By Christine Vaughan
Every quarter, utility management teams present polished slides showing capital plan execution, constructive regulatory outcomes, and earned ROE trends. Every year, the 10-K tells a more complicated story.
We read them. Specifically, we read the regulatory proceedings sections, the commitments and contingencies footnotes, and the risk factor disclosures of 44 U.S. electric and gas utilities’ FY2025 10-K filings. We were looking for one thing: the regulatory fights that matter but don’t make the earnings deck.
What we found is a sector with more open-ended regulatory risk than the investor presentation narrative suggests. Here are the patterns worth paying attention to.
Wildfire Liability Is Still Unquantifiable
Three years after the Maui fires and two years after Smokehouse Creek, the utility sector’s wildfire exposure has not stabilized — it has compounded.
Edison International faces probable material losses from the January 2025 Eaton Fire with no estimable upper bound. The Los Angeles DA’s office has an active criminal investigation. The CPUC prudency review hasn’t begun. SCE’s liability cap is approximately $4.3 billion, and cumulative after-tax wildfire charges across 2017–2018 events already exceed $3.2 billion — with recovery rates of only 35–60% on settled claims.
Xcel Energy’s SPS subsidiary has $430 million in booked Smokehouse Creek losses, but the filing explicitly excludes fines, punitive damages, and government entity claims from that figure. The Texas Attorney General filed suit in December 2025. Xcel cannot estimate the upper end of the range.
Sempra’s SDG&E recorded a $651 million charge in Q4 2025 after the CPUC disallowed or deferred $449 million of wildfire mitigation costs in the Track 2 proceeding. Meanwhile, SoCalGas is named in both the Palisades Fire and Eaton Fire consolidated actions.
Hawaiian Electric committed to $1.99 billion in Maui wildfire settlement payments and has already funded the first $479 million settlement installment. The real financial risk is the remaining $1.44 billion, for which HEI has no financing plan in place. The filing explicitly discloses bankruptcy as an alternative scenario if financing cannot be obtained.
FERC ROE Cases: The 14-Year Open Question
The longest-running unresolved regulatory matters in the sector are FERC complaints challenging transmission ROE. Eversource’s four New England complaints date to 2011 — fourteen years ago — across approximately $11.3 billion in transmission rate base. The base ROE currently billed (10.57%) was set by a 2014 FERC order that was vacated by the D.C. Circuit in 2017. Eversource cannot estimate the range of loss.
Ameren’s MISO ROE complaints have been active since November 2013 with refunds potentially stretching back over a decade. Duke Energy Ohio lost its RTO adder fight after the U.S. Supreme Court declined to hear its appeal in November 2025, making the lower court ruling final. FirstEnergy’s ATSI is still charging the adder to customers but may be forced to refund those collections. It has already booked a $46 million charge in anticipation. A FERC rulemaking proposal to eliminate the RTO membership adder entirely — worth roughly $40 million per year to PSEG alone — has been pending since 2021 with no final action.
Nuclear and Coal: Imprudence Findings and Forced Operations
Two notable imprudence findings emerged this cycle. The Minnesota PUC ruled NSP-Minnesota imprudent in operating the Prairie Island nuclear plant after an incident that caused an extended outage. NSP-Minnesota argues the refund should be $6 million; intervenors want $40 million. A decision is expected in Q2 2026.
In Arkansas, the APSC found Entergy Arkansas did not meet its burden on prudence for the $1.6 billion Jefferson Power Station — and the benchmark the commission set is $90 million below the actual cost estimate, an error Entergy is asking the commission to correct on rehearing.
Meanwhile, the Department of Energy is using emergency orders under Section 202(c) to force coal plants to keep running after they’ve been approved for retirement. CMS Energy’s Campbell, CenterPoint’s Culley Unit 2, and NiSource’s Schahfer are all operating under these orders with FERC cost recovery mechanisms pending and no guarantee of full reimbursement.
Ohio: The Most Contested Regulatory State
Ohio stands out as the most adversarial state regulatory environment in the sector. FirstEnergy received only $34 million of a $190 million rate request — a 82% haircut — resulting in a $352 million impairment. The Ohio Companies have been operating under 2009 base rates for sixteen years. The HB 6 Deferred Prosecution Agreement remains active as long as two former senior officers’ criminal cases are unresolved.
AES Ohio’s ESP/RSC Rider appeal is pending at the Ohio Supreme Court with approximately $79 million per year in revenue at stake. AEP’s OVEC cost recovery for 2016–2020 is fully submitted to the Ohio Supreme Court after oral arguments in December 2025. The common thread: aggressive intervenor challenges, willing appellate courts, and regulatory outcomes that deviate materially from utility requests.
Illinois: Death by Disallowance
Illinois stands out as a particularly difficult environment for gas utility capital recovery. Three gas utilities — Southern Company’s Nicor Gas, WEC Energy’s PGL, and Ameren Illinois — are simultaneously contesting ICC capital disallowances or facing pending prudency reviews on billions in infrastructure investment. The charges are substantial: WEC’s PGL took a $205 million charge in Q4 2025 with a separate $353.9 million appeal still live; Ameren Illinois is appealing orders that cut $75 million in planned capital; and Nicor Gas had $127 million of capital disallowances in its 2023 base rate case and $120 million in its 2025 rate case.
The Clean Stories Are Real Too
Not every utility has a contested regulatory portfolio. Atmos Energy, Black Hills, ONE Gas, and New Jersey Resources had no active appeals, material disallowances, or contested proceedings in their 10-K filings. These are companies with functioning formula rate mechanisms, cooperative settlement cultures, and no history of adversarial regulatory outcomes. In a sector where the median utility has three to five live regulatory fights, a clean record is a genuine differentiator.
What This Means for Investors
The gap between the investor presentation narrative and the 10-K disclosure is not new, but its magnitude in this cycle is notable. Several of the largest open exposures — Eaton Fire liability with no estimable upper bound, FERC ROE complaints spanning a decade of potential refunds, $352 million Ohio rate case impairments, forced coal plant operations with no cost recovery mechanism — receive little or no treatment in quarterly earnings materials.
This doesn’t mean management teams are hiding information. The 10-K is public, the disclosures are there, and anyone who reads the commitments and contingencies footnotes can find them. The issue is one of emphasis. Investor presentations are designed to tell a growth story. The 10-K tells a risk story. Both are true. But the regulatory risk story is harder to find, and the financial community tends to underweight what it doesn’t see on a slide.
Our full report catalogs every material regulatory appeal, disallowance, and contested proceeding across all 44 utilities. Each entry is condensed to the essential facts: what the fight is about, how much is at stake, where the proceeding stands, and what happens next.
The full report is available to LaReg clients. To request a copy or learn more about LaReg’s regulatory data, AI tools, and analytics platform, visit lareg.ai.