The Big Picture: 2022 Electric, Natural Gas and Water Utilities Outlook

Introduction

The U.S. utility sector is dynamic, and stakeholders are paying close attention to major changes taking place that are affecting service providers of varying sizes. The growing need for investment in infrastructure upgrades and the desire to meet environmental, social and governance goals is expected to drive utility capital spending in the next several years. Investors, regulators and a variety of other entities with diverse interests are playing a critical role in moving the industry forward.

The Take

Electric transmission and distribution spending is the cornerstone of many utilities' investment programs as companies look to harden critical infrastructure and accommodate the expansion of electric vehicles, energy efficiency, battery storage and smart grid technologies that facilitate the broader sector's transition toward decarbonization.

Federal and state regulators play an increasingly critical and often overlooked role in the energy transition, and climate change is accelerating the shift in the nation's generation mix to renewable sources of energy and away from fossil fuels. In the electric power sector, more frequent extreme weather events are increasing stress on the grid and threatening system resilience and reliability, and new renewable energy resources, particularly those in remote locations, are highlighting the urgent need for new transmission infrastructure to interconnect the resources to the grid. The highly fragmented water utility industry is dealing with a unique set of infrastructure replacement needs, and this matter also features prominently in national discussions.

State regulatory support, including in the form of adequate returns on equity, to ensure ongoing capital attraction in the utility sector will be instrumental as the shift in generation mix ramps up and the industry strengthens the grid against climate change and other risks.