• Statechains Mechanism: A third method for Bitcoin scaling involves moving the ownership of bitcoin rather than moving the bitcoin itself.
• Re-Keyable Vault Concept: Ownership transfer is conceptualized as "re-keying" a vault, secured by two components: one held by the owner and one by a neutral Statechain Entity.
• Cooperative Deadlock: Neither the owner nor the Entity can unilaterally spend the bitcoin; they require the other's key fragment for a transaction.
• Key Rotation Process: Transferring ownership from Alice to Bob involves generating a new locking mechanism based on Bob's key, after which the Entity deletes the fragment matching Alice's key.
• Cryptographic Basis: The mechanism relies on concepts like adaptor signatures, where the Entity updates its key to mathematically match the new owner's "Transitory Key."
• Trust Trade-Off: Statechains introduce a trust-minimized relationship with the Entity, as they cannot steal funds but must be trusted to honestly delete old key fragments.
• Exit Transaction Protection: To mitigate risks if the Entity disappears or acts maliciously, each transfer includes a pre-signed Exit Transaction with a Decrementing Time-Lock.
• Time-Lock Race Condition: The Decrementing Time-Lock ensures that the current owner always wins the race to withdraw funds on-chain if a dispute arises, as their time-lock is shorter than previous owners'.

In our previous exploration of Bitcoin’s scaling landscape, we looked at Lightning as a network of express couriers, and Ark as a public railway system that efficiently batches users onto a shared train. Lightning focuses on moving value from point A to point B by updating balances, while Ark focuses on concentrating as many users as possible on a single point. But there is a third way to scale Bitcoin, one that involves no routing, no batching, and surprisingly, no movement at all. This is the logic of Statechains: instead of moving the bitcoin to a new owner, we simply move the ownership of the bitcoin.

To understand this, we have to let go of the idea of "sending" money and start thinking about "re-keying" a vault.

The Re-Keyable Vault

Imagine a high-tech transparent vault sitting in a public square. Inside is a bar of gold, or better yet, some bitcoin. Everyone can see it, and everyone knows exactly where it is. This vault has a unique security feature: it has no physical keyhole. Instead, it opens only when it receives a specific digital signal constructed from two separate mathematical fragments. One fragment is held by Alice, the owner (imagine this is you). The other fragment is held by the Statechain Entity (a neutral operator), much like a safe-deposit box where your bank holds one key while you hold the other one. Neither of you can open the vault alone. The Entity is not a custodian; they cannot run away with the bitcoin because they lack Alice’s fragment. Alice, conversely, cannot spend the money on the main Bitcoin blockchain without the Entity co-signing Alice’s transaction. They are in a deadlock, but it is a cooperative one.

Now, imagine Alice wants to sell this bitcoin to a buyer, Bob. In a standard on-chain transaction, Alice would open the vault, take the bitcoin out, and walk it over to Bob’s vault. This is slow, expensive, and leaves a footprint. In a Statechain, the bitcoin stays exactly where it is. Instead of moving the asset, Alice and the Entity perform a "Key Rotation." Alice introduces Bob to the Entity, and together they generate a new locking mechanism for the vault that responds to Bob’s key instead of Alice’s but still needs the entity’s help to be unlocked.. Crucially, as soon as this new lock is active, the Entity deletes the fragment that matched Alice’s.

This "deletion" is the magic trick that makes Statechains work. It relies on a cryptographic concept called adaptor signatures, or simply Schnorr aggregation.  Let’s say the vault is permanently programmed to open for the sum 15. To make this work, we split the "key" to the vault into two separate parts.

1. The Statechain Key: Held by the Entity (The Operator).

2. The Transitory Key: Held by Alice (The Owner).

The "Statechain Key" is the anchor. The "Transitory Key" is the ticket to ownership, it is the piece that allows anyone to move the funds. It is called "transitory" because it is designed to change hands (or change form) as ownership moves from person to person.

The Vanishing Math

Don’t worry, we will keep it simple. Let’s see how these two keys interact using our “permanently programmed to open for the sum 15” rule. Of course, the cryptographic challenge would be much harder in reality – this is just an example for illustration purposes.

1. The Setup

• Alice holds the Transitory Key: 5
• The Entity holds the Statechain Key: 10

Together (5+10), they unlock the funds (15).

2. Passing the Torch

When Alice transfers ownership to Bob, she doesn't just hand him her key (because she would still remember it!). Instead, she performs a swap.

•  Bob generates a New Transitory Key (6) and he keeps this secret.
•  Bob tells the Entity: "I am the new owner. Please match my key!."

3. The Adjustment

The Entity must now update its own key so the vault still opens. It effectively "re-keys" itself to match Bob.

• The Entity deletes its old Statechain Key (10) and calculates the new one (9).

4. The Result

• Bob is the new owner: His Transitory Key (6) + Entity's New Key (9) = 15.
• Alice, the previous owner, is locked out: her old Transitory Key (5) + Entity's New Key (9) = 14 fails.

The moment the Entity deletes the old instruction, Alice’s key (5) becomes useless. It’s an orphan. Alice can shout "5" at the vault all day, but without the Entity’s "10," she will never reach the old target of 15. The mathematical bridge to her ownership has been burned.

To the outside world, the vault looks untouched. The Bitcoin blockchain sees a single, static UTXO that hasn't moved. But in the private reality between the users and the Entity, the ownership has completely changed hands.

The Trust Trade-Off

If this sounds too good to be true, it’s because it comes with a specific catch. We are trading the "trustlessness" of the base layer for a trust-minimized relationship with the Entity.

We don't have to trust the Entity with our funds, they can't steal them because they never have the full key. However, we do have to trust them to be honest about the deletion. If the Entity is malicious, they could theoretically keep a copy of the old key fragment ("10") and collude with Alice to cheat Bob. This is why Statechain implementations rely on reputation and strictly sequential operations. While not perfectly trustless, it is a massive improvement over centralized exchanges.

But what if the Entity disappears? Or what if a previous owner tries to cheat? To protect users, every Statechain transfer includes a pre-signed Exit Transaction that allows the user to withdraw its funds on-chain without the Entity's help. However, this creates a potential problem: previous owners also have old Exit Transactions.

To solve this, Statechains use a Decrementing Time-Lock, think of it like a countdown clock that gets shorter for every new owner.

• Owner 1 (Alice) gets an exit ticket valid in 100 blocks (about 16 hours).
• Owner 2 (Bob) gets an exit ticket valid in 90 blocks.
• Owner 3 (Charlie) gets an exit ticket valid in 80 blocks.

If Alice (Owner 1) tries to cheat Charlie (Owner 3) by broadcasting her old exit ticket, the Bitcoin network will put her on hold because her "100 block" timer hasn't finished yet. Meanwhile, Charlie can broadcast his "80 block" ticket, which confirms first. By the time Alice's ticket becomes valid, the money is already safely in Charlie's wallet, assuming he was on the lookout and prepared for publishing his exit transaction.

This mechanism guarantees that the current owner always wins the race to the exit.

At this point you might be asking “what happens to Owner 10? What if the exit ticket reaches 0 blocks?” This should be considered as the last possible state of a Statechain, in our example, Owner 10 should be the last possible owner of the UTXO and all they can do with it now is go on-chain and create a new UTXO as the Statechain doesn’t loop.

A new tool in the Box

While the concept was originally proposed by Ruben Somsen in 2018 as a way to transfer full UTXOs, the idea is evolving. Projects like Mercury Layer are building this "transfer of full ownership" model today, allowing for the instant handover of specific coin amounts (like handing over a digital cash bill). Meanwhile, newer protocols like Spark are taking this foundation and expanding it. Spark uses the Statechain model but adds flexibility, allowing users to transfer parts of the value rather than the whole UTXO, effectively combining the "re-keying" efficiency of Statechains with the divisibility we expect from payment systems. If Lightning is the courier network and Ark is the freight train, Statechains are the deed registry. They remind us that in a digital world, moving value doesn't always require moving data. Sometimes, it’s enough to simply change the locks.

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• Lease Structure: Carnegie House operates as a ground-lease cooperative, meaning residents own building shares while leasing the underlying land from a separate entity.
• Cost Escalation: Ground rent for the property increased by 450 percent in 2025, rising from $4.36 million to $24 million based on fair-market land values.
• Equity Depletion: The drastic increase in operating costs has caused shareholder equity values to collapse and raised the risk of building dissolution.
• Risk Awareness: Purchasers in ground-lease buildings typically pay lower prices to compensate for the inherent risk that land values will appreciate faster than building values.
• Legislative Proposal: New York Senate Bill S2433 seeks to cap annual ground-rent increases at 3 percent or the Consumer Price Index for leases older than 30 years.
• Market Impact: Imposing rent caps on land may discourage investment, prevent property redevelopment to its highest use, and undermine the residential ground-lease market.
• Legal Constraints: Legislative interference with existing private contracts may violate the Contract Clause of the U.S. Constitution, which prohibits states from impairing contractual obligations.
• Economic Solution: Maintaining the integrity of property rights and expanding the overall housing supply are presented as the viable alternatives to government-mandated contract revisions.

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](https://images.unsplash.com/photo-1639095150499-923d59490bad?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wzMDAzMzh8MHwxfHNlYXJjaHw0fHxiaWxsaW9uYWlyZXMlMjByb3d8ZW58MHx8fHwxNzcwMTQxNDAwfDA&ixlib=rb-4.1.0&q=80&w=1080)

Photo by Garrett Lawrence on Unsplash

For decades, residents of Carnegie House enjoyed what looked like a rare bargain at one of Manhattan’s most coveted intersections. Their apartments on 57th Street and Sixth Avenue sold at a steep discount to nearby market prices.

But like over 100 similarly situated “ground-lease” cooperatives across New York City, the low prices came with a catch. Carnegie House does not own the land on which it sits. Instead, its residents own shares in the building while leasing the land from a separate owner—a structure that keeps purchase prices low while shifting long-term risk onto buyers.

Yet Carnegie House’s ground lease recently renewed, and rent owed to the landowner skyrocketed. Shareholders saw their equity values collapse overnight. The co-op now faces the risk of dissolution, a move that would erase what remains of owners’ equity and turn them into rent-stabilized tenants.

The result has been litigation and calls for legislative intervention in Albany. But legislation that interferes with the rights and obligations of a ground lease would likely invite constitutional challenges and set a harmful precedent for property rights and urban land use, with consequences extending far beyond a single building.

Carnegie House’s ground lease has been the subject of concern for years. The lease, signed in 1959, set the building’s annual ground rent at 8.1667 percent of the fair-market value of the unencumbered land, with three 21-year renewal options. That structure worked reasonably well for decades. But when the lease renewed in 2025, soaring land values caused the ground rent to spike by 450 percent, from $4.36 million to $24 million, causing panic among residents.

A legal fight ensued. After an arbitration panel allowed the ground-rent hike to proceed, the co-op appealed the decision to a New York trial court. It lost, leaving residents uncertain about whether the building would default. If that happens, shareholders would see their equity wiped out while remaining responsible for any outstanding mortgage payments. The building itself would revert to rent-stabilized rentals, effectively ending the cooperative.

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The vast majority of New York City’s co-op buildings own the land beneath them, so rising land prices translated into higher share prices. Carnegie House’s shares, by contrast, did not capture this appreciation, which is one reason they traded at lower prices.

That distinction matters. Real estate functions both as a consumable good and a store of value. Demand for a given unit depends largely on two factors: its location and its physical characteristics.

Sometimes a parcel becomes particularly valuable or worthless because of its proximity to a nearby attraction or hazard. Carnegie House, for example, happens to sit along what has become known as “Billionaires Row,” home to multiple ultra-luxury condo towers. Land next to a new power station or homeless shelter, by contrast, may fall in value.

Cities, after all, are labor markets. Land located near centers of productivity and opportunity tend to appreciate over the long run. Since the 1970s, Manhattan land values have risen steadily as the city’s jobs market and economy have grown.

A co-op share or a condo unit in a building that owns its underlying land allows residents to benefit from both proximity to a productive labor market as well as rising land values. But in a ground-lease building like Carnegie House, the landowner carries the risks and rewards associated with the local economy and surrounding area, for better or worse.

Carnegie House’s shareholders can’t plausibly claim they were unaware of the risks associated with a ground lease. Any lawyer seeking to avoid a malpractice claim would inform his client of these dangers. Mortgages for ground-lease co-ops are much harder to secure, and cash purchases are often the only way a buyer can acquire shares at all. These constraints exist because lenders understand that ground leases introduce significant uncertainty, especially as renewal dates approach. According to the landowners, more than 100 units in Carnegie House are held as investment properties—suggesting many buyers were speculating that the lease terms would be overridden or unenforced in some way.

Unfortunately, some lawmakers in Albany are trying to give them the cover they were expecting. Senate Bill S2433 would cap annual ground-rent increases at 3 percent or the consumer price index, whichever is higher, for leases that are 30 years old or more. Capping increases in this way would effectively kill the market for residential ground leases and prevent land from being redeveloped to accommodate new circumstances.

Urban land should generally be free to be priced and redeveloped as circumstances change to achieve its highest and best use. Artificially suppressing ground rents would sever the link between land values and land use, discouraging redevelopment even when economic conditions warrant it. The destruction of the magnificent Gilded Age mansions that once lined Fifth Avenue along Central Park may be lamentable, but it was necessary to allow New York to grow—quite literally—to new heights.

S2433 would also grant co-op owners subject to a ground lease a right of first refusal if the landowner ever sought to sell the lease. Landowners would be required to disclose the price and material terms of any proposed sale and give the co-op up to 120 days to match the offer and purchase the land.

If this sounds familiar, it’s because the proposal nearly matches the Community Opportunity to Purchase Act (COPA), a New York City Council bill nearly passed last fall that would have given qualified nonprofit organizations the right of first refusal when certain residential buildings were put up for sale.

The bill would have introduced delay, uncertainty, and political considerations into ordinary property transactions, discouraging investment. After sustained criticism of the bill—especially in City Journal—COPA fell short of a veto-proof majority. Mayor Eric Adams vetoed the bill, and new City Council Speaker Julie Menin declined to revive it (at least for now).

Despite the harsh consequences for co-op owners, ground leases should be enforced as written, without legislative intervention. For one thing, a bill like S2433 risks violating the Constitution’s Contract Clause, which prohibits states from passing any law “impairing the Obligation of Contracts.”

And if a law like S2433 passes, it would fundamentally undermine the reliability of real property leaseholds. Carnegie House’s owners can’t plausibly claim not to have understood the risks; many bet that they’d get bailed out in some form. Many enjoyed living in a location coveted by billionaires at a relative bargain. The co-op’s board can attempt to purchase the land and charge shareholders a special assessment—as the owners of Trump Plaza did in 2015 without government intervention—but the price would likely be too steep for most Carnegie House owners to bear.

Sympathy for co-op owners caught in bad ground-lease deals is understandable. But legislative relief for Carnegie House would invite appeals from other investors who made bad—or at least risky—deals and now want Albany to rescue them from unfavorable outcomes. If these owners had more housing alternatives available to them, their predicament wouldn’t be quite as dire.

As Albany has proven time and again, measures like S2433 are likely to make a bad deal worse. The real solution lies not in rewriting contracts, but in expanding housing supply.

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Until shortly before the coronavirus pandemic, real electricity costs for most American families had been declining for a decade. From 2009 to 2019, the fully loaded cost—that is, the total price per kilowatt-hour including generation, transmission, distribution, and surcharges—rose from 11.5 cents to 13 cents, an increase of 13 percent, well below the 19 percent growth in the Consumer Price Index. Despite inflation, the average annual national rate even ticked down in a few of those years.

That changed in 2019. From that year through 2024, residential rates jumped 27 percent (faster than inflation) to an average of 16.5 cents nationally. These recent price shocks have not been evenly distributed. Most states still saw rates rise more slowly than CPI, meaning that they fell in real terms. The fully loaded cost of a kilowatt-hour today varies more than ever. In 2024, it ranged from 11.5 cents in Nebraska, Idaho, and North Dakota to 29.4 cents in Massachusetts, 32 cents in California, and 42.9 cents in Hawaii.

Much of the rise in the national average stemmed from California’s eye-watering 67 percent increase, the nation’s biggest.

The next largest hikes, as a percentage of 2019 rates, were in the District of Columbia, New York, Maryland, and Maine—all at 36 percent, or roughly 50 percent above inflation.

Electric bills pose a special hazard for the political class because they serve as monthly reminders of policy failure. Public officials scramble to show that they’re “doing something.” New Jersey governor-elect Mikie Sherrill, for instance, has called for rate freezes. Utilities remain a favorite scapegoat for state legislators, even as their rates (and profits) remain tightly regulated by those same states. Some populists, meantime, blame data centers for consuming massive quantities of electricity. But today’s high prices stem from decisions made years ago by governments and the utilities they regulate. Much of the recent increase was purposeful—indeed, avoidable—and the worst is likely still to come.

Electric rates have two main components: the cost of generating power; and what transmission and delivery companies—mostly utilities—are paid to deliver it. For most of the past century, this boiled down to a single rate set by a local electric monopoly, with the blessing of state utility regulators.

Beginning in the late 1990s, deregulation swept the country as many states, including New York, Texas, and California, required utilities to sell off their power plants. Generators would compete in newly created wholesale markets, while utilities focused on maintaining and operating their parts of the grid. The new landscape attracted fresh capital, with high prices serving as a beacon for investment where the need was greatest. Much of the added capacity came from natural-gas plants, taking advantage of the vast new supply unlocked by the fracking boom.

Gas fueled a transformation in American power generation. In 2008, half of U.S. electricity still came from coal, while natural gas and nuclear each provided about 20 percent. By 2024, gas was supplying 42 percent of the grid, and coal had fallen to just 16 percent.

The consumer benefits of cheap gas obscured the extent to which state governments, prodded by environmentalists, were deliberately making electricity more expensive. One method was requiring power plants to pay for their carbon-dioxide emissions through “cap-and-trade” programs. Ten Northeast and Mid-Atlantic states, including New York, participate in the Regional Greenhouse Gas Initiative (RGGI).

The cost of these allowances has surged in recent years. In 2019, the four RGGI allowance auctions brought in $284 million. The four most recent rounds took in $1.4 billion, with costs passed on to ratepayers and the windfalls flowing to state governments to divvy up. New England’s grid operator, ISO–NE, estimated that RGGI compliance pushed up prices from gas plants (the region’s main power source) by 0.7 cents to 1 cent per kilowatt-hour.

California and Washington also operate emissions-allowance systems for fossil-fuel power plants. California’s grid operator estimated that the requirement added roughly 1.6 cents per kilowatt-hour “for a relatively efficient gas unit” in 2024.

All nine mainland states where residential electric rates have risen by 4 cents or more since 2019 were either part of RGGI or California. These gas-related up-charges weren’t the only factor, but they undeniably work at cross-purposes with the affordability concerns that many governors now voice.

Another driver of rising electricity costs is nuclear-power subsidies. The low gas prices of the 2010s prompted five states—New York, Ohio, New Jersey, Illinois, and Connecticut—to craft subsidy deals for nuclear plants that had previously been profitable. The cost of that assistance, about $500 million for New York in 2024, was passed along to customers.

More states have enacted renewable-energy mandates, requiring utilities and large customers to pay premiums for projects that often wouldn’t be built otherwise, even with separate federal subsidies. The solar panels now tiled atop upstate New York farmland are a vivid example. Beyond closing that price gap, adding new renewables—especially in remote areas—imposes additional interconnection and transmission costs, which states expect utilities to absorb and then “recover” through rate cases.

Intermittent renewables have distorted electricity markets. Grid operators need additional plants connected and ready for times when wind lulls or clouds cut output. That is capacity that must be paid for—which ultimately drives up costs.

Especially over the last decade, state governments have pushed for what can fairly be described as the biggest transformation of the grid since the last rural homes got electric lights after World War II.

Skyline-defining power plants sending high-voltage transmission lines to the horizon are no longer the grid’s defining image. The rise of “behind-the-meter” generation, particularly rooftop solar, means that electricity is now flowing both to and from homes. That shift has changed how much energy utilities deliver from power plants and, with it, how the costs of running local distribution networks get allocated. Ratepayers have gone from simply maintaining the grid to underwriting its transformation.

The Washington Post reported last October that supply prices had fallen, in nominal dollars, by 35 percent since 2005 (chiefly between 2010 and 2020) but that transmission and distribution charges had more than doubled, up 141 percent and 181 percent, respectively. Falling supply costs concealed rising delivery expenses, until they couldn’t.

Part of the increase in delivery expenses reflects utilities facing the same inflationary pressures as their customers. Utility wages rose—and with them, utility delivery rates. But utilities’ role was also changing almost as much as the grid itself, as companies were pushed out of the generation business and pulled deeper into the climate-industrial complex.

Even before Covid, utilities’ capital expenditures were rising faster than inflation. They leaped 44 percent between 2019 and 2024, an Edison Electric Institute review found. Covid disruptions made grid hardware scarcer—and more costly. The Producer Price Index for electric transformers, measuring the price of producing key grid-related components, surged more than 60 percent in 18 months, starting in late 2020.

The price of state and federal efforts to reconfigure electricity supplies has spilled far beyond generation alone and into the rising outlays for transmission and distribution. Demand for hardware—and the associated charges—has been driven up by state climate policies. Utilities in states with aggressive mandates are now accommodating more interconnections from small generators (mostly wind turbines and solar panels) than ever before. New York alone has approved more than $8 billion in transmission upgrades, prompted almost entirely by its 2019 climate law. The deluge of state and federal subsidies encouraged developers to build more projects—especially rural wind turbines—than the grid could readily receive. Residential customers bear the bulk of the expense.

“Too much of the permitting process depends on who is in the White House and whether he roots more for oil exploration or for offshore wind.”

Some of these programs, such as energy-efficiency incentives, can theoretically pay for themselves by “shaving” the amount of generation needed to meet peak demand for just a few hours in the hottest afternoons each summer. In other cases, though, the delivery charge becomes a vehicle for adding new expenses. It is a handy mechanism—an alternative to raising state taxes—for making people fund initiatives that policymakers want but prefer not to budget for, such as shifting customers to electric heat pumps (which, in turn, increase grid demand).

Climate policy is a major driver of rising electricity charges but isn’t the only one. Recent bills have also climbed as utilities recover the cost of uncollectible accounts. Arrears have always existed, but they swelled in 2020, first as households fell behind and then as states blocked utilities from disconnecting nonpaying customers. Nationally, households remain more than $15 billion in utility arrears, up from $10 billion in early 2022. As these balances become officially uncollectible, the burden will shift to other ratepayers. On top of that, states are experimenting with new forms of income-based electricity pricing, which will discourage conservation while pushing up other customers’ costs.

How can we make electricity more affordable? It starts by identifying Public Enemy Number One: uncertainty.

Fortunately, strong interest remains in generating and delivering electricity more efficiently, and opportunities abound. New or upgraded power plants and transmission lines remain attractive investments, especially as older coal facilities retire. But many projects never get off the ground because the path from approval and construction to interconnection and operation is so murky.

The arduous process for federal permitting, including environmental reviews under the 1969 National Environmental Policy Act (NEPA), hinders major interstate transmission projects that would better connect generation with the places where it is needed. The duration of reviews has lessened in recent years, but most still take more than two years to complete. Litigation remains a preferred, and effective, weapon for project opponents.

Too much of the permitting process depends on who occupies the White House and whether he roots more for oil exploration or for offshore wind. The June 2023 debt-ceiling legislation made modest changes to narrow the scope of certain NEPA reviews, but more can be done, including stricter limits on when lawsuits can be filed and steps to create more predictability in the system.

At the state level, unattainable climate targets—such as New York’s plan to more than double its renewable generation in the next five years—are preventing new, more efficient gas plants from replacing older, less reliable units. Several states have begun recognizing that they are purposefully making electricity less affordable in pursuit of objectively unreachable greenhouse-gas reduction goals. These choices often conflict with other state priorities, including affordability and reliability. States can relax such targets (some immediately) to ease rate pressures.

As for natural gas, Congress could curb states’ ability to misuse the Clean Water Act. New York has invoked the law to block pipelines serving New England, where gas-starved power plants must switch to burning oil on the coldest winter days. Setting aside the broader trade-offs involved in reducing emissions, some state legislatures have also adopted “carbon-free” or “zero-emissions” rules for the electric sector that would require power plants to stop using natural gas as soon as 2040. These deadlines create major obstacles for siting or financing more efficient plants that could not just lower costs but also improve reliability and reduce emissions in the meantime.

States have also increased expenses by mandating specific technologies within the broader category of renewables. New York, for instance, has committed its utilities and large customers to subsidizing 9,000 megawatts of offshore wind—arguably the least economical form of generation and one that would necessitate the addition of almost unimaginable amounts of battery storage for periods when the turbines don’t spin. Instead, states should take a more pragmatic approach to adding zero-emissions resources. A technology-agnostic framework, along with a freeze on mandatory renewable-purchase volumes, would ease upward pressure on electric rates, since new projects typically arrive with a fresh invoice for subsidies.

State lawmakers like using utilities as political punching bags, and utilities that punch back do so at great risk to their ability to operate. The result is predictable: utilities often agree to play the villain and the bagman, collecting funds and carrying out tasks that lawmakers don’t want to vote for, secure in the knowledge that their rate hikes will be approved. New Yorkers would be surprised to learn that the state’s energy agency holds more U.S. Treasury bills ($1.9 billion) than some banks, chiefly because it has been collecting money indirectly from electricity customers faster than it can be spent. That’s only possible because customers can’t see it happening.

An immediate, and overdue, step that state governments could take is fully to disclose how much their own policy choices are inflating electric bills. States should allow, and perhaps oblige, utilities to be more forthright about how much of a customer’s bill reflects market conditions, how much results from government mandates, and how little of the remainder represents actual profit. At a minimum, utilities should itemize the premiums that customers pay for RGGI or other emissions programs, the outlays for energy credits and subsidies, and the added cost from transmission or other grid build-outs required by state climate goals.

No state tells ratepayers the full story, though a few have made halting moves toward transparency. Connecticut, better than most, now breaks charges into four buckets: supply, federally regulated transmission, local distribution, and a “public benefit” line that includes its power-purchase deal with the Millstone nuclear plant. New York went in the other direction. In 2017, it barred utilities from showing the price of nuclear subsidies, and it has kept most renewable-energy expenses out of sight as well.

Without reform, the price pressures will only intensify. Near-total electrification—New York’s goal, and that of several other states—will require more than doubling the power delivered to some regions that still rely on fuel for home and building heat. Customers will keep receiving utility bills that feel too high and explain too little. But the utility is only the messenger, not the culprit. The real authors of those bills are the elected officials who designed, and still want, the system to work this way.  

This article is part of “An Affordability Agenda,” a symposium that appears in City Journal’s Winter 2026 issue.

Photo: Nationally, residential electricity rates jumped 27 percent from 2019 to 2024—with some states showing much greater increases. (Dominic Gentilcore/Alamy Stock Photo)