. So let's make sure that we soak up as much of that solar as we can. But I need to really manage my peak during this other period of time. And so figure out how do we take all those goals and then come up with schedules for all the resources, whether it's batteries, thermostats, electric vehicles. Energy have maps that evolution through a four-level maturity curve. Level one, looks like traditional demand response. At levels three and four, a VPP is a real-time resource that can meet many different needs on the system. It's actually better than a power plant because you're able to solve problems in the distribution network, which is where a lot of the cost is right now. You're able to solve problems in an automated way, whereas power plants actually are fairly slow to respond to issues. It's the future of how the grid operates. And we just need to connect them in the right ways, give them the right algorithms and make that happen. Energy Hub's GridAware Derms is the flexibility platform trusted by 230 utilities across North America. Open Circuit is brought to you by Everyday Electric. After years proving the market was ready, they're delivering a new kind of VPP. So how does it work? Starting with features built into the products people already own and use. Things like smart thermostats, electric vehicles, and home batteries adjust automatically to the needs of the community. Energy Hub's GridAware Derms is brought to you by Everyday Electric. So how does it work? all stakeholders take the time to educate policymakers, consumers, regulators about why bills are going up and to not lose sight of that, because I think there is definitely a focus on the data center piece. But again, what I worry about is that we lose sight of the fundamental structural drivers, which is an aging grid, extreme weather events, and that if we don't get that in check, then we're not going to prevail. I guess the other thing that I would say is just this, which is that we have seen the story before of rising electricity demand and rising electricity prices. And for better or worse, that led to some of the most significant disruption and market restructuring that our grid has seen. And I think what I would just end on is that I don't know if we can fully predict five years from now what any of this is going to look like. And I think what to me that means is that it's an opportunity for us to rethink, reimagine, and re-envision what is the grid of the future that we're trying to build. Not just the physical grid, not just the physical infrastructure, but also the regulatory infrastructure, and use this as a moment to make sure that we're advancing a system that truly can unlock more out of our existing grid infrastructure while making it easier to build new infrastructure, that can lower utility bills while advancing economic development opportunities, and that can take us back to that original vision of the grid that we had, which is we've got electricity, we've got to figure out a way to get it to people so that everybody can use it, because it's the lifeblood of our modern economy. And we've got to do so in a way that's affordable and reliable. And now is the moment for us to reimagine what that looks like. Open Circuit is a production of Latitude Media. You can, of course, find all of our episodes on Apple, Spotify, or wherever you get your podcasts and give us a rating and review if you haven't done that already. Also, you can find us on YouTube. Starting this year, we started posting all of our episodes on YouTube. And if you want to watch our episodes each week, go subscribe to Latitude Media on YouTube. Thanks so much. We'll be in our regular cadence soon. We'll catch you next time.