I can't stop thinking about this number. Florida Power & Light cut power to 1.23 million homes in 2024 for unpaid bills. That is about 102,000 shutoffs a month. Florida Power & Light is owned by NextEra. NextEra is the top holding in XLU. It makes up nearly 13% of the fund.

If you own XLU or NextEra or Duke, you own a piece of this machine. It earns an authorized return on equity near 10%. I don't think most people realize they are on both sides of this trade. Your utility stocks win. But the bills those stocks create are pulling cash out of every other part of the economy.

PowerLines dropped a report last Thursday. Utilities filed $23.1 billion in rate-hike requests in the first nine months of this year. Q3 alone set an all-time record. Last year the total hit $31 billion. More than double 2024. This year is on pace to match it or beat it. Twenty-eight states. The Q3 filings alone could touch 45.5 million customers. That is not a rounding error. That is forty-five million homes bracing for higher bills this winter.

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Here's what worries me. Behind those filings sits a $1.4 trillion capital spending plan through 2030. That is up 21% from the year before. Utilities earn an authorized average 9.84% return on equity. Not on daily costs. On equity. So the push is to build. Not to squeeze more from what they have. NextEra alone plans $94.1 billion. Duke plans $103 billion. Southern Company raised its plan to $81 billion. Those three add up to $278 billion. AI data centers, storm-proofing, and new power plants drive the surge. Over 30 utilities named data centers as a growth driver through 2030. I find that part hard to ignore. The same AI wave lifting your tech stocks gives utilities a reason to build more and bill more. Every dollar they spend becomes a dollar they are legally owed a return on. That return lands on someone's bill.

Regulators are supposed to be the check on this. They are not. State commissions approved 66% of the dollar value of rate requests last year. The two-decade average was 52%. Only 2 of 83 requests were flat-out rejected. Indiana's Governor Braun pushed back hard on NIPSCO's $471 million ask. He did not kill it. The commission cut it to $257 million. He called it the first real rejection in decades. That is the rare case. The normal case is simple. File. Approve. Charge.

Every major AI firm now relies on massive data centers. But these monstrosities suck up our electricity. They drain our water supplies. They steal precious land. Yet AI companies are requesting 700 gigawatts of new electricity – enough to power every home in America!

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Now look at the people paying these bills. Electricity prices are up nearly 40% since 2021. Rates climbed 7% last year alone. Bank of America tracks what people pay each month. Utility bills rose 5% over the past year through the summer. In Detroit, Baltimore, and DC, the jumps topped 10%. Two in three customers told PowerLines their bills went up this year. Four in five said they feel powerless to stop it. Utilities sent 94.9 million final shutoff notices to home customers in 2024. Not warnings. Final notices. And 13.5 million times they followed through.

Every dollar a family puts toward a higher bill is a dollar gone. It does not reach a store or a car lot. I see the pullback in survey data already. It is sharpest among lower-income homes. But it is moving up the ladder. Own an S&P 500 index fund? The utility stocks inside it ride the rate machine. But the retailers and restaurants in that fund lose out. Rate hikes drain the cash they need. Nobody knows when this drag shows up in earnings. But it builds quarter by quarter. The same way the rate hikes do. Our portfolios sit on both sides of this whether we like it or not.

I get it. We own these stocks because they are supposed to be safe. Look at the margins though. Utilities kept 15 cents of every dollar they collected last year. That is up from 13 cents over the prior four years. Florida Power & Light pocketed 27% of its revenue as profit. Its CEO earned $24.2 million. Across the industry, utility CEOs split $626 million in pay last year. There are 110 listed utility companies. Their combined profits rose from $38.8 billion in 2021 to $52.5 billion in 2024. The machine does what it was built to do. The question is who pays for it.

Two rejections out of eighty-three filings. A 97.6% pass rate. Regulators exist to protect us from monopoly pricing. Right now they are the billing department.

Picture a retiree in Juno Beach, Florida. That is NextEra's headquarters town. His XLU dividend lands in his account. That same week, his neighbor's lights go dark over an unpaid bill. Same company. Same street. He collects a check from the machine that shut off the lights next door.

More on this tomorrow.

— American Ledger