Utilities Seek Big Rate Hikes to Cover Data Center Costs.

US utilities are seeking significant rate hikes to cover costs associated with replacing aging infrastructure and powering data centers for AI. The hikes are driven by booming demand for electricity from data centers, which are expected to consume a growing share of the US power grid. The rate increases could total billions of dollars.

US utilities are seeking substantial rate hikes to cover the costs of replacing aging infrastructure and powering data centers for artificial intelligence (AI). The hikes are driven by the booming demand for electricity from data centers, which are expected to consume a growing share of the US power grid. The rate increases could total billions of dollars.

According to a report by Commercial Observer, Blue Owl Capital has provided a $65.7 million loan to refinance a data center in San Antonio, Texas [1]. The 75,840-square-foot property, operated by Stream Data Centers, has a power capacity of 8.5 megawatts and expansion potential for another 1 megawatt. This investment reflects the increasing importance of data centers in the real estate market.

Caterpillar, a construction giant celebrating its centennial in 2025, has seen its energy and transportation segment outpace its construction industries business. The growth is driven by the data center boom, which accounts for a significant portion of Caterpillar’s revenue [2]. The company has been increasing its manufacturing capacity for gas-fired turbines, which are crucial for powering data centers.

In the race to develop AI, large technology companies like Google and Meta are securing massive amounts of electricity to power their new data centers. This demand is leading utilities to offer discounts to these companies, which are then passed on to regular consumers. For instance, a Meta data center under development in Louisiana is projected to use twice as much energy as the city of New Orleans [3]. The utility Entergy is proposing to build over $3 billion worth of new power plants and infrastructure to meet the data center’s energy demand, with the costs potentially being shared among all customers.

The increasing demand for electricity from data centers is leading utilities to seek rate hikes to fund these expansions. However, the extent of the rate increases and how the costs will be distributed among consumers remains a contentious issue. Policymakers are exploring ways to ensure that the costs of powering data centers do not disproportionately burden regular consumers.

References:
[1] https://commercialobserver.com/2025/07/blue-owl-san-antonio-texas-data-center-refi/
[2] https://finance.yahoo.com/news/centennial-anniversary-caterpillar-growth-now-110000710.html
[3] https://www.theinvadingsea.com/2025/07/08/data-centers-utilities-artificial-intelligence-ai-google-meta-power-plants-electric-bills-energy/