Electric utilities nationwide are increasing their regulations for new AI data center customers. They’re now demanding binding financial commitments, collateral, and hefty engineering fees to distinguish legitimate projects from those that are merely speculative, often referred to as “phantom” data centers.
The Wall Street Journal reports that the surge in electricity demand from AI has overwhelmed utilities with requests for grid connections. Alarmingly, many of these requests are unlikely to result in actual facilities. A research firm, Wood Mackenzie, states that only about 23 percent of disclosed data-center requests are considered “high confidence.” The rest, well, they’re pretty much just speculation.
Jeanne Jones, who is the executive vice president of finance and strategy at Exelon—a utility company serving the Mid-Atlantic and Midwest—observed a considerable rise in inquiries starting in 2024, with the scale of individual requests also increasing. Previously, a typical request was around 50 megawatts, enough to power about 50 Walmart stores. Now, companies are asking for 1,000 megawatts or more, resembling what you’d expect from a large nuclear reactor.
At Exelon, individual project evaluations used to be the norm. However, once requests from sizable customers tripled to a staggering 18,000 megawatts, the company shifted to assessing them in groups. Jones highlighted the challenge of differentiating between “real growth that’s going to happen versus speculative growth.”
“We’d get these questions both internally and externally: ‘How do you know what’s real?’” Jones mentioned.
To address this, Exelon implemented a policy that requires binding financial commitments and collateral before approving connections. This move reduced their list of high-probability projects from 18,000 megawatts to 11,000, with the remaining ones needing about $1 billion in collateral.
“It really helped to filter out the speculative projects,” Jones said. “It might not look great—we went from 18 to 11—but it’s the smart choice.”
Jones also noted that the stakes are high for both sides. “For our customers, it’s crucial,” she explained. “If we expand the grid and a data center backs out, someone has to bear that cost, and that’s not fair.” She added that certainty is equally vital when discussing capital with investors: “I need to know that it’s real and sustainable growth.”
Utilities are also binding customers to longer contracts. The average minimum contract term for large clients has risen to about 10.8 years since 2024, compared to approximately 4.6 years previously, based on utility filings compiled by the AI startup Halcyon.
Texas appears to be most affected. As the busiest market in the U.S. for data-center construction, it boasts about 12,800 megawatts of ongoing projects according to Cleanview, which monitors such developments. However, the state’s backlog of connection requests has shot up to more than 400,000 megawatts. Governor Greg Abbott has halted grid connections and environmental permits for data centers, although analysts suggest these decisions may resume later this year. Large customers in Texas are now required to pay a $50,000-per-megawatt deposit for engineering studies, translating to a hefty $25 million fee up front for a 500-megawatt facility before any construction begins.
Jim Burke, CEO of Vistra, a Texas power producer, mentioned that new data centers needing about 12,000 to 15,000 megawatts are likely to connect to the Texas grid by 2030. He supports efforts to streamline the state’s connection queue, citing demand estimates he believes are exaggerated.
“When numbers are overstated by more than 20 times, it leads to complications for policymakers,” Burke remarked. “We’re in favor of reducing the queues and making more realistic decisions to ensure everyone can move forward.”
Breitbart News previously indicated that $68 billion worth of data center projects have been delayed in recent months.
These projects, tracked by Data Center Watch, affiliated with AI intelligence company 10a Labs, represented over half of all new large-scale developments they monitored during that timeframe. Lead analyst Miquel Vila observed a growing opposition against the industry. “New groups keep forming, and opposition is emerging across various states and localities, with online petitions gaining traction,” he noted.
The statistics support this. Data Center Watch identified 843 opposition groups across 49 states, with Hawaii being the sole exception. Approximately 30 state legislatures have introduced or passed regulations regarding data center siting, energy consumption, or water usage. In Tennessee, a petition opposing a specific data center project garnered over 500,000 signatures on Change.org—over a third of all the signatures collected on the platform that quarter, per Data Center Watch.
The rise of AI data centers and their corresponding technology is shifting the political landscape. Breitbart News social media director Wynton Hall authored his New York Times bestseller Code Red: The Left, the Right, China, and the Race to Control AI as a comprehensive guide for how the MAGA movement can shape AI policies that serve humanity, all while avoiding ceding control to leftist interests in Silicon Valley or letting China dominate.
