ELC 2025: A Blue-Sky Future Owned by Private Equity? By Kristen van de Biezenbos and Melissa Powers

In July, 2025, the New York Times reported on moves by two major private equity companies, BlackRock and Blackstone, to acquire electric utility companies. BlackRock had proposed purchasing Minnesota Power, which primarily serves business and residential customers in the northern part of the state, while Blackstone had already acquired TXNM Energy, which serves customers in New Mexico and Texas. Both companies appear to be scooping up the utilities in anticipation of a major increase in energy demand driven by data centers, AI, and cryptocurrency mining. While experts have long predicted a stagnation or decrease in future U.S. electricity demand, the explosion of interest in AI and crypto has dramatically revised those estimates. Some models now forecast that these technologies will cause demand to surge where the data centers and crypto facilities are located, and private investment companies want in on what some believe will be a “gold rush” in the electricity sector. This gold rush has threatened the U.S. electricity system’s progress in decarbonizing—progress that had demonstrated to many that blue skies are possible. It also raises profound concerns about who will profit and who will pay as private asset managers see the appeal of buying up utilities. 

To understand these risks, it helps to have a very brief background on utility regulation. Energy utility companies, like other “public utilities” (a term that, confusingly, refers to primarily privately owned companies with a duty to provide services in the public interest), are authorized to operate energy monopolies that would otherwise be illegal under U.S. law. In exchange for the government allowing them to maintain their monopolies, energy utility companies are subject to various legal requirements, including a duty to provide nondiscriminatory service to customers within their service territories, regulation of the rates the companies charge, and regulatory oversight of the utilities’ expenditures. State regulators set the rates by first determining how much a utility needs to earn annually and then dividing that amount by anticipated energy sales to different customer classes, which typically include residential customers, industrial customers, and commercial customers (each of which can be subdivided into more specific groupings). The annual earning requirement is established through a “cost-plus” formula that allows the utilities to earn a rate of return on their capital expenditures (i.e., to profit from building infrastructure) and to recover—but not directly profit from—their operating expenses, including the cost of fuel and customer service. In concept, this ratemaking structure allows utilities to earn enough profit to maintain their financial integrity and attract sufficient capital to build the infrastructure we need, while keeping rates affordable for consumers. And, again in theory, regulatory oversight ensures that customers get adequate service and are protected against utility risk-taking.

 In practice, the regulatory system has always been vulnerable to regulatory capture and, perhaps more insidiously, a power imbalance that favors electric utility companies. Their rates of return are excessive—and not because the market has over-valued utility companies but because rate regulators set the returns too high, requiring customers to pay excessive rates to the utilities. According to one analysis, energy utilities’ rates of return (and thus returns on equity) are twice their cost of capital, and the average return on equity for the utility sector is 43% higher than the average return of Wall Street investment firms. 

No wonder Blackstone and BlackRock want in on the utilities’ action! 

And when things go wrong—if past investments become unnecessary before they are fully paid off (i.e., they get “stranded”) or fuel prices become higher than expected—customers, rather than utilities or their shareholders, end up paying the price. Worse, when better and cheaper alternatives to the utility’s service become available, customers are often legally prohibited from choosing the alternatives. Imagine how much worse that power imbalance will be when asset managers like Blackstone and BlackRock—which have mastered the art of extracting income from infrastructure that we, the public, have paid for—gain ownership over the electricity system and benefit from monopoly power.

 In fact, it does not take too much imagination to identify the risks. Consider, for example, the current AI, cryptocurrency, and data center boom. Utilities want to build new power plants (and earn elevated rates of return) to serve the growing energy demand, but they want to spread the costs of those plants among all ratepayers—basically requiring all customers to subsidize the tech industry’s AI dreams and leaving ratepayers responsible for stranded assets if AI and cryptocurrency operations go under. Some states have refused this gambit, but the Federal Energy Regulatory Commission (FERC) went the other way, denying a utility’s attempt to protect other customers from the risks of building new power plants to supply electricity to speculative cryptomining operations. For now, state and federal policies are working in parallel, but one could easily imagine a global asset management firm insisting upon a uniform federal policy that overrides state attempts to prevent this cross-subsidization.

Increased ownership of utilities by Wall Street asset managers could also interfere with states’ climate goals, particularly since Congress rescinded most of the Inflation Reduction Act’s clean energy subsidies. As William Boyd noted, large multinational companies (the so-called “Clean Energy Supermajors”), large financial institutions, and large asset managers were poised to “extract substantial profits” from these subsidies–while figuring out ways to keep our energy prices high. When the subsidies go away, profit opportunities will lie in building massive projects as quickly as possible to serve the tech industry’s energy appetite–which means building or restarting fossil fuel plants. And once these assets are built, the firms will have every incentive to keep marginal wholesale prices high by ensuring that wholesale energy markets are designed to exclude renewable energy sources. The disturbing retreat from corporate climate commitments, we believe, will only accelerate if Wall Street firms, which are isolated from communities clamoring for decarbonization, become the owners of energy utility companies.

And, finally, there is the risk that increased Wall Street ownership will threaten grid reliability and increase prices due to the change in utility management. Companies focused on arbitrage opportunities in the electricity sector have engaged in market manipulation and economic withholding, exposing consumers to elevated prices as companies intentionally made their energy supplies scarce. It was only 25 years ago when Enron’s economic withholding and other corrupt acts, which a network of other private and public actors enabled, drove California utilities into bankruptcy. While regulations and market rules have aimed to limit the risks of future illegal acts, research indicates the risks are still very present. 

But even as the risks of investment firm takeovers of public utilities are rising, the guardrails to prevent abuses of regulated rates—and guaranteed profits—of utility companies have been dismantled. The first (and strongest) line of defense was the Public Utilities Holding Companies Act of 1935 (“PUHCA”). Congress enacted PUHCA after holding company conglomerates monopolized ownership of local electricity utilities and used the corporate structure to extract value for investors while loading the utilities with risk and debt. PUHCA gave the Securities and Exchange Commission the ability to review any purchase of more than 10% of public utility shares, to impose strict guidelines, and even to impose a “death sentence” by breaking up holding company ownership of public utilities. This came about after one of the largest holding companies—which owned electric utilities in 39 states—went bankrupt, leaving thousands without power and wiping out the savings of its investors. PUHCA instituted numerous regulatory reforms, including restrictions on complex businesses and financial arrangements between regulated and non-regulated affiliate companies. But despite its success in preventing holding company manipulation of public utilities, PUHCA was repealed in 2005. 

Since the repeal, there has been an increase in holding company acquisition of utilities and an uptick in utility fraud, corruption, and bribery charges. More broadly, evidence suggests that regulators cannot or will not adequately regulate corporate conduct that impermissibly extracts value from and shifts risks onto regulated utilities. Private equity is subject to almost no regulatory oversight, so risks to utilities and their customers may increase when private equity firms take over regulated utilities. It is little wonder that private equity acquisitions have raised red flags. With respect to the BlackRock deal, ratepayer advocates and environmental groups opposed the acquisition, fearing it would drive up rates and slow progress on decarbonization. It also came to light that many Minnesota Power employees and board members who voiced support for the takeover were provided with financial compensation from the utility, likely fueled by the financial incentives offered by BlackRock. Despite the opposition and indications of shady dealing, the Minnesota Public Utility Commission (“PUC”) approved the acquisition. We believe it erred. When firms that prioritize profits and investors’ returns over all other concerns seek to acquire utilities, we should be concerned about the potential harm to captive ratepayers. 

So, what can be done to stop these takeovers? First, it is time for Congress to restore PUHCA in full. Second, states have the authority to deny merger requests that they deem to not be in the public interest. In fact, an administrative law judge recommended the state deny BlackRock’s takeover of Minnesota Power because of the risks it presents to ratepayers. Time will tell whether the PUC made the right choice. In the meantime, we hope other regulators will closely scrutinize proposed acquisitions and recognize that the electricity system is both too fragile and too important to be treated like other assets that asset management firms have gobbled up. Finally, to the extent local electric utilities are vulnerable to outside acquisition, that may signal that states need to step in and support public ownership of their own electric utilities. Allowing them to become just another holding in asset managers’ massive investment portfolios is a way to lose even more control of an essential service. 

More broadly, private equity’s entry into the electricity system should lead us to question how we pursue our blue-sky future. Private equity firms have become enormously wealthy, often employing a “plunder” business model of buying companies, loading them with debt, stripping them of their value, and then reselling them or liquidating them through bankruptcy. Through their profit-extraction model, private equity firms have destroyed storied businesses; delayed investments in infrastructure; cut services, wages, and employment; reduced tax bases for local communities; and refused to provide health care and other essential services. Utilities and utility regulators may be tempted by the capital that private equity investment could provide—some of which could presumably facilitate quicker decarbonization. Is this capital worth the risks? Electricity consumers in Minnesota, New Mexico, and Texas may be about to find out.

Kristen van de Biezenbos is a Professor of Law at California Western School of Law.

Melissa Powers is a Jeffrey Bain Faculty Scholar & Professor of Law at Lewis & Clark Law School.