Election Shows Electricity Politics Are Hot. This Stock Was Downgraded.

New Jersey governor-elect Mikie Sherrill has vowed to freeze electricity rates (Joe Raedle/Getty Images)

Key Points

• Democrats won Public Service Commission seats in Georgia, potentially leading to tougher conditions for utilities and affecting Southern Co.’s earnings.
• Democratic gubernatorial victories in New Jersey and Virginia, where electricity prices were a campaign issue, signal the political importance of power costs.
• Rising electricity prices are becoming a national political theme.

The politics of electricity are here to stay, and that could be bad news for some utilities.

Democrats in New Jersey, Virginia, and Georgia all won their races on Tuesday after running campaigns based in part on making electricity more affordable.

In Georgia, two Democrats won seats on the state’s five-member Public Service Commission, which votes on electricity rates. It had been years since Democrats had won these kinds of elections on the state level in Georgia, experts said, and their victory could signal a tougher climate for utilities.

Jefferies analyst Julien Dumoulin-Smith lowered his rating on Southern Co., an Atlanta-based utility, to Hold from Buy after what he called a “resounding Republican loss.” Shares fell 1.1% in early Wednesday trading.

Before Tuesday’s results, Republicans controlled all five seats on the board and had supported several utility rate increases over the past two years. If the board changes the formula to determine rates in the future, it could shave about 8% off Southern’s earnings per share, he wrote.

Georgia recently froze base electricity rates for three years, but the impact of Tuesday’s election could start to have a bigger effect in 2029.

Democrats won governor’s races in New Jersey and Virginia after making electricity prices part of their campaigns. The immediate effect of those victories on rates and utilities is tough to gauge, but they signal that the issue has political potency.

New Jersey governor-elect Mikie Sherrill vowed to freeze electricity rates as soon as she gets into office, though some experts question whether she can do that. And Virginia governor-elect Abigail Spanberger said in her victory speech that she will work to bring down power prices, add new energy sources, and “make sure that data centers pay their fair share.”

Data centers have been blamed for causing power prices to rise because of their enormous energy needs.

Rising power prices are a theme that Democrats have begun to hit on at the national level, too. They criticize President Donald Trump for failing to bring down electricity prices after pledging on the campaign trail he could make them drop by 50%.

Trump, for his part, blames rising prices on the use of renewable energy sources. Republicans in Virginia and New Jersey tried similar arguments in their races.

The midterm elections next year will feature a much broader electorate. The politics of electricity are likely to play a role again.

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