Electricity demand is rising for the first time in decades as data centers are built, manufacturing is reshored, and electrification increases. As White House National Energy Dominance Council officials explained at the Electric Power Supply Association’s annual summit, President Donald Trump and his administration are leading efforts to keep electricity prices affordable.
Most recently, President Trump and seven of the country’s largest tech companies signed the Ratepayer Protection Pledge to ensure that data centers pay for their own electricity costs and protect Americans from electricity price increases due to data center demand. Despite the administration’s efforts, some electric utilities in the mid-Atlantic are threatening to undermine the core principle of the pledge and shift the risk of building new generation onto captive customers.
In the 1990s, electricity markets across the country turned to competition, allowing independent power producers to compete in a marketplace that rewards the cheapest and most efficient power plants.
Some utilities, like Exelon, want to re-establish monopoly systems where they own and operate the power plants that generate electricity, the long-distance transmission lines, and the local distribution infrastructure. Under this model, utilities would build generation with guaranteed returns and shift construction risk, cost overruns, and performance failures directly onto ratepayers. Unlike a monopoly system, competitive markets put the risk of investment on the power producers and their investors, not the end users.
If power demand is rising so quickly, why aren’t utilities already building?
Utilities in competitive markets can still build generation today, they just have to do it competitively and without guaranteed returns. Consider National Grid Ventures’ recent announcement in New York. Despite being a major electric utility provider, its competitive affiliate, National Grid Ventures, is pursuing generation projects through competitive channels, accepting market risk rather than demanding ratepayer guarantees. New York and Governor Kathy Hochul have also been tackling affordability concerns by holding utilities accountable. Last month, Hochul moved to block Con Edison’s proposed rate increase and directed regulators to audit utility salaries across the state. Pennsylvania Governor Josh Shapiro also acknowledged that utilities lack public accountability, and transparency while making billions of dollars through guaranteed returns.
Utilities’ own load forecasts show surging power demand, and their supporters argue that capacity markets are “loudly” signaling scarcity. If utilities are so confident in their own predictions, why are they not building generation already?
The answer is simple: utilities want the upside without the risk. They seek guaranteed cost recovery regardless of whether their projects succeed, whether costs spiral, or whether the forecasted demand materializes. Competitive power suppliers, by contrast, put their own capital on the line. If they build inefficiently or misjudge the market, investors—not ratepayers—absorb the losses, shielding customers from higher bills.
Utilities may also be exaggerating their own forecasts to increase profits. After Ohio introduced a new method of forecasting data center demand, AEP Ohio’s “speculative data center queue” dropped from 30,000 MW to 5,642 MW of load when “substantial financial commitments” were required. Did 81% of projected demand evaporate overnight, or are utilities being less than diligent with their public projections? You be the judge.
Virginia is a clear counterexample
Exelon and other utilities have argued that returning to monopoly generation is needed to meet the growing demand, but that’s far from reality. If monopoly-owned generation was the clear answer to rising demand, one would expect that Virginia’s monopoly system has the power it needs to meet data center demand. Instead, Virginia is one of the top electricity importers in the country, relying heavily on power generated in states with competitive generation.
Ensuring that the grid remains reliable is essential, and one of the ways that this is done is through capacity costs where power plants are paid to ensure they can deliver when electricity is needed. Virginia ratepayers face some of the highest capacity costs in the mid-Atlantic. In 2025 and 2026, capacity prices in Dominion’s service territory was 64% higher than the rest of the mid-Atlantic’s grid operator, PJM. When PJM’s capacity prices were near record lows, Appalachian Power’s capacity costs were more than 1,000% higher than the rest of the mid-Atlantic’s.
If monopoly generation is so much better at meeting demand efficiently and affordably, why would a state like Virginia have to import nearly a third of its power while paying significantly higher capacity prices?
Competition protects customers
Competitive markets have consistently delivered lower costs, faster innovation, and greater accountability than monopoly utility generation. Market participants respond to price signals, invest their own capital, and compete to serve customers efficiently.
Policymakers should resist calls to turn back the clock. Competition, not monopolies, will help the Trump administration protect customers from the costs of new energy infrastructure.
Todd Snitchler is President and CEO of the Electric Power Supply Association (EPSA).
This article was originally published by RealClearEnergy and made available via RealClearWire.
Thank you for this interesting article. Some of the problems in states like Virginia and California is that power generation is relatively limited – high barriers to entry- so you don’t get much competition there. Both states import electricity. Plus there are many problems with the transparency of way the grid works. One of the utilities was in bankruptcy three times! Huge mess but at least governor Newsom extended the Diablo Canyon lease.
The powers that be in Virginia decided decades ago it was more economic to purchase power from its neighbors instead of generating it in Va. Then, they decided to build in Virginia. The local utility built 3 gigantic, top efficiency CCGTs as well as 2 medium sized CCGTs. Then they started building a NG pipeline to make the gas supply more reliable and less costly.
Then, the enviro NGs started fighting tooth-and-nail against the pipeline and any new generating facilities, all while coal was winding down due to federal regulations during the Obama/Biden years. So we exist in a stalemate while the loads from domestic users and data centers are increasing.
But the new supply from wind is in progress. Too bad data centers need power 24/7.
This highlights a tricky balance between encouraging large scale infrastructure growth and protecting everyday consumers from rising costs. As electricity demand increases with data centers and AI workloads, the question is who ultimately bears that cost.
While the pledge aims to ensure companies pay for their own energy needs, the challenge seems to be enforcement and long term accountability. Without clear mechanisms, there is always a risk that some of those costs still get distributed indirectly across the system.
It feels like the real issue is not just policy intent, but how utilities, regulators, and companies coordinate to ensure transparency and fair cost allocation over time.
Curious whether stronger regulatory frameworks or market driven approaches would be more effective in actually protecting ratepayers in the long run.
https://www.solix.com/
A rather funny AI video of what Germany will be like when it reaches Net Zero nirvana in ’45.
Stuttgart 2045 klimaneutral – Deutscher Rock – Metal – Official Video
“In the 1990s, electricity markets across the country turned to competition, allowing independent power producers to compete in a marketplace that rewards the cheapest and most efficient power plants.”
Government mandates (e.g. FERC Order 888) is not competition. Sometimes markets determine that a spot market is not the most efficient way to allocate a resource, which is why we have contracts and vertical ownership of resources. Government mandates have caused a lot of problems, including early retirement of some generators and selecting suboptimal levels of intermittent generation (wind, solar).
FERC 888 didn’t mandate investor owned utility (IOU) divestment of generation assets, but rather the functional separation of each IOU’s transmission and generation operations to ensure market access to the former.
The mandate for some IOUs to divest themselves of their generation assets was driven by individual state public utility commissions (PUC), based on the not unreasonable idea that a competitive generation market would be economically more efficient than having the IOUs overbuilding generation in order to pad their earnings and to avoid calling their executives at 2am in the event of a tube leak.
The real problem, as concisely pointed out by Ed Reid, below, is that goof ball states with goof ball PUCs fell hook, line and sinker for the Left’s narrative of climate alarmism, which has lead to the subsidized addition of non-dispatchable renewables to the grid. This is, and always has been, a political problem.
“FERC 888 didn’t mandate investor owned utility (IOU) divestment of generation assets…”
I never said it did, but did require utilities to interconnect IPPs to their grid.
“…not unreasonable idea that a competitive generation market would be economically more efficient…”
First, it’s important to recognize that a spot market is not the same as a market in a general economic sense. Credit to Ronald Coase on questioning why firms exist in market economies. Second, your “real problem” example contradicts the statement above–why does it matter if non-dispatchables are overbuilt in a “competitive market”? The answer is that “generation” isn’t a homogenous good; there is asset specificity which could also mean that a spot market isn’t the economically efficient mode of allocating generation. Unfortunately most economists, particularly at FERC, and politicians never got around to reading economists like Ronald Coase and Elinor Ostrom.
The introduction of substantial quantities of redundant, intermittent renewable generation, without adequate associated storage to render it dispatchable, is largely responsible for the increase in capacity charges. The intermittent renewables can DISPLACE conventional generator output when they are available but cannot REPLACE the conventional generation required to meet demand when the intermittent renewables are not producing at or near capacity. Displacement reduces conventional generator output and fuel cost, but not investment and non-fuel operating cost which must be recovered over much lower MWh deliveries.
Higher capacity charges will remain as long as intermittent renewables remain on the grid and will worsen as additional intermittent renewables are connected to the grid.
IMHO, the projected huge increase in power consumption from AI data centers is an illusion. Future growth in generation capacity is constrained by limited supplies of power generation equipment. Distributed computing architectures have the potential to greatly reduce the power consumption requirements of AI software and firmware.
If AI data centers and industrial consumers of electricity must bear the risk of acquiring new generation capacity, they will have every incentive to choose computing architectures and industrial processes which don’t require huge buildouts of additional capacity — only that much more needed to support an economically efficient approach to delivering the services and the products they sell.
I love Josephs video 2045 !!
Why could not each AI Group putting up the AI Data Center not also put up their own Community Power Plant sized accordingly ~ and feed their produced power to the AI Data Center and not rely on the grid at all? If they wanted to be a good community member they (1) could oversize their MW power production by say 15 or 20% and come to an agreement with the local community to sell that “extra” power created into the grid network. That way, when they do have to do their yearly maintenance, they could have their agreement to include selling to them electricity as needed for that week or two needed.
And (2) if the AI Group really wanted to be a good community member they would Host the combusted exhaust generated at the power plant to a third party, who would then capture the Heat Energy and the CO2 and the Water out of the combusted exhaust to be used efficiently, turning that exhaust into good paying full time jobs and money for the local community.
Somebody – one of the parties, could be collecting 45Q monies by not having the CO2 being vented into the atmosphere. Then there is the water. The combusted natural gas is 18% water, and with the heat energy removed this water is created. And then there is the water from the AI Data Center cooling system. If this water can be collected together, it can be utilized efficiently.
This alone makes this whole complete project worthwhile, the AI Data Center and the Community Power Plant and this Community Hosting Group all working together, supporting each other, creating hundreds of jobs and saleable products for this community.
It’s called Win-Win and isn’t that something we should all be striving for?
“story tip” ?
This could be happening all across America. I really believe in the Community Power Plant idea so America can rebuild (rewire) our National Grid, but it would no longer have to be done “in a hurry”, and the second part about finally creating high efficiency lo or no emission power plants, is something that should have been in the works many years ago. And the other part of it is Electrical Energy Security. Natural gas is to valuable a commodity to continue to waste – as America is and has been doing for decades. The residential and commercial market has their high efficiency water heaters and boilers. Why not the largest natural gas consumers, the power plants. The technology is there – Utilize it – Make it happen.
Coal technologies have also improved tremendously. The environmentalists seem to need something to rat on, so they pick coal, but coal can be combusted almost as clean as natural gas.
I have been hearing lately “Energy is Power – Energy is Security. If some some reason something should happen to America’s natural gas network, having coal ready to fill in as needed could be America’s Saving Grace.
Secretary Wright. We look forward to your comments.
Have A Great Weekend!