The American electric grid stands at a pivotal moment. Artificial intelligence, advanced manufacturing, data centers, and electrification are driving a new era of electricity demand that is growing faster and on a larger scale than grid operators anticipated just a few years ago. This reflects a significant shift. It reflects a lasting shift in how the country produces and delivers electricity, and the grid must be ready to keep pace.
State utility regulators are increasingly at the center of that challenge. The decisions they make will shape whether electricity remains reliable and affordable while supporting continued economic growth. Meeting rising demand will require significant investment, and competition power markets have long proven capable as a driver of investment and innovation.
However, building new generation takes longer today because inflation, supply chain constraints, permitting requirements, and siting challenges continue to extend project timelines and drive up costs. Strengthening grid reliability starts with addressing these barriers. Policymakers should focus on creating policies that help interconnect projects to the grid faster and meet the nation’s growing energy needs.
Competitive Markets Are Sending the Right Signals
Markets are already moving. Following the price signals sent by PJM Interconnection’s capacity auctions in recent years, generators have announced, restarted, expanded, or advanced tens of gigawatts of generation projects across the PJM region. More than 12,000 megawatts of additional generation capacity have been announced or added in PJM since 2024 alone. Private capital is flowing into a diverse mix of resources, including new natural gas generation, nuclear uprates, plant life extensions, energy storage, and facility expansions.
The scale of potential new development is striking. More than 220 gigawatts of new generation entered PJM’s latest interconnection review cycle. More than 55 gigawatts have already completed PJM’s interconnection process and are positioned to move toward development. More than 130 gigawatts expressed interest in contracting directly with large load customers, including data centers, through PJM’s Bilateral Contracting RFP. These figures reflect a private sector that is ready to build. The challenge isn’t attracting investment, it’s removing the barriers that keep projects from becoming operational.
Planning for Demand Without Overbuilding
Not every data center announcement becomes an operating facility. Utilities have already revised their demand forecasts significantly as projects that appeared certain failed to materialize on the expected timeline. Overbuilding infrastructure in response to projections that do not come to pass imposes real and lasting costs on consumers. Better load forecasting is not just a technical exercise. It’s a consumer protection measure.
Several federal and state legislative proposals have identified where forecasting methodologies can be improved and offered practical solutions. Regulators should engage with these efforts and push for greater transparency and accountability in how utilities develop and revise their demand projections. Competitive markets provide a natural check against overbuilding because investors bear the risk of projects that do not show up. That discipline is one of the market’s most important consumer protections.
Skepticism Is Warranted When Utilities Seek to Ratebase Generation
As supply constraints have tightened, some utilities in competitive regions have proposed building generation and recovering costs through traditional rate-based mechanisms, shifting investment risk from shareholders to captive customers. These types of proposals deserve careful scrutiny.
Utilities in restructured regions already have the ability to build power plants through competitive affiliates that operate on a level playing field with other competitive power suppliers. But they have chosen not to without the security of guaranteed cost recovery from ratepayers. The issue isn’t speed, it’s who assumes the financial risk.
Returning generation to cost-of-service recovery does not resolve permitting delays, supply chain backlogs, or interconnection queues. Those constraints apply equally to utility-owned and competitively owned projects. What changes is who bears the cost if a project is delayed, over budget, or ultimately unnecessary. Under competitive market structures, investors bear that risk. Under rate-based recovery, consumers do. Regulators should prioritize preserving the principle that investors, not ratepayers, bear the risk of new generation investments in competitive markets.
What Regulators Can Do
State regulators and policymakers have meaningful tools to accelerate investment and protect consumers simultaneously, and the most effective interventions focus on removing barriers rather than changing ownership models.
Long-term policy certainty is one of the most powerful levers available. Developers and investors need confidence that the rules will not change mid-project, and predictable, transparent regulatory environments attract investment more effectively than uncertain ones.
Existing generation also deserves serious attention. Plants already operating are often the fastest available source of reliability, and policies that accelerate their retirement before adequate replacements are online increase both costs and risk. Maintaining existing generation while new resources are built is essential to preserve reliability and protect consumers during this period of demand growth.
Finally, an all-of-the-above approach to the resource mix supports both reliability and affordability. Policies that unnecessarily restrict fuel types, technology choices, or procurement methods reduce the competitive pressure that keeps costs in check and limit the range of solutions available to meet growing demand.
Questions Every Regulator Should Ask
When evaluating utility proposals related to generation investment, a few core questions can help distinguish policies that serve consumers from those that primarily serve utility shareholders.
- Does it improve reliability?
- Who is on the hook to pay for the project?
- Does it encourage private investment?
- Does it preserve flexibility as demand forecasts evolve?
- Could this be procured competitively?
- Is competition likely to reduce costs?
- Does it protect consumers from unnecessary costs?
- Does it strengthen competitive markets rather than discourage investment?
These are not abstract questions. They are the practical tools of consumer protection in an era when the stakes for getting energy policy right have never been higher.
The Bottom Line
America’s growing electricity needs require more investment, not a return to cost shifts that put consumers at greater risk. By preserving competitive markets and removing barriers to new generation, state regulators can help deliver reliable, affordable electricity. That approach will best position the grid to power America’s next era of growth.
