AI power demand turns utilities into gatekeepers

On June 2 the Electric Reliability Council of Texas approved a new interconnection framework that includes a non-refundable $50,000 per megawatt fee and higher deposits for large customers. The change follows nearly 200 applications filed in early 2026 seeking a combined 438 gigawatts of capacity in Texas from data centers, cryptocurrency operations and industrial users.

The new rules shift more interconnection costs to large customers and require those users to curtail during grid emergencies. ERCOT adopted the requirements to reduce speculative claims on limited transmission capacity and to manage how scarce connection slots are allocated.

In Albany, New York lawmakers moved to pause approvals for new large data centers for one year while state agencies assess impacts on residential electricity bills, water use and grid reliability. The measure would temporarily halt large project permits while regulators complete the review.

Forecasts show rapid growth in data center demand. Goldman Sachs projects U.S. data center power use rising from about 31 gigawatts in 2025 to 41 gigawatts in 2026 and 66 gigawatts in 2027, which would increase data centers’ share of U.S. peak summer demand from roughly 4.1% to about 8.5% over that period. The International Energy Agency projects overall data center electricity consumption could roughly double by 2030 and that demand from AI-focused facilities could triple. Federal energy models expect U.S. electricity use to reach record levels in 2026 and 2027.

Industry and grid planners point to several constraints that limit how fast capacity can be added. New generation and high-voltage transmission lines can take years to permit and build. Supply chains for gas turbines and large transformers are extended, and grid connection processes involve long lead times. Analysts estimate that around half to three-quarters of planned capacity due in the next year or two will arrive on schedule.

The economics of power are changing for large customers. Regulated utilities earn returns on approved capital investments, which can make grid upgrades part of the rate base. Independent power producers can offer new capacity into tighter markets at higher prices. Grid operators, working with finite connection capacity, now determine which projects can proceed and under what terms.

Operational differences between large energy users affect the market. Cryptocurrency miners historically used flexible, interruptible power and could curtail quickly when the grid strained. By contrast, companies building AI data centers seek continuous, always-on power and long-term supply contracts. Bids for firm power have increased prices for that category of supply and placed flexible loads under pressure.

Proposals for on-site generation and other local solutions appear in many project plans, but a number of those proposals remain unbuilt. Delays in equipment delivery and permitting add uncertainty about when additional firm supply will be available.

Residential electricity rates rose about 5% in 2026, with the largest increases on the East Coast. State and federal officials, utilities and project developers continue to debate how to allocate the costs of grid expansion and which projects should move forward.