If you’re old enough to remember landlines, maybe you remember the feedback loop that turned them from must-haves to luxury items. As customers started switching to mobile, the phone companies had to raise rates on the cord keepers to cover the cost of their telephone lines. That only pushed more people to defect, exacerbating the problem—and increasing the cost.

It’s this sort of feedback loop that worries Sonny Garg. He’s the head of energy research for Uptake Technologies and spearheaded the data analytics firm’s new report showing that over the past two decades, the investor-owned utilities that represent nearly half the US grid’s electrical load saw the effective cost of generating one megawatt of electricity rise 74 percent.

Making electricity, in other words, is becoming a less profitable business. And Garg worries that these costs will eventually reach consumers and send ripples throughout the economy. “You don’t need a huge amount of people to leave to cause a huge issue with the grid,” he says.

Unlike in the phone industry, an enervated electric grid can hurt just about everybody. Even most folks with solar panels on their roof still need that baseload power when the clouds block the sun long enough for the fridge to suck their Powerwall dry, or wires onto which they can shunt their excess power whenever the panels are generating more juice than any home can use.

These utilities are taking it from all sides. Increasingly energy efficient homes and the economy’s shift from power-hungry manufacturing to service industries are dampening demand. Meanwhile, the insatiable costs of keeping power plants running—salaries, maintenance, etc—aren’t dropping. And that 74 percent rise doesn’t even account for the cost of the fuel these plants turn into electricity.

Futilities

Don’t lean on capitalism to work this out. The utility biz isn’t for the laissez-faint of heart. The financial realities of building a power plant (plus the infrastructure to transmit and distribute the electricity it produces) means the utility industry has been pretty heavily regulated from early on. In return for their virtual guarantee of profit, utilities agreed to oversight from public utilities commissions that would ensure they were charging consumers a fair rate. Overall, this arrangement worked for everyone until the oil crisis of the 1970s. Up until then, a lot of America’s electricity came from oil-fired plants, and so the utilities passed their crazily inflated fuel expenses on to consumers.

“The regulatory structure basically paid utilities to build power plants, and charge customers for the cost of those plants through bills, but didn’t provide much incentive for the utilities to be efficient,” says Seth Blumsack, who studies energy policy at Pennsylvania State University. So long as you didn’t have any competitors eyeing your market share, why innovate or look for cheaper fuel sources?

Prior to this, many power plants had been owned by so-called investor-owned utilities—because the upfront costs of building a power plant required extensive outside financing. As part of the limited monopolies, these investor-owned utilities also controlled the transmission and distribution wires (a setup known as vertical integration). After the oil crisis, however, state and federal regulators stripped the investor-owned utilities of their monopolies on power generation. Now, so-called independent power producers could build a power plant, and sell their electricity in a marketplace. “Rather than having these integrated utilities that would build power plants and sell the power to its own captive customers, the idea was to create these regional markets where power plants would compete with each other and essentially the power plant owners would take on the risk of not making a profit,” Blumsack says. This new risk meant power plants had to innovate, and become more efficient, or go dark. Independent power producers were pretty successful. Where investor-owned utilities at one time generated about 70 percent of US energy (with publicly-owned utilities, like the Tennessee Valley Authority, making up the difference), now they generate roughly 40 percent of the US’s total electrical load.