Document Type

Article

Publication Date

1-31-2026

http://dx.doi.org/10.2139/ssrn.6160272

Abstract

The explosion of investment in artificial intelligence and cryptocurrencies has spurred a data center boom, with politicians jostling to attract companies to build data centers in their states. The potential financial windfall from these data centers has also attracted the attention of private equity firms, which are seeking to capitalize on the potential riches to be made in supplying these projects with electricity by buying regulated public electric utilities. These utilities are unusual in our capitalist system, in that they are subject to both state and federal regulation regarding their duties to serve the public and the amount they can charge for their services. Public utilities have only one source of revenue: their customers. But when a utility is purchased by a private equity company, it becomes one of a portfolio of businesses that the company expects will generate a return on its investment.

History has shown that companies that own public utilities in portfolios manipulate filings and finances to maximize profits at the expense of the utilities’ captive customers. When private equity firms, which have no purpose other than to realize the highest possible returns for investors, become owners of public utilities, the risks to ratepayers skyrocket.  This paper is the first to identify this emerging phenomenon and advocate for halting or placing strict conditions on these acquisitions. We do this by showing how investment companies may be able to take advantage of two flawed regulatory systems—the system that regulates utilities and the system that regulates corporations and private investment firms—to extract value from utilities while shifting risks onto ratepayers and society at large.

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