Western governors pledge $60B for transmission: Who profits and who pays?
Governor Cox and 10 western states endorse a $60 billion transmission buildout. The mechanism at work is rate-of-return regulation, which rewards utilities for owning assets, not for outcomes, and risks gold-plating unless structural reform forces competition.
Governor Spencer Cox, chair of the Western Governors Association, rallied 10 states to endorse a $60 billion plan to add 12,600 miles of high-voltage lines across the West, as reported by KSL.[1] The stated goal is to meet projected 15-30% demand growth from AI, EVs, and manufacturing. But beneath the bipartisan rhetoric is an economic mechanism that determines who profits and who pays.
Rate-of-return regulation compensates utilities as a percentage of their capital base, the more they spend on wires and plants, the more profit they earn. This is the Averch-Johnson effect: a rational incentive to over-invest in capital-intensive solutions, even when cheaper alternatives exist. A transmission line earns ~10% return on every dollar of rate base. A non-wires alternative, such as distributed solar or demand flexibility, earns nothing. Predictably, utilities favor building over procuring.
The $60 billion price tag is not a neutral engineering estimate. It reflects the incentive structure: utilities propose the solution that maximizes rate base. Independent studies have found that grid-enhancing technologies and competitive procurement can reduce transmission costs by 20-40%, but utilities resist them because they shrink the capital pool. The Western Transmission Expansion Coalition’s roadmap is a necessary conversation, but without functional unbundling, separating wires ownership from grid operation, the buildout risks becoming a gold-plating exercise.
Who wins? Utility shareholders, construction firms, and bondholders. Who pays? Ratepayers, whose bills will rise to cover the returns on that $60 billion. The alternative is not to stop building, but to change the incentive: performance-based regulation that rewards outcomes (reliability, cost-effectiveness) over spending; totex approaches that treat operating expenditures equally with capital; and independent distribution system operators that can procure non-wires alternatives without utility bias.