Interest Rate Sensitivity Risk: Utilities are highly sensitive to interest rate changes because they are capital-intensive and often viewed as bond proxies; rising rates can increase borrowing costs for utilities and make fixed-income investments more attractive, potentially reducing demand for utility stocks.

Regulatory & Political Risk: The utilities sector is heavily regulated, and adverse changes in government policies, rate-setting methodologies, or environmental regulations at federal, state, or local levels can significantly impact utility companies' revenues, costs, and profitability.

Commodity Price Volatility Risk: Many utilities rely on commodities like natural gas, coal, or other fuels for power generation; volatile commodity prices can lead to higher operating costs that may not always be fully recoverable through regulated rate increases, impacting profit margins.