On December 7, 2023, TIME recognized "the Architects of AI" as Person of the Year, underscoring the significant influence of artificial intelligence (AI) across various sectors, including climate and energy. AI's short-term effects have included rising energy demand, projected increases in emissions, and escalating electricity prices, fundamentally transforming the utility sector from a traditionally stable industry into a rapidly evolving one.

Political figures, such as Tom Steyer, have responded to these changes by emphasizing the urgency of addressing climate change while advocating for affordable energy costs. Steyer, an investor and politician, has shifted his focus in the California governor's race towards dismantling monopoly electric utilities, which he describes as "coddled powerful interests" profiting at the expense of consumers. He has pledged to reduce electric bills by 25% through this proposed breakup.

However, Steyer faces significant challenges in his campaign, as recent polls indicate low support. The complexity of dismantling the monopoly utility model poses additional hurdles, given the considerable political power held by the industry. Rising electricity costs, driven by factors such as AI and electrification, have led to voter dissatisfaction across various states, influencing elections in Virginia, New Jersey, and Georgia.

The structure of regulated utilities in the United States, which grants them exclusive service territories in exchange for regulatory oversight, has historically ensured profitability but limited growth. The current demand for electricity, driven by AI, is prompting utilities to invest over $1 trillion by 2030 to expand infrastructure and generation capacity, resulting in increased profits and rising stock prices.

Despite this, public backlash against higher electricity prices is emerging. In Georgia, for instance, voters have recently elected new candidates to the state utility regulator, reflecting growing discontent with rising bills associated with infrastructure projects by Georgia Power, the state's monopoly utility. Local officials are also attempting to slow the development of data centers, which could further impact utility profits.

The idea of breaking up utilities and fostering competition, as proposed by Steyer, could significantly challenge the profitability of these companies. Historical attempts to introduce competition in the 1990s have largely faded, but recent movements in states like Maine, New York, and California indicate a resurgence of interest in municipalization, where utilities are transferred to local control.

Utilities are aware of the potential risks posed by these developments, as indicated in regulatory disclosures. For example, New Jersey utility PSE&G has acknowledged that changes to its exclusive service rights could negatively affect future earnings. Even without a complete breakup of monopoly utilities, the growing public sentiment against rising energy costs presents a new challenge for the sector, with implications for both consumers and the broader economy as discussions continue into the new year.

In parallel, tariffs imposed on imported goods by the U.S. government are also shaping economic policy. Tariffs are designed to protect domestic industries from foreign competition but often lead to increased costs for importers, which are typically passed on to consumers. Studies indicate that U.S. consumers and importers are currently bearing the brunt of these tariffs, with importers absorbing up to 80% of the costs. If the U.S. Supreme Court upholds the tariffs, consumer costs are expected to rise further.

Historically, tariffs were a primary source of revenue for the U.S. government until the introduction of the income tax in 1913. The last significant tariff legislation was the Smoot-Hawley Tariff Act of 1930, which led to retaliatory measures from other countries and contributed to a global trade war during the Great Depression. Post-World War II, the U.S. played a key role in establishing the General Agreement on Tariffs and Trade (GATT), which aimed to reduce tariffs and promote free trade.

While Congress holds the constitutional authority to set tariffs, it can delegate emergency powers to the president. The current Supreme Court case involves President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to modify tariff rates unilaterally, raising questions about the extent of presidential authority in this area.

Critics of tariffs argue that they can lead to market inefficiencies by favoring certain industries at the expense of others, ultimately raising prices for consumers. Additionally, the uncertainty surrounding tariff policies can deter investment, as businesses prefer stable conditions for planning and growth. Trump's tariffs have also faced criticism for potentially violating international trade agreements, undermining the U.S.'s reliability as a trading partner.

Looking ahead, if the Supreme Court rules against Trump’s tariffs, he has indicated plans to pursue alternative emergency measures, suggesting that the current trend of aggressive tariff policies may persist. This emphasizes the importance of public understanding regarding who bears the costs of tariffs and their broader economic implications.