Rochester Business Journal: New York is paying for its energy transition twice | Guest Opinion

July 13th, 2026

Read on RBJ.net here.

Fitch recently revised its outlook for the North American utilities sector from ‘neutral’ to ‘deteriorating,’ reflecting mounting credit pressure from a more difficult political and regulatory environment for cost recovery. This was not the result of weak demand – instead, the reason is much more problematic: the politics of paying for the energy transition, while demand for power is rising, are becoming more difficult than the engineering. In its latest outlook, Fitch specifically noted the challenges of recovering investments in an environment where policymakers set increasingly costly mandates, utilities are incentivized to deploy capital, and regulators ultimately determine how those costs are passed through to ratepayers.

That should get the attention of anyone in New York who opens an electric bill.

Credit rating agencies like Fitch, Moody’s, and S&P aren’t household names, but they shape the cost of nearly every dollar that companies, governments, and utilities borrow. Credit ratings and outlooks influence the cost of borrowing. A downgrade — or the prospect of one signaled by a negative outlook — can increase financing costs, while stronger credit ratings generally reduce them. Because these agencies measure financial risk rather than push a political agenda, their assessments offer something rare in today’s debates: an independent verdict on whether policy is truly working.

That verdict, in this case, is unflattering — and the reason is what makes it striking. Fitch did not identify a market failure. It identified a political and regulatory one.

Consider this: Fitch effectively downgraded its view of the sector on June 12, revising its outlook from “neutral” to “deteriorating,” exactly one week after the State Legislature adjourned for 2026 and a little more than two weeks after the ink had dried on the newly enacted state budget. Within that budget was an Energy Affordability Package that included much-applauded “reforms” that tinkered with long-held principles that make utilities attractive to private capital markets, such as Return on Equity, and requiring utilities to submit budget-constrained rate case proposals. These proposals make for appealing political sound bites, but they are less reassuring to the investment community that supplies the billions of dollars needed to modernize and expand the electric grid. And when utilities become less attractive to investors, higher financing costs eventually flow through to customer bills.

Utilities across the country are facing enormous capital demands. Some of that spending is market-driven: data centers, reshored manufacturing, and electrification are pushing load growth to levels we haven’t seen in a generation. But in New York, a growing share of utility investment is being driven by state policy itself, most visibly through the Climate Leadership and Community Protection Act (CLCPA), which imposes ambitious mandates on how energy is generated, delivered, and consumed.

The goals of the CLCPA are not the issue here.  The issue is the policy-driven pressure on utilities and the Public Service Commission (PSC).  The Legislature sets mandates requiring utilities to invest. The PSC must then decide how — and how quickly — those costs are recovered. That is where New York’s affordability debate collides with financial reality. If regulators allow utilities to recover the full cost of these investments, customer bills rise. If they delay or restrict recovery in the name of affordability, utility credit profiles weaken, borrowing costs increase, and customers ultimately pay those costs as well. In other words, the debate is no longer whether ratepayers will pay for the energy transition. The debate is whether they will pay through infrastructure costs, financing costs, or both.

This is precisely the tension Fitch identified. As the agency put it, “a return to ‘neutral’ would require evidence that affordability pressures are easing and that utilities can continue to recover rising investment needs without materially increasing regulatory lag or weakening credit profiles.”

The political system has increasingly embedded policy costs in utility rates, and affordability constraints are now managed primarily at the point of rate recovery rather than at the point of policy design.

It is fair to acknowledge the constraint this creates for regulators: affordability is a genuine concern for many households, and approving rate increases is politically difficult. But limits on cost recovery do not eliminate costs—they shift their timing and composition.

When recovery is delayed or stretched, utilities must rely more heavily on financing to bridge the gap between upfront investment and eventual repayment. That can place pressure on credit metrics over time and, in turn, affect the cost of capital. To the extent borrowing costs rise as a result, those higher financing costs are ultimately recovered through customer bills.

The irony is that policies intended to make the energy transition more affordable can, through the back door of the bond market, make it more expensive. Fitch isn’t warning that utilities are spending too much. Fitch warns that the politics of paying for what policymakers have already decided to build is becoming increasingly difficult — and that this difficulty carries a cost of its own.

Fitch is doing its job — flagging a problem before it becomes a crisis. The question is whether anyone in Albany is listening.

Justin Wilcox is the Executive Director of Upstate United.