The Big Picture 2023: Electric Natural Gas and Water Utilities Outlook

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A look at the prominent issues likely to face stakeholders in the utility sector in 2023 and beyond.

Introduction  

The U.S. utility sector is undergoing significant changes that are impacting companies of varying sizes and service types. Investments in cleaner forms of energy production and the need to bolster infrastructure reliability is expected to drive utility capital spending in the next few years. Investors, regulators and an array of other entities with diverse interests are playing a critical role in moving the industry forward.  

The Take 

Electric utility investment decisions are being guided in large part by the societal push for expanded use of renewable energy, the need to address the impact of electric vehicles on the domestic electric grid and improvements in smart grid technologies. Enhanced transmission and distribution, or T&D, spending has been a focal point for utilities for several years, but it is garnering more attention than ever as system reliability is being tested by the effects of climate change. Utilities will play an essential role in the broader domestic decarbonization transition and federal and state regulators are also at the core of this effort. 

In the electric power sector, more frequent extreme weather events are increasing stress on the grid and impacting system resilience, and new renewable energy resources, especially those further away from load center, are highlighting the urgent need for new transmission infrastructure to integrate these resources to the grid. Gas utilities have heeded calls to replace vulnerable parts of their distribution systems in light of several high-profile incidents. The highly fragmented water utility industry is dealing with its own unique set of infrastructure replacement needs, and this matter also features prominently in national discussions.  

Federal legislation designed to support decarbonization initiatives is expected to attract substantial interest from utility investors in the coming years, but regulatory support, in the form of adequate returns on equity and ample cost recovery opportunities, is necessary to ensure that capital continues to flow to the sector.