By Christine Vaughan
Tech companies move in product cycles measured in months. The power grid operates on timelines measured in years, sometimes decades. That collision is now one of the defining investment stories in the utility sector, and the regulatory decisions being made right now will determine which utilities capture the opportunity and which ones watch it move to a different state.
The Scale of the Ask
The numbers are not subtle. U.S. utility power demand from data centers is projected to reach 75.8 GW in 2026 and 134 GW by 2030. A single hyperscale campus can draw as much as 11 gigawatts, enough to power a mid-size city. Amazon, Microsoft, Google, and Meta spent over $200 billion on capital expenditures in 2024, and hyperscaler capex is forecast to exceed $600 billion in 2026.
For utility equity investors, the question has shifted from whether demand will materialize to which utilities will be positioned to serve it, and on what regulatory terms.
The Queue Problem
The fundamental barrier is structural. The median wait time for a new power project is five years, and in high-demand areas like Virginia, delays can reach seven years. Projects built in 2023 took nearly five years from interconnection request to commercial operation, compared to under two years in 2008. The system was never designed to handle the volume it now faces.
The consequences of this supply and demand imbalance are already affecting pricing. PJM’s latest capacity auction ballooned from $2.2 billion to $14.7 billion in a single year, and in 2024, $4.3 billion in transmission costs to connect data centers in PJM were passed to ratepayers, with Virginia bearing $1.98 billion. That number is now embedded in the political backdrop reshaping regulatory proceedings nationwide.
The Behind-the-Meter Detour
Faced with years-long queues, hyperscalers looked for a faster path. The behind-the-meter (BTM) structure — co-locating a data center at a generation facility to bypass standard interconnection review — seemed like the solution. The regulatory system disagreed.
When Talen Energy sought to expand Amazon’s BTM arrangement at its Susquehanna nuclear facility from 300 MW to 480 MW (FERC Docket ER24-2172), FERC rejected the amended interconnection agreement in November 2024, citing cost-shifting concerns. Talen restructured to a 1.9 GW front-of-meter PPA in June 2025 and filed a Fifth Circuit appeal in August. The appeal is pending. PJM’s Independent Market Monitor has raised parallel concerns about capacity interconnection rights in Constellation Energy’s proposed transfer to the Crane facility (FERC Docket ER26-2028-000), confirming that co-location structures face sustained federal scrutiny regardless of how they are structured.
Washington Weighs In
The Trump Administration moved to address the bottleneck directly. In July 2025, an Executive Order directed federal agencies to streamline permitting for data center projects requiring more than 100 MW of new AI load. In March 2026, Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and xAI signed the Ratepayer Protection Pledge at the White House, committing to build, bring, or buy generation resources and cover all power delivery infrastructure costs for their facilities.
The pledge addresses the political problem more than the structural one. It lacks enforcement muscle, and “bring your own generation” raises unresolved jurisdictional questions. Federal permitting streamlining does not reach the state commission proceedings that govern utility cost recovery and risk allocation. That is where the real investment decisions are being made.
The Tariff Battleground
The utility industry’s response has been the large-load tariff: a separate rate class ensuring data centers bear the infrastructure costs their load requires. State regulators approved 29 such tariffs in 2025 alone, with 77 now pending or in place across 36 states.
However, this is all being done in an environment of heightened political pressure on utility bills. Utilities requested more than $29 billion in rate increases in the first half of 2025, double the prior period. Average residential electricity prices reached 17.65 cents per kilowatt-hour by early 2026, a 7% annual increase. Affordability became a winning political issue in 2025 Virginia and New Jersey gubernatorial races, and over 60 pieces of data center legislation were introduced across 22 states, most focused on ratepayer protection.
Key sticking points are consistent across jurisdictions: stranded cost allocation if a hyperscaler exits early, minimum bill and demand charge structures, credit and collateral requirements, and enforceability against counterparties that may be larger than the utility itself.
States and Dockets to Watch
For utility investors, the most consequential proceedings right now span several jurisdictions simultaneously.
Ohio’s data center tariff (24-0508-EL-ATA) approved in July 2025 are being appealed (Case 2025-1458) by the Ohio Manufacturer’s Association Energy Group arguing discriminatory treatment. The commission adopted a settlement supported by the utility, staff, and consumer groups over a competing proposal from the technology firms. However, it was the traditional manufacturing customers who appealed the tariff as they don’t want special rates based on what they do inside their buildings. At stake is a significant volume of signed letters of agreement for data center load that would roughly double Ohio’s current load if built.
Michigan has high regulatory uncertainty with several dockets in play. The MPSC conditionally approved DTE’s special contracts for a 1,383 MW Oracle data center in Saline Township (Docket U-21990, December 18, 2025), requiring DTE to bear any unrecoverable costs and directing the utility to file a large-load tariff within 90 days. The Michigan Attorney General filed a Court of Appeals challenge on April 17, 2026, arguing the approval was procedurally defective. DTE has separately pledged no new electric rate case until 2028 if the first data project comes online as planned and it receives other regulatory approvals. Although DTE did not identify which regulatory approvals it meant, it is likely to include the special contract with Google in U-22058 and potentially items in its recently filed rate case in U-22046. Our read is that the stay-out pledge therefore rests on three separate conditions: the AG’s Court of Appeals challenge must fail; the Saline project must come online by end of 2027; and the other regulatory approvals must clear. Investors holding DTE on the stayout thesis are long on all three at once.
Meanwhile at FERC, the ANOPR on large load interconnection standards (RM26-4-000) is developing the national framework within which all of these state proceedings will have to operate.
The commissions are not moving slowly because they are indifferent. They are moving at the speed prudent cost allocation requires. Whether tech’s urgency and that pace can find common ground, state by state and docket by docket, is the question utility investors are now paid to answer.
References
- 451 Research via S&P Global — Data center grid power demand forecast (October 2025): https://www.spglobal.com/energy/en/news-research/latest-news/electric-power/101425-data-center-grid-power-demand-to-rise-22-in-2025-nearly-triple-by-2030
- SE.com / PowerMag — Hyperscale campus power scale (December 2025): https://blog.se.com/datacenter/2025/12/08/how-hyperscaler-growth-is-rewriting-the-data-center-playbook/
- Energy IB — Hyperscaler capex and load growth data (March 2026): https://ibinterviewquestions.com/guides/energy-investment-banking/data-center-power-boom-ai-demand-hyperscaler
- Acres.com — Interconnection queue wait times and withdrawal rates (July 2025): https://landvalues.acres.com/part-4-interconnection-queues-stalling-data-center-growth
- Lawrence Berkeley National Lab via Sustainability Dialogue — Queue time doubling since 2008 (July 2025): https://sustainabilitydialogue.uchicago.edu/news/how-the-interconnection-queue-backlog-is-slowing-energy-growth/
- GlobalDataCenterHub — PJM capacity auction and Virginia ratepayer costs (November 2025): https://www.globaldatacenterhub.com/p/the-interconnection-bottleneck-how
- White House — Executive Order on Accelerating Federal Permitting of Data Center Infrastructure (July 23, 2025): https://www.whitehouse.gov/presidential-actions/2025/07/accelerating-federal-permitting-of-data-center-infrastructure/
- White House Fact Sheet — Ratepayer Protection Pledge (March 4, 2026): https://www.whitehouse.gov/fact-sheets/2026/03/fact-sheet-president-donald-j-trump-advances-energy-affordability-with-the-ratepayer-protection-pledge/
- Spectrum News — Ratepayer Protection Pledge enforcement concerns (April 30, 2026): https://spectrumlocalnews.com/us/snplus/politics/2026/04/28/artificial-intelligence-energy-grid-economy
- Utility Dive / SEPA — Large load tariff proliferation (March 2026): https://www.utilitydive.com/news/large-load-tariffs-proliferate-as-states-take-more-active-role-in-data-cent/816184/
- EESI — Rate increase requests and residential price data (February 2026): https://www.eesi.org/articles/view/data-center-power-demands-are-contributing-to-higher-energy-bills
- Brookings — Affordability, midterms, and Democratic wins in VA/NJ (April 2026): https://www.brookings.edu/articles/how-rising-electric-rates-could-affect-the-2026-midterms/
- Latitude Media — State legislation count, 60+ bills across 22 states (October 2025): https://www.latitudemedia.com/news/state-lawmakers-stand-between-ratepayers-and-data-center-costs/
- Michigan MPSC Press Release — DTE Saline Township approval (December 18, 2025): https://www.michigan.gov/mpsc/commission/news-releases/2025/12/18/mpsc-approves-dte-electric-energy-contracts-for-data-center
- Daily Energy Insider — PA PUC large load tariff final order (May 2026): https://dailyenergyinsider.com/hearing-summaries/52122-pennsylvania-puc-adopts-large-load-tariff-framework-imposes-but-for-cost-standard-and-authorizes-customer-self-construction/