New Jersey and Pennsylvania Push Major Reforms to Overhaul Electric Utility Regulation

This week, Pennsylvania and New Jersey—two of the largest states in America’s biggest electricity market—are advancing far-reaching regulatory reforms that could reshape how electricity infrastructure is planned and funded for over 65 million Americans.

New Jersey’s Push for Utility Reform

New Jersey Governor Mikie Sherrill made electricity prices a cornerstone of her 2025 campaign, citing a 48% increase in electricity prices over the past four years. According to data from Heatmap and MIT’s Electricity Price Hub, average bills in the state rose from $83 per month to $130 during that period.

On her first day in office, Sherrill issued two executive orders to address the issue. The first directed the state to allocate funds to freeze rates, while the second declared a state of emergency to expedite the construction of new generation facilities. Embedded in the first order was a directive for state regulators to review utility business models.

On Wednesday, the New Jersey Board of Public Utilities (NJBPU) announced it will examine whether the state’s century-old utility model—one that compensates electric distribution companies (EDCs) for capital spending even when cheaper alternatives exist—should be replaced with a performance-based framework focused on affordability and long-term cost stability.

The board stated that the review is expected to drive the “most significant restructuring of utility regulation in New Jersey in decades.” During a hearing on Thursday, NJBPU President Christine Guhl-Savoy emphasized that the current system “creates a structural incentive to favor capital-intensive solutions, even when lower-cost, non-wires, or demand-side alternatives may be available.”

Guhl-Savoy added that this structure may explain why “electric delivery charges in New Jersey have risen steadily over the past decade.” For example, within the service territory of PSEG, one of New Jersey’s four major utilities, distribution charges alone increased from $19.24 per month in January 2020 to $21.84 as of April, while transmission charges rose from around $20 to just over $29 per month.

Critics argue that high local grid spending on distribution allows utilities to inflate earnings through ratepayer-funded returns. Under the proposed reforms, new projects would face greater scrutiny, and ratepayer payments would be tied to utilities meeting predefined service goals.

Bob Brabston, NJBPU’s executive director, indicated that the review will also scrutinize utilities’ regulated returns on equity—echoing calls from Pennsylvania Governor Josh Shapiro for greater transparency and justification of these returns.

Pennsylvania’s Regulatory Compact Review

Pennsylvania is also questioning whether the modern “regulatory compact”—which grants utilities monopoly geographical franchises and regulated returns on capital investments—remains viable amid rising prices and data-center-driven load growth. Governor Shapiro recently wrote to state utilities, demanding that their regulated returns on equity be “transparent” and “justifiable.”

These parallel efforts in New Jersey and Pennsylvania signal a potential nationwide shift in how electricity infrastructure is regulated, with both states prioritizing affordability, performance, and long-term cost stability over traditional capital-intensive models.