| Resource Type | Research Report |
| Author / Source | Jacob Becker, Joseph Daniel, Becky Li, Roberto Zanchi (RMI) |
| Publication Date | November 2025 |
| Location | United States |
| Initiative Type | Policy, Program, Technology |
| Project Complexity | Intermediate |
| Recommended For | Board, Staff |
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Estimated reading time: 30+ minutes
Why This Matters for Rural Electric Co-ops
As EVs, rooftop solar, and other new technologies connect to the grid in growing numbers, utilities face pressure to upgrade infrastructure faster than ever before. Load-growth forecasts project up to 400 million megawatt-hours of new demand by 2035, and distribution system investments are expected to account for 32% of utility capital spending between 2025 and 2028.
Without a fair framework for who pays for those upgrades, costs risk falling disproportionately on members least able to pay, slowing electrification and straining co-op finances. Co-ops can use this report to understand how peer utilities and regulators are structuring cost allocation for proactive grid investments, and to evaluate which approaches best protect their members.
Key Takeaways
| › | Proactive grid upgrades built ahead of demand can produce net ratepayer savings within a decade, but only if costs are allocated fairly from the start. |
| › | Cost allocation frameworks should balance "cost causers pay" and "beneficiaries pay" principles to avoid regressive cross-subsidies. |
| › | The "last in line pays all" model, where a single project absorbs the full cost of a shared upgrade, creates unpredictable bills and stalls DER interconnection; alternatives exist and should be evaluated. |
| › | Cost caps, income-based credits, and usage-based recovery mechanisms are emerging as essential guardrails to protect energy-burdened members when anticipated load growth doesn't materialize. |
Implementation Considerations
- Regulatory or Governance Considerations: Cost allocation frameworks vary significantly by state. Co-ops should monitor relevant proceedings and consider participating through their statewide association.
- Staffing or Technology Requirements: Engaging in cost-allocation proceedings requires ratemaking and interconnection expertise most smaller co-ops won't have in-house. Outside support is likely needed.
Notable Examples
- Minnesota Public Utilities Commission: Developed a proactive cost-allocation framework in under a year using a staff-led working group, with a standardized per-kilowatt fee and affordability guardrails for smaller customers.
- Massachusetts Department of Public Utilities: Evaluating a shared fee spread across all new interconnections to replace the "last in line pays all" model. The proceeding remains active as of November 2025.
- New York Public Service Commission: Approved roughly $600 million in urgent distribution upgrades while requiring utilities to justify cost allocation project by project rather than adopting a uniform new mechanism.
View Full Document Requires name and email to access
Estimated reading time: 30+ minutes
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