For the last century or more, utilities have sized their grids to meet peak demand needs: those few hours during a year when electricity use soars. This approach has ensured lights stay on and air conditioning keeps running, even during summer’s hottest days. But it also leaves ratepayers on the hook for generators that rarely run and transmission and distribution lines with more carrying capacity than is needed most of the time.

Now, power planners are starting to look at how to use that excess more efficiently. Virginia is leading the pack in this effort, beginning with a new law requiring its two largest utilities to provide detailed data on how efficiently they’re using their grids. Maximizing use of this available capacity alongside efforts to incentivize flexible data center operations could help minimize the need for system expansion while still supporting technology growth. California has similar legislation on the boards, and other states also are exploring their options.

Data center dilemmas

Data centers are adding more complexity to regional planning efforts for a couple of reasons. First, their baseline operations can add significant demand to a utility’s operations on an ongoing basis. Second, depending on the work they’re doing, these centers’ peak requirements can shoot upward in seconds, and back down just as quickly. Utilities and regional transmission organizations (RTOs) now face the need to meet demand that’s high and difficult to predict.

The result is wide variability in projected growth. The Electric Power Research Institute, for example, sees A.I. facilities using between 9% and 17% of all U.S. electricity production by 2030, up from a range of 4% to 9% in 2024. Given the longstanding imperative to size grid operations to meet the highest possible need, planners and RTOs are looking at the possibility of enormous power-system buildouts.

New rate structures are coming online to help direct added expenses to data center owners. But that’s not stopping residential rates from rising. Average U.S. energy bills rose 31% between 2020 and 2025, according to the U.S. Energy Information Administration. With further increases predicted, state governments are evaluating their options for improving grid efficiency.

The first step, according to Virginia’s legislators, is to better understand how the state’s grid is being used. Legislation signed by Gov. Abigail Spanberger in April requires the commonwealth’s two leading utilities, Appalachian Power Co. and Dominion Energy, to report use data to the State Corporation Commission (SCC) to better assess “the true need to build, or defer building, new electricity transmission and distribution infrastructure,” according to a Virginia General Assembly press release.

To begin, the two utilities must submit their proposals for metrics that assess current grid performance and allow comparisons to employ what the legislation calls “optimal utilization of grid assets.” SCC staff will use this data for reports outlining the potential for the utilities to improve grid-use efficiency through “nonwire” alternatives, meaning measures that don’t require new lines or generation. 

The SCC will set a timeline for each utility to boost their use based on the agreed-upon metrics. Data reporting will continue on a seasonal basis for possible use in future capital investment discussions with state regulators.

Addressing rising costs

It makes sense that such a move would begin in Virginia. The state is home to the world’s largest concentration of data centers, and 70% of internet traffic is either created or runs through Northern Virginia’s Loudon County, according to the Virginia Economic Development Partnership. Virginia’s utilities also are served by PJM, the nation’s largest RTO. Utilities within PJM are seeing peak demand costs skyrocket thanks in large part to projected A.I. development throughout the RTO’s territory.

The idea that existing infrastructure could be better used is based in research. A February 2025 report from Duke University, “Rethinking Load Growth,” outlines results from analysis of 22 of the nation’s largest balancing authorities, covering about 95% of peak U.S. power load. Researchers found that the existing grid has plenty of room to serve new demand by adding some flexibility into how large loads operate. Specifically, 76 gigawatts of new load—about 10% of current U.S. aggregate peak demand—could be served by existing infrastructure if those loads were able to be curtailed for just 0.25% of their maximum uptime, which translates into just under 22 hours in a year for an always-on facility.

California, with the nation’s highest levels of grid expenditures, now has legislation in its state Assembly and Senate requiring grid-use reporting and related improvements. Residents there pay about twice the national average for electricity, according to data from Lawrence Berkeley National Laboratory and the Brattle Group. 

A separate Brattle Group report, “The Untapped Grid,” argues that improving system use nationally by 10% could reduce U.S. power bills by $110 billion to $170 billion over the next decade.

stock.adobe.com/Chris M