Electric utilities across the country are tightening their rules on new AI data center customers, requiring binding financial commitments, collateral and steep engineering fees to separate genuine projects from speculative ones, known as “phantom” data centers in the industry.
The Wall Street Journal reports that AI’s electricity appetite has buried utilities in requests for grid connections, and many of those requests are never going to turn into actual buildings. Wood Mackenzie, a research firm, puts only 23 percent of disclosed data-center requests in the “high confidence” category. The rest is speculation.
Jeanne Jones, executive vice president of finance and strategy at Exelon, a utility operating across the Mid-Atlantic and Midwest, said inquiries began ballooning in 2024, and the individual asks got bigger too. A typical request used to be around 50 megawatts, about enough to power 50 Walmart stores. Now companies ask for 1,000 megawatts or more, the kind of output you’d expect from a large nuclear reactor.
Exelon used to study each project on its own. But once service requests from large customers tripled to 18,000 megawatts, the company switched to studying them in clusters instead. Jones described the challenge as separating “real growth that’s going to happen versus speculative growth.”
“We would get these questions internally but also externally: ‘How do you know what’s real?’” Jones said.
Exelon’s fix was to require binding financial commitments and collateral before granting a connection. That dropped the company’s high-probability project list from 18,000 megawatts to 11,000, with the remaining projects posting roughly $1 billion in collateral.
“It did kind of help weed out the speculative projects,” Jones said. “It might not be glamorous. Hey, our pipeline went down from 18 to 11. Investors are like, ‘Wait, why?’ But it’s the smart thing to do.”
The stakes cut both ways, Jones said. “For our customers it is obviously important,” she said. “Because if we build out the grid and then that data center walks away, someone’s got to pay for it and that’s not fair to them.” Certainty matters on the other side of the table too, she said: “When I’m out there telling the investors about our capital, I need to have certainty that it’s real and durable growth.”
Utilities are also locking customers into longer contracts. Average minimum contract lengths for large customers have grown to about 10.8 years since 2024, up from roughly 4.6 years before, according to utility filings aggregated by the AI startup Halcyon.
Texas is where the strain shows up most. It’s the busiest U.S. market for data-center construction, with about 12,800 megawatts of projects under way, according to Cleanview, which tracks data-center development. The state’s queue of connection requests has swelled past 400,000 megawatts. Gov. Greg Abbott (R) has paused grid connections and environmental permitting for data centers, though analysts expect those decisions could resume before the end of the year. Texas has also started requiring large customers to pay a $50,000-per-megawatt deposit to cover engineering studies, which means a 500-megawatt data center owes $25 million upfront before anything gets built.
Jim Burke, chief executive of Texas-based power producer Vistra, told investors that new data centers needing roughly 12,000 to 15,000 megawatts of power are likely to connect to the Texas grid by 2030. He backed efforts to narrow the state’s connection queue, pointing to demand estimates he considers inflated.
“When you have numbers overstated by more than 20x, it causes problems for policymakers,” Burke said. “So we support the thinning of the queues and getting the better, realistic decisions to make sure we can all move forward.”
Breitbart News previously reported that $68 billion in data center projects have been delayed over the past three months:
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The projects, tracked by Data Center Watch, a project of the AI intelligence company 10a Labs, made up more than half of all new large-scale developments the group monitored during that period. Data Center Watch’s lead analyst, Miquel Vila, said opposition to the industry is broadening. “New groups continue to emerge, opposition is appearing across a wide range of states and jurisdictions, and online petition signatures continue to grow,” he said.
The numbers back that up. Data Center Watch counted 843 opposition groups spread across 49 states; Hawaii is the only state without one. About 30 statehouses have introduced or adopted rules covering data center siting, electricity use or water consumption. In Tennessee, a petition against a single data center project drew more than 500,000 signatures on Change.org, more than a third of all signatures collected on the platform that quarter, according to Data Center Watch.
AI data centers and the integration of this technology is changing the political landscape. Breitbart News social media director Wynton Hall has written his New York Times bestseller Code Red: The Left, the Right, China, and the Race to Control AI to serve as the definitive guide on how the MAGA movement can create positions on AI that benefit humanity without handing control of our nation to the leftists of Silicon Valley or allowing the Chinese to take over the world.
Read more at the Wall Street Journal here.
Lucas Nolan is a reporter for Breitbart News covering issues of AI, free speech, and online censorship.