Sept 1 (Reuters) – Data centers have requested roughly as much electricity across the middle swath of the United States as it takes to power every home in the country, but much of that demand may be an illusion.
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In an attempt to find out what is real, Texas recently became the first major data center hub to freeze new grid connections for the facilities and investigate their plans. Other U.S. states are taking similar steps to fix the intensifying problem that is vexing regulators and politicians nationwide.
A Reuters review of utility and grid data found that electricity requests from very large power users, mostly data centers, exceed 700 gigawatts — or more than 10 times industry estimates of current U.S. data center power use — across portions of the Midwest, Mid-Atlantic and the South.
Consumer advocates and regulators have cautioned that many requests are likely to be duplicative, or made by companies without the funds or expertise to see the projects through, threatening to stymie grid planning that is crucial to keeping the lights on.
Some of those warnings are now being validated, with major utilities cutting their data center demand figures once financial guardrails, like requiring upfront payments, are put in place.
The uncertainty is leading data center hot spots like Texas, Pennsylvania and Ohio to enact rules to filter out projects that could drive up prices and provoke political backlash without ever even getting built.
“When you don’t know what is real, you really don’t know how to build the infrastructure for it,” Texas Public Utility Commission Chairman Thomas Gleeson said at an industry conference in March.
GHOST DEMAND
As Big Tech’s planned AI data center spending tops $700 billion this year, companies and landowners with access to power or grid connections have rushed to cash in on the boom by securing electricity supplies needed to run those facilities.
Since 2023, requests from data centers and other large energy users to connect to the Texas grid have soared from about 48 gigawatts to more than 474 gigawatts, according to documents from grid operator ERCOT and Governor Greg Abbott, making it the fastest-growing region for AI and cloud server warehouses in the world by some measures.
Outside of Texas, data center electricity demand requests in 10 of the biggest U.S. utilities in the Midwest, Mid-Atlantic and U.S. South, including AEP Ohio, Southern Co and PPL, have reached about 270 gigawatts, according to a review of the latest utility quarterly earnings calls with investors.
There is no set standard for how utilities report requests for electricity from data centers, with some disclosing only projects that have signed contracts and others tallying up inquiries from projects without firm commitments.
When states and utilities have taken a closer look at data center electricity projects, however, and enacted requirements like large upfront deposits, chunks of that demand can fall away.
“The entities that rushed into the space, because there was a sort of pot of gold, are maybe now learning the hard way just how difficult some of this is to actually construct and bring online,” said Daniel Farris, an attorney at Foley & Lardner, who advises data center developers and hyperscalers. The latter refers to companies such as Amazon, Alphabet’s Google and Microsoft, which operate massive data center networks.
Chicago-based Exelon cut its tally of high-probability data center demand by about 40% to 11 gigawatts, it said in an investor presentation on July 30, after the company began imposing stricter collateral requirements.
In Ohio, electric utility AEP Ohio’s data center power demand pipeline dropped by more than half following state rules adopted last year that included grid connection study fees for data centers of up to $100,000.
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The uncertainty around data center electricity use, said Tyson Slocum, director of the Energy Program at consumer advocacy group Public Citizen, raises the risk that utilities either under-build and threaten the stability of the grid, or overbuild to serve projects that never materialize, leaving average Americans footing the bill.
“I think part of what (Texas) is trying to do is to create some order, and impose some transparency, on an industry that in much of the country is still like the Wild West,” Slocum said.
Electricity requests from proposed data centers have already increased costs in PJM Interconnection, the nation’s largest grid covering 13 states, including Data Center Alley in Virginia. Growth in existing and forecast data center demand drove a $29.4 billion increase in capacity costs for homes and businesses in the PJM footprint over roughly the past four auctions that determine those prices, according to grid monitor Monitoring Analytics.
Even after utilities dramatically reduce demand forecasts, however, they are still left with enough substantiated data center requests to overwhelm grids running short on supplies.
“The reality is that the load is showing up, and generation is not at the pace we need it to,” said PJM spokesman Jeff Shields.
AUDITING THE UNKNOWN
In Texas, the cornerstone of Abbott’s order is a comprehensive audit, requiring that proposals to power up data centers reveal who ultimately owns the centers, instead of earlier rules that allowed only an affiliate company to be disclosed.
The state Public Utility Commission, chaired by Gleeson, and grid operator ERCOT will be in charge of implementing the directive, which also asks for details about whether data center projects rely on taxpayer-funded incentives, water use and on-site power generation plans.
“The PUCT and ERCOT cannot make decisions to guarantee grid stability and reliability based on substantially incomplete information,” Abbott said in an update on his order.
Pennsylvania Governor Josh Shapiro, whose state’s abundant electricity supplies and natural gas have drawn a flurry of data center interest, has since made a similar move.
Shapiro signed a data center executive order on August 18 that includes stricter permitting requirements for projects of 25 megawatts or more and greater disclosure of project plans and end users.
Of the more than 100 data centers proposed in the state, only 20 have applied for permits needed to move the projects forward, a member of the governor’s office told Reuters.
Most of the proposals have not secured power sources or a customer that would be critical to funding the server warehouses, the official said.
(Reporting by Laila Kearney in New York; Additional reporting by Kavya Balaraman in Bengaluru; Editing by Liz Hampton and Matthew Lewis)
Copyright 2026 Thomson Reuters.
