Giant US power merger bets on AI build-out, but may hinge on power bills

The companies must clear reviews by multiple local, state and federal regulatory agencies that will assess consumer impacts as power bills surge in some U.S. regions as rising AI data-center demand is outpacing the installation of new generation. “With the concerns about affordability throughout ‌the country, the key issue here is keeping rates down, and keeping the growth affordable,” said Paul Patterson, an energy analyst at Glenrock Associates LLC.

NextEra and Dominion Energy's massive merger ‌may ​depend on whether the combined company can keep power bills in check even as it rushes to supply the energy-hungry data centers that have pushed consumer electricity prices higher. NextEra said buying Dominion, a deal that would create the third-largest energy company in the U.S., ‌would let it swiftly build new generation where others have lagged and connect proposed data centers waiting to begin operations. The companies must clear reviews by multiple local, state and federal regulatory agencies that will assess consumer impacts as power bills surge in some U.S. regions as rising AI data-center demand is outpacing the installation of new generation.

“With the concerns about affordability throughout ‌the country, the key issue here is keeping rates down, and keeping the growth affordable,” said Paul Patterson, an energy analyst at Glenrock Associates LLC. Serving data centers is a ‌core reason for the merger.

Dominion's service territory includes the northern Virginia area known as "Data Center Alley". That area of surging power demand sits within the 13-state PJM Interconnection, where new data hubs are also expanding. Virginia’s electricity consumption increased at an annual rate of 3.1% between 2019 and 2024, more than three times the national average of 0.9%, according to the U.S. Energy Information Administration.

Household power bills have risen in some parts of PJM ⁠by more than 20% ​over the last two years as demand ⁠grows but supply stagnates. The wave of large-scale projects has sparked a political backlash and increased regulatory scrutiny as the resulting supply-demand imbalance has pushed prices higher.

SCALE, SPEED AND SCRUTINY Merging NextEra and Dominion – which, together, say they have ⁠built more power generation than the next 25 largest utilities combined – may provide the scale needed to move forward data center power generation and transmission projects that have been stalled, analysts and investors say.

The ​deal would allow NextEra to accelerate its data center ambitions by using Dominion's expertise and relationships. “Utilities now need larger balance sheets, broader generation portfolios, and faster infrastructure ⁠deployment to compete in the AI era,” said Alex Torgerson, a mergers and acquisitions lead at business and technology consultancy West Monroe.

"The biggest challenge now shifts to regulators, who will scrutinize market concentration, grid reliability, and whether customers see ⁠meaningful ​ratepayer benefits from a deal of this size,” Torgerson said. NextEra and Dominion, in a joint statement, highlighted the combined company would keep rates from swelling, and proposed $2.25 billion in bill credits over two years for Dominion customers in Virginia, North Carolina and South Carolina. “The regulatory obstacles to closing the deal are the real variables,” said the research arm ⁠of investment banking advisory firm Evercore in a note. The merger has drawn criticism from consumer advocates who say it is unnecessary and would ultimately benefit shareholders and executives at the ⁠two companies more than utility customers. Five Dominion ⁠executives could together receive an estimated $66 million in pay and benefits as a result of the takeover, according to Dominion’s latest proxy statement. Dominion CEO Robert Blue’s change-in-control payout was estimated at $30.1 million.

“Utility mergers are all about benefits for shareholders and executives, not ratepayers,” said Ari ‌Peskoe, director of the Electricity ‌Law Initiative at Harvard University Law School.