6 min read · Last updated September 9, 2026
- A utility cannot raise its own rates. It has to file a formal rate case with a state public utility commission and prove, in a public hearing that can run up to 10 months, that the increase is necessary.
- Regulators decide two separate things in every rate case: the revenue requirement (the total dollars the utility may collect) and the rate design (how that total is split among residential, commercial, and industrial customers).
- Under Arkansas’s process, a filed rate case must reach a final decision within 10 months, and the commission can suspend a requested increase for up to 9 months while it investigates.
- If a commission takes no action within 30 days of a filing, the utility’s requested rate can go into effect automatically, before a hearing has even been held.
A utility raises its rates by filing a formal rate case with a state public utility commission. That commission reviews a revenue requirement and a rate design in a public process that can take up to 10 months. The process includes a hearing where the utility, not the customer, carries the burden of proof.
In this article
- The two numbers every rate case has to settle
- How a rate case moves, from filing to decision
- Where the public actually gets a say
- Frequently asked questions
In 2025, the average U.S. residential electricity customer paid 17.3 cents per kilowatt-hour, according to the U.S. Energy Information Administration (EIA). Prices vary sharply by state – across all types of electric customers combined, the 2025 average ranged from 8.2 cents per kilowatt-hour in North Dakota to 35.7 cents in Hawaii. Whenever a household’s rate moves, it moved because a public utility commission approved a rate case. That means a formal filing, investigation, and hearing that state law requires the utility to win before it can collect a single additional dollar.
A utility cannot simply decide to charge more. Every rate change has to survive that formal proceeding, called a rate case. A state public utility commission reviews the utility’s own numbers and decides, in public, whether the request is justified.
The two numbers every rate case has to settle
A rate case decides two separate questions, according to the Arkansas Public Service Commission’s explanation of the rate case process, a state regulator whose process illustrates the anatomy most state commissions share. The first is the revenue requirement: the total amount of money the utility is allowed to collect from all of its customers combined, covering operating expenses, depreciation, taxes, and a return on its investment. The second is rate design: how that total revenue requirement gets divided among residential, commercial, and industrial customers. Commissions generally base rate design on cost-of-service principles. The charge to a given customer class should roughly match what it actually costs the utility to serve that class. The commission does not guarantee the utility will actually earn the return built into its rate order. The burden of proof for every dollar requested sits with the utility, not the customers.
How a rate case moves, from filing to decision
The Arkansas process, typical of the steps most state commissions require, runs through several stages. The utility must notify the commission 60 to 90 days before filing, giving the commission time to assemble a review team. The case formally begins when the utility submits a written application supporting its request with current and projected expense data. If the commission takes no action within 30 days of the filing, the requested increase can take effect automatically. Instead, the commission can suspend the increase for up to 9 months while its staff investigates. During that window, an independent staff team audits the utility’s books and intervenors and members of the public can weigh in. A formal hearing is held that functions much like a civil trial, with sworn testimony, exhibits, and a court reporter. State law gives the commission up to 10 months from filing to issue a final, binding order.
| Stage | What happens | Typical timing |
|---|---|---|
| Notice of intent | Utility formally tells the commission it plans to file | 60-90 days before filing |
| Application filed | Utility submits its request with supporting financial data | Day 0 |
| Suspension decision | Commission either lets the request take effect or suspends it for investigation | Within 30 days of filing |
| Staff investigation and hearing | Independent staff audits the request; a formal public hearing is held | Through the suspension period |
| Final order | Commission issues a binding decision on revenue requirement and rate design | Up to 10 months from filing |
Where the public actually gets a say
State law requires the utility to publish notice of the requested change in local newspapers for two consecutive weeks before the commission takes it up, giving affected customers a chance to respond. Under the Arkansas process, a customer can write a letter to the commission’s secretary, circulate a petition, or speak during the public comment portion of the hearing. A customer can also formally become an intervenor, a status granted to any individual or group that files a timely written request. None of that participation guarantees a particular outcome. But the commission’s own materials describe every letter and petition as part of the official case record that commissioners review before ruling.
A rate case decides what a utility can charge going forward. It has no bearing on a bill that’s already due. A household that can’t pay a current bill has separate options worth knowing. Those include the Low-Income Home Energy Assistance Program, or LIHEAP, other utility assistance programs, and the steps to take if a utility is about to shut off service.
Frequently asked questions
Who decides whether a utility can raise its rates? A state public utility or public service commission, an independent regulatory body, reviews every rate increase request and issues a binding decision after a formal investigation and public hearing.
How long does a rate case typically take? Under Arkansas’s process, state law requires a final decision within 10 months of filing. The commission can suspend a requested increase for up to 9 months while it investigates the utility’s request.
What is a revenue requirement? It’s the total amount of money regulators allow a utility to collect from all customers combined, covering its operating expenses, taxes, depreciation, and a return on its investment. It’s decided separately from how that total is divided among customer types.
Can a regular customer take part in a rate case? Yes. Customers can submit written comments, circulate petitions, speak at the public hearing, or apply for formal intervenor status, which allows fuller participation in the proceeding.
Does filing a rate case guarantee the utility gets the increase it requested? No. The utility carries the burden of proving every part of its request is necessary, and the commission can approve, reduce, or reject any portion of it after reviewing the evidence.
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