On Thursday, TIME “” Person of the Year, acknowledging the significant influence AI is exerting on our society, particularly regarding climate and energy.
At least for the near future, AI has driven up energy demand, raised projected emissions, and increased electricity prices. It has also fundamentally altered the utility sector’s landscape—transforming a traditionally slow and stable industry into a rapidly expanding powerhouse.
This is a pattern I’ve covered extensively this year—and one that has drawn the attention of many politicians. Among them is Tom Steyer, a candidate for office. I’ve with Steyer on over the last few years. The former investor who became a politician and then returned to investing, now running in another campaign, has long been a vocal advocate for urgent climate action, making it a cornerstone of his public service.
Since joining the California governor’s race in November, he has adopted a more populist stance, moving his emphasis from climate issues to affordability concerns. This aligns with the national conversation, but he has added his own twist, advocating for California to dismantle the electric utility monopolies. In a late November Wall Street Journal piece, he argued that electric utilities represent “coddled powerful interests” that exploit ordinary citizens.
“I will dismantle the utility monopolies and cut electric bills by 25%,” Steyer wrote. “That’s just the beginning.”
Steyer’s path to the governorship is an uphill battle. have him in single digits. And the route to abandoning the monopoly utility business model is even more challenging. (Steyer doesn’t detail precisely how he would implement a breakup, and various approaches carry different consequences). The industry wields significant political influence, and departing from the established model is complex and entails genuine risks.
Nevertheless, Steyer is channeling a strong populist sentiment. Increased power demand from AI, electrification, and other sources has caused consumer electricity costs to surge, angering voters across party lines and influencing key statewide races in Virginia, New Jersey, and Georgia. In this climate, it’s unsurprising that utilities themselves have emerged as a major point of contention in a quickly shifting landscape. It’s still early, but how on the role of utilities develops will carry major consequences—for climate, AI, and the economy.
The structure of regulated utilities in the U.S. represents both their greatest asset and their biggest weakness. While the specific structure differs across states, utilities generally receive exclusive service territories in return for a duty to serve and regulatory protection that lets them recoup approved expenses and secure a fixed return on capital investment. This model has made investor-owned utilities dependably profitable but not major growth enterprises.
The AI surge—and the accompanying rise in electricity demand—is altering that equation. The Edison Electric Institute, the trade association for investor-owned electric utilities, earlier this year that its members would invest over $1 trillion to satisfy this demand by 2030. As they expand the grid and increase power generation capacity, their profits are set to surge and share prices have already climbed accordingly.
However, the emerging voter and consumer pushback against higher prices could disrupt those plans. Over the summer, I about mounting public frustration in Georgia over escalating electricity bills as Georgia Power, the state’s monopoly utility, prepares a major infrastructure expansion. In November, voters chose two insurgent candidates for the state utility regulator by large majorities. In many parts of the state, local leaders have tried to stop the construction of data centers, which should theoretically slow the increase in electricity demand and thus utility profits.
Dismantling utilities and bringing in competition—as Steyer proposes—represents a far more serious challenge that could substantially diminish utility profits—or, if investor-owned utilities were replaced with public entities, could eliminate the business altogether.
This is not a novel threat. In the 1990s, many states introduced competition into segments of the power industry, while the local utility maintained a regulated monopoly on transmission. Since then, these initiatives largely faded—until recent years when movements have resurfaced in places like Maine, New York, and California. At the beginning of this year, more than 10 communities nationwide were exploring municipalization, the transfer of utility ownership to local control, according to a from the Brattle Group.
Utilities are clearly conscious of this risk, and the matter usually appears near the top of the risk factors in regulatory filings. “If legislative and regulatory frameworks were to change in a manner that undermined PSE&G’s exclusive right to serve its regulated customers, its future profits could be adversely affected,” states last year’s from New Jersey utility PSE&G.
Even without dismantling monopoly utilities—a difficult proposition given numerous constraints—the rhetoric indicates a fresh public relations hurdle for the industry. Consumers can voice opposition to data centers at public hearings and urge politicians to take action against utilities. And this sentiment—which could have tangible repercussions—will probably persist into the new year.
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