Gas utilities across the country are building pipelines and deploying capital to serve data centers at a pace that should make every commercial ratepayer pay attention.

According to a recent S&P Global analysis, companies like Atmos Energy, Chesapeake Utilities, and National Fuel Gas are signing deals worth $10 million to $100 million to build infrastructure specifically for data center campuses with on-site power generation. National Fuel Gas is constructing a 7-mile pipeline lateral to deliver 205,000 dekatherms per day to a single facility in western Pennsylvania. Atmos Energy contracted to ship about 30 billion cubic feet of gas annually to one data center. Enbridge is eyeing expansions to serve a 4.4-gigawatt generating facility at Homer City.

These aren't billion-dollar megaprojects. They're exactly the scale where utilities can move fast and negotiate favorable terms.

Here's what catches my attention: When manufacturers and commercial businesses ask for infrastructure upgrades or rate relief, they hear about cost allocation challenges, rate case timelines, and regulatory constraints. When hyperscale data centers come calling, utilities suddenly find ways to deploy capital efficiently and structure deals that work.

The Economics Behind the Red Carpet Treatment

Data centers are getting special treatment because they bring something utilities desperately want: massive, predictable load growth. With demand for data center grid power expected to roughly double between 2024 and 2028, utilities see an opportunity to expand rate base and boost revenues.

The financial incentive is substantial. AltaGas executives told analysts that serving medium-sized data centers could add $10 million to $40 million of incremental rate base per project, potentially boosting their annual rate base growth by a percentage point.

Notice the language utilities use when discussing these deals. Enbridge's CEO described their cost-of-service structure as "super safe for the investor and very fair for the customer." One Gas talked about "aligning new demand with planned reinforcements" to foster "more efficient capital deployment."

That same creative thinking about efficient capital deployment? It rarely appears when existing commercial customers need relief from rising costs or infrastructure improvements.

The Cost Allocation Question Nobody's Asking

The S&P Global article mentions something important in passing: data center developers "might have to make contributions to offset the cost of new infrastructure needed to serve them."

Might. Not will. Not must. Might.

Compare that to how utilities typically approach cost allocation for existing commercial and industrial customers. When infrastructure needs upgrading to serve current loads, those costs get socialized across the rate base. When new industrial customers require system improvements, they often face significant upfront contributions.

But when data centers need a new pipeline lateral or system expansion? Utilities are willing to build first and negotiate contributions later, if at all.

This isn't speculation. These are the actual deal structures being announced and celebrated in utility earnings calls.

What's Really Driving the Urgency

Data center developers are scrambling because traditional electric grid connections have become impossible to secure quickly. That bottleneck is creating a gold rush mentality around on-site gas-fired generation.

Here's the question worth asking: If utilities can mobilize capital, cut through bureaucracy, and build infrastructure in months to serve data centers, why do existing commercial customers face years-long timelines for far simpler system improvements?

The answer isn't technical. It's economic and regulatory.

Data centers represent new revenue streams with minimal risk. They're typically backed by companies like Alphabet, Meta, Amazon, or Microsoft with bulletproof credit. Utilities can justify infrastructure investments because the payback is clear and the customer isn't going anywhere.

Existing commercial customers? You're already captive. You can't credibly threaten to leave. Your rate case interventions are viewed as cost centers, not opportunities. When utilities need to boost revenues, it's easier to spread increases across existing customers than to negotiate tough deals with new ones.

The Indiana Context

Indiana sits at the intersection of several trends that make this particularly relevant:

Significant manufacturing base with growing energy needs. Utilities actively seeking load growth and rate base expansion. Proximity to data center development zones in Ohio and other states. Rate cases that increasingly socialize infrastructure costs.

If your utility is signing deals with data centers while arguing they need rate increases from existing commercial customers to fund system improvements, that's worth examining. If new infrastructure gets fast-tracked for tech companies while manufacturers face delays and cost barriers, that reveals priorities. If utilities can suddenly find "very economical" expansion options when massive new loads appear but claim existing system upgrades are cost-prohibitive, someone should be asking why.

The Regulatory Double Standard

The framework utilities describe for data center deals, "super safe for the investor and very fair for the customer," should apply equally to all customers. But it doesn't.

When utilities negotiate with data centers, they're thinking about efficient capital deployment, creative financing structures, and win-win outcomes. When they file rate cases affecting existing commercial customers, they're thinking about revenue requirements, cost recovery, and maximizing returns.

The regulatory system allows this double standard because data center deals often happen outside traditional rate cases, through special contracts, system expansion riders, or negotiated agreements that never face the same scrutiny as general rate increases.

What Commercial Ratepayers Should Understand

When your utility announces a major data center contract or pipeline expansion, that's relevant to your next rate case. These are the kinds of questions worth considering:

What contribution is the data center making toward infrastructure costs? How are system expansion costs being allocated between new and existing customers? What rate structure applies to data center loads versus commercial and industrial loads? Are existing customers subsidizing infrastructure built primarily to serve new, high-load customers?

These aren't rhetorical questions. They're line items in rate cases that determine whether you're paying fair rates or subsidizing someone else's growth.

The data center boom is happening. Gas utilities are going to chase that load growth, and that makes economic sense for them. But existing commercial customers shouldn't foot the bill for infrastructure that primarily benefits newcomers with better negotiating leverage.

Why This Matters Now

The S&P Global analysis documents deals that are already signed and infrastructure that's already being built. This isn't a future trend to monitor. It's happening right now across Ohio, Pennsylvania, and Texas, with more deals in the pipeline.

For Indiana manufacturers and commercial ratepayers, the question isn't whether similar dynamics will play out here. The question is whether anyone will be in the room asking hard questions about cost allocation, rate design, and whether utilities are applying the same "efficient capital deployment" thinking to all their customers or just the ones backed by Silicon Valley.

Rate cases happen whether or not commercial customers participate. Cost allocation decisions get made whether or not manufacturers have representation. Infrastructure gets built and paid for whether or not anyone questions who benefits and who pays.

Fair Rates Alliance exists because these questions don't answer themselves. Someone needs to be in the room with the expertise to understand what's being proposed, the standing to challenge unfair allocations, and the commitment to fight for commercial ratepayers who are already dealing with margin pressure.

Based on what's happening with data center deals across the country, those questions need asking right now.

Any questions about how these trends might affect your operation, please contact us!

Read the full S&P Global Article here: https://www.spglobal.com/commodity-insights/en/news-research/latest-news/natural-gas/082525-gas-utilities-in-the-us-advance-data-center-deals-as-power-bottlenecks-persist