Electricity Prices Are on the Ballot This Election. Watch Utilities.

Several state and local races could determine the fortunes of some utility companies. (Joe Raedle/Getty Images)

Key Points

• Electricity prices have become a significant political issue, with state and local elections potentially influencing utility regulation and rates.
• Key races in New Jersey, Virginia, and Georgia could impact utilities like PSEG, Dominion Energy, and Southern Company.
• New Jersey and Georgia have seen electricity rate increases of over 20% and 30% respectively, making energy affordability a central campaign topic.

After years of double-digit inflation to consumer bills, electricity has emerged as one of the hottest political issues this election season.

Several state and local elections on Tuesday could impact how regional governments handle the problem. They will also shed light on whether rising electricity prices will be a major liability for President Donald Trump and other Republicans in next year’s midterm elections.

The outcome of some races could also determine the fortunes of utilities, whose earnings can swing based on regulatory changes. Among the utilities under the gun are New Jersey utility Public Service Enterprise Group , Virginia’s Dominion Energy , and Georgia-based Southern Company.

“This has not been a political issue historically,” said Charles Hua, the executive director of PowerLines, a nonprofit focused on consumer energy issues. “Energy affordability certainly has been—but more on the oil and gas side, and less on the electricity side.”

The key elections to watch are the races for New Jersey and Virginia governor and for the Georgia Public Service Commission, whose members vote to determine utility rates.

Mikie Sherrill, the Democratic candidate for New Jersey governor, has said she wants to declare a state of emergency “on day one” and freeze rates on electric bills. Rates have soared more than 20% for the average New Jersey household in the past year. Hua said it’s not clear how Sherrill can actually undertake such a rate freeze, and such a move could result in litigation by the utilities.

Her opponent, Republican nominee Jack Ciattarelli, has blamed rising prices on environmental laws and wants to withdraw from a pact among northeastern states that caps their emissions. Whoever wins will have the power to appoint to regulatory bodies people who could impact future rates.

Virginia is notable because it’s the state with the most data centers. Data centers need a lot of electricity to run, and nearby residents sometimes foot the bill for some of the infrastructure. Utilities Dominion and Appalachian Power have asked for a combined $1.6 billion worth of rate increases this year, and the state government plays a big role in deciding how much of that money the utilities get, Hua said.

Abigail Spanberger, the Democratic candidate for governor in Virginia, has pushed for more electricity generation, including an offshore wind farm being constructed by Dominion and new, small nuclear plants. She has also emphasized making data centers pay their “fair share” for the electricity they use.

Winsome Earle-Sears, the Republican candidate, has blamed soaring prices on Virginia’s environmental rules, and has pushed for the state to embrace a more diverse set of energy sources, including coal.

A new governor could make things tougher for data centers and the utilities that serve them. Virginia’s Democratic-controlled legislature attempted to impose new rules that would add reviews for data centers earlier this year, but Republican Gov. Glenn Youngkin vetoed the bill. The next governor might look at the issue differently.

In Georgia, the only statewide race this year is for two seats on the public-utility commission, which votes on electricity rates. Currently, all five seats are controlled by Republicans. Hua said that Georgia’s rates have risen more than 30% in the past two years, or around $500 per household, following approvals from the commission. A three-year freeze on base rates was passed in July.

“Utility bills are quite literally on the ballot in Georgia,” Hua said. “There’s a real chance here that the incumbents lose, which would be the first time since 2006.”

The rate freeze should insulate Atlanta-based utility Southern Company from big near-term changes, but the election could signal a shift in utility regulation ahead, wrote Jefferies analyst Julien Dumoulin-Smith. “The election’s off-cycle timing, lower early-vote visibility, and national attention create a noisy backdrop,” he wrote.

Write to Avi Salzman at avi.salzman@barrons.com