US Consumers Fund Unbuilt Power Grids via CWIP Policy

Millions Pay for Future Power Projects

Millions of American households and businesses are now financing large-scale electricity projects before they provide any power. A policy known as Construction Work In Progress, or CWIP, is now active in at least 40 U.S. states, a significant increase from fewer than 20 states a decade ago. This incentive allows utility companies to charge customers for power plants and transmission lines while they are still under construction.

Grid Upgrades and Rising Demand

The push for CWIP policies stems from the urgent need to overhaul the nation's aging electric grid. Soaring demand, largely driven by data centers powering artificial intelligence, has thinned the grid's reserve capacity. Proponents, including state governors, argue that CWIP incentivizes new power generation and reduces long-term financing costs, which can smooth out rate increases for consumers over time.

Economic Impact and Consumer Risk

The immediate consequence for consumers is an increase in monthly utility bills for projects that may not be completed for years. For example, a Nevada utility is charging customers about $4 per month for a project scheduled for 2028 service. Critics argue this system unfairly shifts the financial risk of project delays, cost overruns, or cancellations from utility investors to captive ratepayers, who may wait decades to see any net financial benefit.

Summary and Outlook

As U.S. utilities enter an investment super-cycle expected to exceed $1 trillion, the use of CWIP is likely to expand. While the policy is designed to facilitate critical infrastructure development, it faces growing criticism from consumer groups who highlight the risk of ratepayers funding projects that may not deliver on their promises, pointing to past over-budget projects as a cautionary tale.

FAQ

Q: What is a CWIP incentive?
A: CWIP, or Construction Work In Progress, is a regulatory policy that permits utility companies to bill customers for the costs of new infrastructure projects before those projects are completed and operational.

Q: Why are more states adopting CWIP?
A: States are adopting CWIP to accelerate the modernization of the aging electric grid and meet the sharply rising electricity demand from data centers and the broader economy.

Source: Reuters