Data Centers as Catalysts: Rethinking Regulation for Economic Growth

The emergence of data centers as major electricity consumers is prompting a fundamental shift in how utility commissions approach regulation. According to an article by Jeffrey Jakubiak of Vinson & Elkins, these facilities are no longer just high-demand loads; they are economic engines that attract jobs, taxes, and related businesses. Yet, many commissions remain focused on limiting costs rather than enabling investments that could bolster local economies and innovation. 

Jakubiak argues that regulators should broaden their perspective to view grid investments as tools for economic development, allowing utilities to recover costs for projects that foster growth rather than merely responding to immediate service requests.

The scale of this transformation is significant. Data centers today often propose loads exceeding 50, 100, or even 300 megawatts (MW), driven by AI, cloud computing, and the digital economy. BloombergNEF projects global data center power capacity will more than triple from 81 gigawatts (GW) in 2024 to 277 GW by 2035. 

Regions that secure these facilities benefit similarly to past industrial anchors, with high-value jobs and substantial tax revenue. Loudon County, Virginia, exemplifies this effect: its data centers now account for nearly half of property tax revenues, generate billions in local value, and support over 12,000 jobs.

Traditional regulatory frameworks, focused on reactive cost recovery, could deter utilities from proactive grid expansion. Jakubiak stresses that forward-thinking regulation balances consumer protection with the economic costs of underinvestment. Commissions should embrace innovation, advanced grid technologies, and flexible planning to accommodate rapid energy demand from data centers. By doing so, regulators can transform data centers from a potential challenge into an economic engine, ensuring that reliable and affordable power supports long-term growth, competitiveness, and community prosperity.

This approach positions utility commissions not merely as overseers but as partners in regional economic strategy, demonstrating that the grid can power both homes and the digital economy.