By: Matt Emma
After nearly two decades of relatively flat electricity demand, the U.S. power grid is entering a new era of load growth driven by data centers, electrification, and industrial expansion. Energy Strategist Emily Sanford Fisher says meeting that demand will require substantial investment in transmission, distribution, storage, and grid modernization infrastructure, raising questions for utilities, regulators, large electricity users, businesses, and residential customers about who should pay for these upgrades.
The Debate Over Who Should Pay for the Future Grid
Historically, the costs of grid infrastructure were broadly shared across residential, commercial, and industrial customers because transmission and distribution systems were designed to support reliability across the broader electric network. It made sense to share the costs of infrastructure that served everyone.
However, some of the largest infrastructure investments now being planned are increasingly tied to concentrated load growth from hyperscale data centers, advanced manufacturing facilities, electrification, and industrial expansion.
“In some regions, utilities are receiving individual load requests from data center developers measuring in the hundreds of megawatts or even gigawatts, levels of demand historically associated with large metropolitan areas or major industrial corridors,” explained Emily Sanford Fisher.
As a result, regulators and utilities are increasingly evaluating how much of those costs should be borne by the customers driving the need for the infrastructure rather than shared more broadly across other utility customers. “This, too, however, is a well-understood principle of electricity rates: the entity that ’causes’ the costs pays,” said Sanford Fisher.
“The electric system has historically been planned around shared system benefits and long-term infrastructure investment,” said Sanford Fisher. “But as load growth becomes larger, more concentrated, and more geographically uneven, cost allocation questions become significantly more complicated. It is reasonable to have those who are driving increased costs, particularly for infrastructure that is not broadly useful, to pay more.”
Why Some Grid Costs Are Still Broadly Shared
Many transmission and grid infrastructure projects provide operational and reliability benefits across broader utility systems and regions. Large transmission upgrades can improve regional reliability, reduce congestion, strengthen resilience, support future electricity demand, and improve overall system flexibility across multiple states and utility territories.
According to Emily Sanford Fisher, “Large infrastructure projects, like new or expanded transmission lines, can benefit the larger electric grid, beyond those areas that are most geographically proximate.”
Even when a project is initially driven by a large new electricity user, portions of this expanded infrastructure may also provide system-wide operational and economic benefits, arguing for cost allocation beyond the new user.
“The interconnected nature of the grid is one of its biggest assets, allowing us to better share resources, support reliability, and lower costs for all customers. So, new infrastructure, even when intended to solve a specific grid challenge or for a specific customer, can contribute to reliability and resilience and reduce grid congestion that drives up costs for everyone. These are good outcomes for everyone,” continued Sanford Fisher.
While this can make cost allocation significantly more complex than traditional utility investments confined to a single service territory, “it makes sense to share costs when there are broad benefits,” said Sanford Fisher. “The real challenge is measuring these benefits and then using this to figure out who should pay what.”
Transmission Expansion Creates Additional Cost Challenges
Over the last decade, transmission development has become one of the largest infrastructure and cost challenges facing the electric sector. Large-scale transmission projects require substantial long-term capital investment not only because the infrastructure itself is capital-intensive, but also because large projects frequently cross multiple jurisdictions, require extensive permitting and environmental review processes, and must be planned years in advance of expected demand growth.
New generation resources and electricity demand growth are moving faster than transmission permitting and construction timelines, increasing pressure on existing infrastructure, transmission planning, and interconnection processes.
At the same time, utilities and regional grid operators are trying to expand systems originally designed around different generation patterns and slower load growth conditions.
“This is why there has been such a focus on siting and permitting reform and speeding up the new generation interconnection queue in the last five years. This might seem bureaucratic, but figuring out how to build new things faster actually would reduce costs for everyone, which would make the cost allocation discussions easier,” said Emily Sanford Fisher.
How Utilities and Regulators Are Determining Who Pays for Grid Expansion
Utilities, regulators, and grid operators are responding to increasing infrastructure costs through a combination of long-term transmission planning studies, interconnection analyses, utility rate cases, and large-load service agreements designed to determine what infrastructure is needed, how much it will cost, how quickly it must be built, and how those costs should be allocated.
When very large electricity users such as hyperscale data centers or advanced manufacturing facilities request service, utilities and regional grid operators typically conduct extensive engineering and transmission studies to evaluate whether existing infrastructure can support the new demand or whether new substations, transmission lines, generation resources, or local distribution upgrades are required. “
These studies and this caution are essential,” said Sanford Fisher. “The reliability of the energy grid requires that we keep supply and demand in balance at all times. This means that sometimes adding a new generation means expanding the transmission system to accommodate it. Adding new resources to the grid is a good thing if it helps us meet growing demand, but it can create challenges if not done thoughtfully or with respect for the laws of physics. These studies tell us whether a generator or new user requires that we invest in system upgrades to preserve reliability for everyone.”
At the regional level, grid operators such as PJM are conducting long-term transmission planning processes to identify infrastructure upgrades needed to maintain reliability and accommodate projected demand growth across multiple states and utility territories.
These studies can take years to complete and frequently involve debates over project scope, cost allocation, permitting timelines, and regional system benefits. “But, they are required to understand the costs and benefits of new infrastructure,” said Emily Sanford Fisher.
Beyond engineering, to address costs and concerns about energy affordability, utilities are looking to negotiate specialized service agreements and tariffs with large customers that may include upfront infrastructure contributions, minimum usage commitments, or customer-specific cost recovery structures intended to reduce the risk of broader cost shifting onto existing utility customers.
“These tools can help manage costs for all customers,” said Sanford Fisher. “Some of these are existing tools, and some of these are new twists on these tools, but they can all work to ensure that those who cause costs and those who benefit help pay for new infrastructure.”
Who Will Ultimately Pay for the Grid of the Future?
The future grid will likely still be paid for primarily through regulated utility frameworks and customer electricity rates, but the debate is increasingly about how much of those costs should remain broadly socialized versus directly assigned to the large customers driving the need for new infrastructure.
“The central question should not be whether grid investment is necessary,” Sanford Fisher explained. “It is. But the challenge is determining how to allocate those costs fairly while expanding the electric system to support larger concentrated loads, increasing electrification, and continued electricity demand growth. A mix of both old and newer regulatory tools is helping regulators, utilities, and their customers navigate this new normal.”
About Emily Sanford Fisher
Emily Sanford Fisher is the Founder of Enodia Energy, where she advises utilities, regulators, industry groups, and nonprofits on electricity market design, regulatory policy, transmission expansion, and clean energy strategy. She previously served as Chief Strategy Officer at the Smart Electric Power Alliance and as Executive Vice President, Clean Energy, and General Counsel at the Edison Electric Institute.
