Dec. 20, 2025
Utilities stocks are having a moment that would’ve been hard to imagine just a few years ago. The sector long known for predictable dividends and regulated earnings is now being pulled into the center of the AI buildout—because none of it runs without electricity.
As of Dec. 20, 2025, the utilities story is no longer just “bond-proxy, defensive, yield.” It’s increasingly about load growth, grid reliability, data centers, and a multi-year capital spending wave—with investors trying to decide whether the sector’s recent pullback is a warning sign or an entry point.
Below is a detailed roundup of the most important current news, forecasts, and analyses shaping utilities stocks right now, and what to watch as the market heads into 2026.
The utilities stocks headlines driving markets right now
Several developments—some market-based, some regulatory—are shaping investor expectations into year-end and beyond:
1) Electricity demand forecasts are rising again
A key tailwind is straightforward: U.S. power consumption is expected to hit record highs in 2025 and 2026, driven in part by AI and crypto data centers, plus broader electrification. Reuters reported the U.S. Energy Information Administration (EIA) projecting demand of 4,199 billion kWh in 2025 and 4,267 billion kWh in 2026, up from 4,110 billion kWh in 2024. [1]
The EIA’s Short-Term Energy Outlook also expects U.S. electricity generation to grow 2.4% in 2025 and 1.7% in 2026, calling out large customers (including data centers) as a driver—especially in ERCOT and PJM. [2]
2) PJM capacity prices hit a record—raising the “who pays?” question
One of the biggest near-term signals for the power market came from the PJM Interconnection capacity auction. Reuters reported that prices reached $333.44 per megawatt-day, with data-center-driven demand overtaking supply—an outcome expected to keep pressure on electricity bills in parts of PJM’s 13-state footprint. [3]
Reuters also noted PJM secured 134,479 MW of supply, which was about 6,600 MW short of the reliability requirement, and that some areas saw utility bills jump more than 20% starting last summer. [4]
For investors, that’s a double-edged sword: higher capacity prices can boost revenues for certain power producers, but politically it intensifies scrutiny of the broader data-center boom.
3) Regulators are approving major buildouts—and the price tags are enormous
In Georgia, the state Public Service Commission approved a plan for Georgia Power to increase power capacity by 50% to meet projected data center demand—described by AP as among the biggest U.S. buildouts aimed at AI-era load growth. AP reported $16.3 billion in construction cost, with staff estimating customers could pay $50–$60 billion over coming decades when financing and allowed profits are included. [5]
This kind of approval supports the “rate-base growth” thesis that utilities bulls like. But it also sharpens the risk investors can’t ignore: public backlash if residential customers feel they’re underwriting Big Tech.
4) Federal regulators move on “plugging data centers into power plants”
A separate policy shift is unfolding around “colocation” deals—arrangements where large power users seek to connect directly to generation resources. AP reported that FERC issued a unanimous order designed to clarify rules in PJM and require PJM to develop rates and conditions for different colocation scenarios. [6]
The market implication: these structures could accelerate data center hookups in some regions, but they also heighten debate over grid cost allocation and ratepayer protection.
5) Valuation talk returns after a pullback in utility stocks
Into this backdrop, sector analysts are increasingly talking about valuation and timing. A recent analysis described utilities as having pulled back roughly 10% after a multi-month rally, framing it as an improved entry point—especially for utilities closer to major Eastern and Southeastern data center corridors. [7]
Separately, Barron’s argued utilities “look cheap,” pointing to the sector trading around 17.8x earnings versus ~22x for the S&P 500, and noting utilities were down about 7% since mid-October at the time of publication. [8]
Why utilities stocks are moving like growth stocks now
Utilities are still regulated, capital-intensive businesses—but the demand outlook has changed. The simplest way to understand today’s utilities sector is that it’s being repriced around a single question:
How much incremental load is real—and how fast can utilities build reliably and affordably to meet it?
A “large loads” forecast that changed in just a few years
A report from the Energy Systems Integration Group’s Large Loads Task Force highlights why forecasts are so volatile. In its executive summary, the report notes that utility load forecasts point to an increase in peak demand on the order of 166 GW by 2030, and that data centers are expected to account for roughly 55% of projected demand growth. [9]
Crucially, the same report underscores uncertainty by noting that an aggregate U.S. utility peak-demand growth forecast from only a few years earlier (2022) was far smaller—illustrating how quickly the narrative has shifted. [10]
Deloitte’s longer-term view: peak demand +26% by 2035
Deloitte’s 2026 power and utilities outlook argues that U.S. electricity demand “began accelerating in 2025,” with AI workloads and electrification pushing peak demand projections. Deloitte estimates peak demand could rise about 26% by 2035, and suggests data center demand alone could reach 176 GW by 2035. [11]
Deloitte also points to a major constraint: the interconnection bottleneck. It cites two terawatts of capacity stuck in interconnection queues, nearly twice current installed capacity—an obstacle that could slow the pace at which new supply comes online. [12]
BloombergNEF: 106 GW of data center power demand by 2035—plus a big warning label
Utility Dive summarized BloombergNEF’s estimate that U.S. data center power demand could reach 106 GW in 2035, up from about 25 GW of operating data centers in 2024 (as cited via Bloom Energy earlier in the year). Utility Dive also noted BNEF’s updated forecast was 36% higher than its April estimate, reflecting larger average project sizes. [13]
But Utility Dive also emphasized skepticism from other analysts, including concerns that speculative proposals or an AI bubble could lead to overstated forecasts. [14]
Bottom line: forecasts broadly agree on “up,” but disagree on how much and how fast—and utilities stocks will likely swing with that debate.
Big Tech’s “all of the above” power strategy is reshaping utility investment plans
As data center operators chase fast, firm power, they’re leaning on a mix of renewables, gas, and nuclear. Reuters reported that Big Tech signed a number of U.S. deals to source gas-fired power in 2025 alongside clean power commitments, and cited International Energy Agency data indicating gas-fired stations are currently the largest source of power for U.S. data centers. [15]
One of the most market-relevant data points in that Reuters report: power supplies from utilities to U.S. data centers are expected to jump 22% in 2025 to 61.8 GW and reach 134.4 GW by 2030, according to S&P Global’s outlook cited by Reuters. [16]
Reuters also highlighted how this is feeding directly into utility capex:
- Dominion Energy’s service territory includes Northern Virginia’s “data center alley,” and Reuters noted Dominion’s generation fleet was 44% natural gas in 2024, while it plans to add 47 GW of generation and storage over 20 years, “roughly 80%” carbon-free. [17]
- Entergy has a capital plan including more than 19 GW of new natural gas capacity, plus solar additions and new gas plants tied to a Meta data center project in Louisiana, per Reuters. [18]
For utilities investors, this is the crux: data centers don’t just increase demand—they change the type of demand (24/7, high uptime), which can push systems toward firm generation, storage, and new transmission buildouts.
Interest rates still matter—maybe more than ever
Even as utilities gain a “growth” narrative, the sector remains highly sensitive to capital costs and bond yields.
Reuters reported that the Federal Reserve delivered a 25 basis-point rate cut in December and signaled caution about the pace of future reductions, with projections showing the median policymaker seeing only one quarter-point cut in 2026. [19]
For utilities stocks, rate cuts can help in two ways:
- Lower discount rates can support valuation multiples for dividend-paying sectors.
- Lower borrowing costs can ease pressure on capex-heavy balance sheets—especially for regulated utilities funding multi-year infrastructure plans.
But the flip side is important: if bond yields remain elevated or re-accelerate, utilities can feel it quickly through higher interest expense and weaker relative appeal versus fixed income.
The new utilities bull case: “income plus investment cycle”
A growing number of strategists argue utilities are shifting from a pure defensive yield play into a hybrid “income + secular growth” sector.
State Street Global Advisors (SSGA) described utilities as entering a new era of growth tied to AI-driven energy demand, noting utilities valuations around 18.5x forward P/E (above a historical ~15x average, but below the broader market). [20]
SSGA also cited the scale of planned spending, stating utilities plan $208 billion in grid upgrades for 2025 and more than $1 trillion through 2029 aimed at expanding generation, transmission, and storage. [21]
In the same note, SSGA cited utilities’ dividend yield around 2.68% and consensus EPS growth estimates for calendar years 2025–2027. [22]
This framing helps explain why utilities have been less “defensive” than usual: if investors start treating the sector like an infrastructure-growth complex, utilities can trade more like cyclicals during risk-on periods—especially when AI enthusiasm is rising.
Utility ETFs are a key barometer: what they’re telling investors in late 2025
For many readers, utilities exposure starts with ETFs. A Nasdaq article (via Zacks research) highlighted several utility ETFs positioned to benefit from a lower-rate environment, providing recent performance and holdings.
Among the details reported:
- XLU: AUM about $22.16B, holding 31 utilities/related companies; top holdings included NextEra Energy, Constellation Energy, and Southern Company; up 16.6% year to date at the time cited. [23]
- VPU: Net assets about $8.3B; top holdings included NextEra Energy, Constellation Energy, Duke Energy; up 17.1% YTD in that snapshot. [24]
- FUTY and IDU showed similar sector exposure and YTD performance in the mid-teens, according to the same piece. [25]
ETF flows and relative performance matter because they can amplify moves: utilities often trade as a sector factor (rates + defensiveness), and now increasingly as an AI infrastructure proxy.
Utilities stocks risks investors are watching closely
Utilities may have stronger demand visibility than they did a few years ago—but the sector is also walking into new forms of risk.
1) “Cost shift” politics and regulatory backlash
The more utilities build to serve data centers, the louder the question becomes: who pays if forecasts overshoot or contracts don’t protect ratepayers?
AP’s Georgia Power coverage captured the concern bluntly: opponents warned about ratepayers being left holding the bag if demand doesn’t materialize, while the utility and regulators emphasized mechanisms intended to make large users pay more and potentially reduce pressure on residential bills later. [26]
Reuters’ PJM auction reporting also points to political pressure: governors pushing for price limits and filings aimed at protecting ratepayers ahead of future auctions. [27]
2) Buildout speed vs. grid constraints
Deloitte’s outlook describes a grid where demand is accelerating faster than new supply can connect, with interconnection queues acting as a major bottleneck. [28]
That dynamic can create both opportunity (more rate-base investment) and danger (reliability events, political blowback, emergency procurement at unfavorable prices).
3) Forecast error risk is unusually high
The ESIG Large Loads Task Force report highlights the uncertainty and the consequences of both under- and over-forecasting large loads. [29]
If utilities overbuild and utilization disappoints, customers can be stuck paying for stranded or underused assets for decades.
4) Technology risk: “What if AI gets more power-efficient?”
A quieter risk running beneath the headlines: if data center hardware becomes materially more power-efficient, the long-term load curve could be less steep than today’s more aggressive projections imply. That doesn’t erase growth, but it can reshape what investors are willing to pay for “AI utility exposure.”
2026 outlook for utilities stocks: three scenarios investors are modeling
No one can forecast utilities stocks with certainty, but based on today’s news flow and published outlooks, investors are generally thinking in scenarios like these:
Base case: steady demand growth + heavy capex + ongoing policy fights
- EIA projections imply continued growth into 2026, and both Deloitte and ESIG point to a multi-year buildout cycle. [30]
- Utilities stocks can work in this environment if regulators allow timely cost recovery and contracts with large users meaningfully reduce downside risk.
Bull case: accelerating data center load + faster interconnection reform + easing rates
- If the utility-to-data-center supply ramp (cited by Reuters via S&P Global) stays on track and policy reforms reduce grid bottlenecks, utilities could see stronger-than-expected rate-base growth and earnings visibility. [31]
- Rate cuts or falling yields can further support the sector’s valuation. [32]
Bear case: higher bills trigger backlash + forecasts prove inflated + financing costs stay high
- PJM’s record capacity price and the ratepayer impacts cited by Reuters are exactly the type of flashpoint that can lead to restrictive regulation, delayed approvals, or tougher cost-recovery terms. [33]
- Utility Dive’s reporting on divergent long-term data center forecasts underscores how real “AI bubble” debates have become inside the energy industry. [34]
What to watch next in utilities stocks
If you follow utilities stocks into early 2026, these are the signposts likely to move the sector:
- More state commission decisions on data-center-driven generation and transmission plans (Georgia won’t be the last high-profile case). [35]
- Next steps from PJM and FERC on cost allocation, colocation rules, and reforms tied to reliability and ratepayer impacts. [36]
- Updates to short-term demand and generation forecasts (EIA’s STEO is a key recurring catalyst). [37]
- Corporate disclosures on large-load contracts (duration, pricing, cost-sharing, curtailment rights)—the details that determine whether “AI demand” becomes high-quality earnings or just higher capex. [38]
- The rate path and bond market direction, given utilities’ sensitivity to financing conditions. [39]
The takeaway
Utilities stocks are ending 2025 with a rare combination of forces: record demand forecasts, AI-driven load growth, a massive grid investment cycle, and rising political scrutiny over affordability. The sector’s pullbacks are no longer just about rates—they’re about whether the market believes utilities can convert historic demand into regulated, financeable, politically sustainable returns.
For investors and readers watching utilities into 2026, the defining question is no longer “Are utility dividends safe?” It’s:
References
1. www.reuters.com, 2. www.eia.gov, 3. www.reuters.com, 4. www.reuters.com, 5. apnews.com, 6. apnews.com, 7. 247wallst.com, 8. www.barrons.com, 9. www.esig.energy, 10. www.esig.energy, 11. www.deloitte.com, 12. www.deloitte.com, 13. www.utilitydive.com, 14. www.utilitydive.com, 15. www.reuters.com, 16. www.reuters.com, 17. www.reuters.com, 18. www.reuters.com, 19. www.reuters.com, 20. www.ssga.com, 21. www.ssga.com, 22. www.ssga.com, 23. www.nasdaq.com, 24. www.nasdaq.com, 25. www.nasdaq.com, 26. apnews.com, 27. www.reuters.com, 28. www.deloitte.com, 29. www.esig.energy, 30. www.reuters.com, 31. www.reuters.com, 32. www.reuters.com, 33. www.reuters.com, 34. www.utilitydive.com, 35. apnews.com, 36. apnews.com, 37. www.eia.gov, 38. www.reuters.com, 39. www.reuters.com
