Some consumers are paying to power data centers that don’t yet exist, while states question whether the predictions are real.
The forecasts are staggering: Utilities say they will need two or three times as much electricity within a few years to power the massive new data centers that fuel a rapidly growing AI economy.
But the challenges — some say the impossibility — of building new power plants to meet that demand so quickly have set off alarm bells for lawmakers, policymakers and regulators who question whether these utility forecasts are reliable.
A burning question is whether the forecasts are based on data center projects that may never be built – sparking concern that regular taxpayers could be stuck with the bill for building unnecessary power plants and network infrastructure, at a cost of billions of dollars.
The scrutiny comes as analysts warn of the risk of an artificial intelligence investment bubble that would inflate technology stock prices and potentially burst.
Meanwhile, consumer advocates note that ratepayers in some areas — like the Mid-Atlantic power grid, which encompasses all or parts of 13 states stretching from New Jersey to Illinois, as well as Washington, D.C. — are already shouldering the cost of providing electricity to data centers, some of which are built, others not.
“There’s some speculation in there,” said Joe Bowring, who runs Monitoring Analytics, the independent market watchdog in the Mid-Atlantic Network territory. “No one really knows. No one has looked closely enough at the forecasts to know what’s speculative, what’s double counting, what’s real, and what’s not.”
Suspicions about skyrocketing demand
There is no standard practice across grids or for utilities to review projects of this scale, and finding a solution has become a hot topic, utilities and grid operators say.
Uncertainty surrounding forecasts is generally attributed to several factors.
One concerns developers seeking a grid connection, but whose plans aren’t set in stone or don’t have the clout (customers, financing or otherwise) to see the project through, industry and regulatory officials say.
Another example is data center developers submitting applications for grid connection in various separate utility territories, PJM Interconnection, which operates the Mid-Atlantic Grid, and Texas lawmakers found.
Often, for competitive reasons, developers don’t tell utilities if and where they have submitted other power applications, PJM said. This means that a single project could inflate the energy forecasts of several utilities.
Efforts to improve forecasting got a big boost in September, when a member of the Federal Energy Regulatory Commission asked the nation’s grid operators for information on how they determine that a project is not only viable, but that it will use the electricity it claims to need.
“Better data, better decision-making, better and faster decisions mean we can build all these projects, all this infrastructure,” Commissioner David Rosner said in an interview.
The Edison Electric Institute, a trade association for for-profit electric utilities, said it welcomes efforts to improve demand forecasting.
Real, speculative or “somewhere in between”
The Data Center Coalition, which represents tech giants like Google and Meta as well as data center developers, urged regulators to request more information from utilities about their forecasts and develop a set of best practices for determining the commercial viability of a data center project.
Coalition Vice President for Energy Aaron Tinjum said improving the accuracy and transparency of forecasts is a “fundamental first step to truly meeting this moment” of energy growth.
“Wherever we go, the question is: ‘Is (energy) growth real? How can we be so sure?'” Tinjum said. “And we really see commercial readiness verification as one of those important, easy-to-adopt opportunities right now.”
Igal Feibush, CEO of Pennsylvania Data Center Partners, a data center developer, said utilities are in a “fire drill” as they try to control a deluge of data center projects all seeking power.
The vast majority, he said, will fail because many of the project’s backers are new to the concept and don’t know what it takes to build a data center.
States are also trying to do more to uncover the content of utility forecasts and eliminate speculative or redundant projects.
In Texas, which is attracting large data center projects, lawmakers still haunted by a power outage during a deadly 2021 winter storm were shocked when the grid’s manager, the Electric Reliability Council of Texas, said in 2024 that its peak demand could nearly double by 2030.
They found that state utility regulators lacked the tools to determine whether this was realistic.
Texas state Sen. Phil King said at a hearing earlier this year that the grid operator, utility regulators and utilities weren’t sure whether the power demands “are real or just speculative or somewhere in between.”
Lawmakers passed a King-sponsored bill, now law, that requires data center developers to disclose whether they have electricity demands elsewhere in Texas and set standards for developers to demonstrate they have a substantial financial commitment to a site.
Electricity bills are also increasing
PPL Electric Utilities, which provides electricity to 1.5 million customers in central and eastern Pennsylvania, projects that data centers will more than triple their peak electricity demand by 2030.
Vincent Sorgi, chairman and CEO of PPL Corp., told analysts on a conference call this month that data center projects “are real, they’re coming at full speed” and that “the near-term risk of overbuilding simply isn’t there.”
The data center projects included in the forecast are supported by contracts with financial commitments often reaching tens of millions of dollars, PPL said.
Still, PPL’s projections helped prompt a state lawmaker, Rep. Danilo Burgos, to introduce a bill to strengthen the authority of state utility regulators to inspect how utilities make their energy demand forecasts.
Ratepayers in Philadelphia’s Burgos district just absorbed an increase in their electricity bills – attributed by utility PECO to the rising wholesale cost of electricity on the Mid-Atlantic grid, driven primarily by data center demand.
That’s why taxpayers need more protection to ensure they benefit from the higher costs, Burgos said.
“Once they’ve made their money, regardless of the company,” Burgos said, “you don’t see any empathy toward the taxpayers.”
