Rising ratepayer burdens from costs to meet new large loads from hyperscalers and other load growth can be limited by utilities that use newly available flexibility to manage demand peaks, power system stakeholders told Utility Dive.
Due to growing demand for power from data centers and industrial customers, total U.S. generation by the electric power sector will grow by 2.3% in 2025, according to September data from the U.S. Energy Information Administration. And the average U.S. residential electricity rate rose over 5% from July 2024 to July 2025, EIA’s data browser showed.
Investing in an expanded power system to meet new large load demand and limiting rate impacts while paying for the investments may seem contradictory, but it can be done, stakeholders said.
Large loads increase rates if they induce utilities to make expensive grid infrastructure upgrades to meet higher demand peaks, said University of California, Berkeley, Haas School of Business Professor Severin Borenstein.
But with policy incentives to “restrain” peak demand, large loads can avoid the costs that drive higher rates, he added.
State policymakers and stakeholders can design and enact those incentives and other policies to strengthen power system flexibility, affordability and reliability, analysts said.
“Rate increases are capturing politicians’ attention because costs, and especially energy costs, are emerging consumer issues,” said former Arkansas Public Service Commission Chair Ted Thomas, founder of Energize Strategies. “That makes resisting rate increases important enough for politicians to expend political capital on now.”
Though the amount of load growth is still uncertain, investments to meet it already threaten affordability. But data shows the right regulation can limit its impacts and potentially stabilize customer costs.
The rising prices
Investor-owned utilities, which meet 57% of U.S. electricity use, will invest of about $1.1 trillion from 2025 to 2029 in infrastructure, up from $765 billion in the previous five years, according to a September Edison Electric Institute report. There are 91 GW of new capacity under construction, and 488 GW planned or proposed, it found.
The data center electricity demand has created “a new category of costs” for expanding and modernizing the system that threatens “bills for all customers,” observed a September Union of Concerned Scientists policy brief. Regulatory practices at the state level “allow for this – the worst – outcome” of growth, it added.
But new policies that encourage growing large loads like data centers to be flexible and shift usage away from demand peaks can improve outcomes, stakeholders said.
Large load flexibility
Large loads can increase rates because system operators and utilities must make capital expenditures, or CapEx, for infrastructure to meet demand peaks, Haas Institute’s Borenstein said. Those peaks are 50 hours or fewer per year but the infrastructure costs for meeting them go into and drive up customer rates, he added.
