Will utilities overplay their hand in the age of AI?

Can the utility industry rise to the challenge of driving economic growth, accelerating decarbonization, and cementing itself a role in technology’s future?

In an era defined by the precipitous rise of artificial intelligence (AI) and the hyperscale data centers that power it, utility companies find themselves at a pivotal crossroads.

Historic demand for energy capacity, coupled with limited supply, has handed utility companies unprecedented leverage in the near term. But will they overplay their hand and jeopardize their long-term position?

Hyperscalers such as Google, Meta, AWS, and Microsoft are investing hundreds of billions of dollars to deploy AI, believing it to be the transformative technology that will define the future success of companies, societies, and nations. However, a major roadblock stands in their way: the availability of power to fuel this revolution.

With a combined market capitalization exceeding $10 trillion and a critical technological mandate, these hyperscalers now face a series of regulated utility monopolies, often slow-moving and deliberate, standing in the path of their goals.

Further complicating the situation, many utilities see an opportunity to extract value. They are increasingly demanding more aggressive terms: higher rates, larger upfront payments, longer delivery timelines, and substantial contract minimums. While these tactics may address regulatory concerns, help weed out speculative requests clogging their systems, and maximize short-term profits, they risk triggering long-term consequences that could fundamentally weaken the utility industry.

What’s at risk for utilities?

By pushing hyperscalers too hard with longer timelines and higher costs, utilities are impacting the profit and loss of some of their most profit-producing customers. Hyperscalers consume vast amounts of power, driving significant enterprise value for utilities. Dominion Energy’s electricity sales to data centers in Virginia, for instance, account for 24 percent of their total sales in 2024—and likely a much higher percentage of their profits.

Hyperscalers, however, are not without alternatives. Google has partnered with Intersect Power and TPG Rise Climate to pair new clean energy generation with data center growth. This partnership develops industrial parks with colocated clean energy plants, effectively creating behind-the-meter solutions that bypass traditional utilities entirely.

Their reasoning? “America’s electricity grid planning and investment have not kept pace with the country’s economic growth opportunity. Many regional grids face generation capacity and transmission bottlenecks, leaving them unable to accommodate load increases.”

Moreover, utilities face the specter of deregulation. If utilities are seen as monopolistic bottlenecks to progress, government intervention may become inevitable. Deregulation proposals are already gaining traction. Clean energy trade groups and organizations like the Sierra Club have urged the Federal Energy Regulatory Commission to reverse its decision to approve the Southeast Energy Exchange Market. Instead, they advocate for integrating utilities into regional transmission organizations (RTOs) such as MISO (Mid-continent Independent System Operator) or PJM (an independent operator organization across 13 states in the northeast to mid-west) to foster competition.