AI Load Demand Is Here. Infrastructure and Financing for It Are Not – Yet

In 2017 construction cranes went silent at the V.C. Summer nuclear station in Moncks Corner, S.C., after its owners had already spent roughly $9 billion on two unfinished reactors. The project collapsed into bankruptcy. Now, that same site is being repositioned as a potential power source for data centers.

Santee Cooper, also known as the South Carolina Public Service Authority, announced in December 2025 that Brookfield Asset Management signed a memorandum of understanding, or MOU, to acquire the utility’s two partially built AP1000 units in a proposed cash deal of $2.7 billion plus up to a 25% ownership stake in future plant output. Brookfield is now moving forward with a formal feasibility study to determine by the end of June a target date for its final investment decision. If the $2.7 billion is received, Santee Cooper expects to defease portions of tax‑exempt bonds allocable to the nuclear units.

The rapid expansion of AI and hyperscale data centers is reshaping electricity demand across the U.S., forcing utilities and municipal issuers to reconsider everything from generation planning to debt structure. Demand is palpable, but questions remain on how this infrastructure will be financed and how technology companies will work with municipalities over multi-decade horizons.

“We are seeing renewed interest in nuclear energy, fueled by advanced manufacturing investments, AI-driven data center demand, and the tech industry’s zero-carbon targets,” said Santee Cooper CEO Jimmy Staton in a January 2025 press release, when the authority was seeking proposals to complete the nuclear power plant.

In February, S&P Global Ratings revised the outlook for Santee Cooper to “positive” from “stable,” while affirming the authority’s A- rating. The improvement, S&P says, reflects post-freeze rate flexibility, stronger liquidity and rising fixed-cost coverage. But the ratings report also makes the tradeoffs plain: rate increases of 15% in 2025, 6.4% in 2026 and 6.7% in 2027, which include recovery of $550 million in settlement costs tied to V.C. Summer.

According to S&P Global Ratings, Santee Cooper is projecting substantial electric demand growth, primarily fueled by data center expansions. Moody’s called the Brookfield MOU a potentially “substantial credit positive” if executed. Fitch Ratings tied its outlook to restored rate flexibility and timely cost recovery, while flagging elevated leverage amid a capital expenditure ramp-up. In the offering statement for a February $460 million bond financing insured by Assured Guaranty, the authority estimated that data centers account for about 70% of projected load growth over the next 10 years. The 2025-2028 capital plan totals about $3.5 billion, including about $1.4 billion for new generation and about $1.1 billion for transmission.

The generation and transmission splits in the capital plan reflect the practicalities of powering data centers. Building a plant next to a data center is one option. But if power must travel 100 miles, interconnection and transmission updates become essential, sources told Octus.

Data center load is clustering in Virginia, Texas, California and emerging Southeast markets such as Georgia, and, according to one market source, transmission permitting delays may become the binding constraint. The Regional Plan Association’s “Demystifying the Power Grid” report notes that the century-old U.S. grid is a machine of more than 500,000 miles of transmission and millions of miles of distribution that delivered more than 4 trillion kilowatt-hours in 2023. It is a complex system that, according to the report, requires a massive, once-in-a-generation transformation to become more reliable, resilient and renewable for all who rely on it.

Public power systems – and the bond market that finances them – are navigating the data center boom more cautiously than investor-owned utilities.

Who Builds the Power?

The AI-driven risk is not the load itself but the financing structure behind it, and most of the incremental generation capacity tied to data centers has come from investor-owned utilities, said Mohammed Murad, head of municipal credit research at PT Asset Management.

These utilities are generally larger and can respond more quickly to hyperscalers such as Amazon, Meta and Microsoft. Public utilities operate differently.

Across recent bond offerings, the pattern is consistent with traditional public‑power financings: reliability‑focused projects, revenue pledges, reserve funds, capitalized interest and refundings, but no hyperscaler take‑or‑pay contracts.

• KYMEA’s $122 million power system revenue bonds (Energy Center I project), Series 2025, finance a 75‑megawatt gas reciprocal internal combustion engine plant for reliability, not for data‑center load.
• Kerrville Public Utility Board’s $74.4 million power supply revenue bonds, Series 2025A, fund a 122‑MW gas plant paired with a Texas Energy Fund loan, again for grid stability rather than hyperscalers.
• Oklahoma Municipal Power Authority’s $267 million power supply system revenue and refunding bonds, Series 2025A, support systemwide capacity additions and refundings with no data center commitments;
• Los Angeles Department of Water and Power’s $772 million power system revenue bonds, Series 2025D, finance broad system improvements, not AI campus power deals.

“Public utilities tend to think in much longer terms when they think of their resource planning for generation capacity,” Murad said. “Their overarching mission is to provide a public good that is affordable and reliable.”

The longer-term mandate makes them wary of speculative projects. “The last thing a public utility would want is to be stuck with the cost of additional generation that they’ve built that’s not going to be generating any revenue for them,” he said.

Bottlenecks and Risks to Retail Ratepayers

In April 2025, a congressional hearing highlighted that data center electricity use is projected to rise to 6.7% to 12% of U.S. power by 2028 from 4.4% in 2023, as a single ChatGPT‑style query consumes 10 times the energy of a regular web search.

“So people are planning 10 gigawatt data centers. Now, just to do the translation, an average nuclear power plant in the United States is 1 gigawatt. How many nuclear power plants can we make in one year, where we are planning this 10-gigawatt data center?” said former Google CEO Eric Schmidt in a statement to the U.S. House Committee on Energy & Commerce.

According to MacroEdge’s Legislative Tracker, the number of proposed or enacted legislative moratoriums targeting data center development has risen sharply in recent months, climbing to 19 in February from just one recorded action in mid-2025. The tracker includes city, county, state and national-level actions.

New York state legislators introduced a bill in February proposing a minimum three-year-and-90-day moratorium on new data center permits for facilities using 20 MW or more of electricity. The City of Eagan, Minn., also passed a one-year moratorium on new large data centers in February. At least 14 states, including Maryland, Missouri, Virginia and Oklahoma have seen cities or counties implement or consider localized temporary pauses on data center development. Over 230 environmental and local organizations have formally petitioned Congress for a national federal pause on new data center construction.

“I continue to expect that further political headwinds will mount against data centers in the months to come, and especially during the midterm cycle, because of the very valuable political capital they provide to opportunistic politicians,” wrote Don Johnson, MacroEdge’s chief economist.

In Washington, the White House is floating a voluntary compact for major tech companies to “pick up the tab” for the infrastructure their facilities require, according to a Politico report.

Law firm ArentFox Schiff says that “we likely will not know during 2026 whether the projections for new data center buildout are accurate, so expect many new projects to be advanced by developers, even though not all of them will be built.”

But how can existing retail ratepayers be ringfenced from the risk of a stranded asset if a utility borrows heavily to build a plant for a data center that may not remain long term? If utilities build generation specifically for hyperscalers and the load disappears, ratepayers could be left covering debt service, said a source familiar with the sector.

In April 2025, Santee Cooper created a special rate for very large customers (50 MW and up) to protect regular ratepayers. The rate requires big users to sign longer contracts, pay for higher minimum demand and provide collateral or extra demand charges so the utility is not left paying for a power plant if the customer leaves.

The official statement for the authority’s Series 2026 bonds also notes that federal private‑business‑use rules limit how much tax‑exempt bond‑financed facilities can serve private companies. If those limits are exceeded, the bonds might lose their tax-exempt status and the utility may have to refinance part of the bonds with taxable debt.

That risk has led to increased scrutiny around minimum annual take-or-pay guarantees, long-term contact alignment with asset life and load concentration limits. Murad compared the situation to federal lease-backed credits: Investors want lease terms that match bond maturities. Short-term data center contracts against 30- or 40-year assets create mismatch risk.

Despite political rhetoric about clean coal revival, Murad said economics remain unfavorable. “The last municipal clean or modern coal plant that was built was completed in 2012.”

Murad said gas has replaced coal as baseload, explaining that “coal is considered an intermediate load.” Nuclear power, however, may be different. The completion of Georgia’s Vogtle Units 3 and 4, the first new U.S. reactors in decades, could serve as a roadmap, Murad said.

Still, cost overruns provide reason for caution. That makes the V.C. Summer reboot especially significant. Unlike Vogtle, which ultimately cost more than $30 billion, V.C. Summer remains unfinished infrastructure with sunk costs already absorbed.