Why you should care about 2 power companies merging. Hint: affordability : NPR

Stay up to date with our Up First newsletter sent every weekday morning.

One of the major electricity producers in the U.S. might expand further with a proposed merger with another power firm.

This development comes at a time when energy demand is increasing due to the rise of AI, accompanied by growing concerns over escalating electricity costs.

“Anytime there’s a merger, there’s a worry consumers might face raising rates,” said Darrell West, a senior fellow at the Brookings Institution’s Center for Technology Innovation.

On Monday, NextEra Energy declared its intention to acquire Dominion Energy in a deal valued at approximately $67 billion. The merger will need both federal and state approvals, including in Virginia, North Carolina, and South Carolina. The merged company would cover these three states, in addition to Florida.

According to the Energy Information Administration, residential electricity rates increased by 7.4% in February compared to the previous year, with some states experiencing even steeper hikes. For instance, rates in Virginia rose by 12.2%. This surge in electricity prices has caught the attention of politicians. Virginia Governor Abigail Spanberger pledged during her campaign to lower electricity costs and recently signed a bill requiring data centers to bear the burden of electricity expenses.

NextEra sees lower prices for customers, advocates don’t see it that way

John Ketchum, CEO of NextEra Energy, stated in a press release that the merger’s increased scale and efficiency would result in “more affordable electricity for our customers in the long run.” NextEra plans to provide Dominion Energy customers in Virginia, North Carolina, and South Carolina with $2.25 billion in bill credits over two years.

However, Shelby Green, a research and communications manager for the Southeast region at the Energy and Policy Institute, expressed skepticism. She believes that in the long run, customers will face higher rates, as seen in a previous merger involving NextEra Energy.

“Families and small businesses can expect to pay more in their utility bills, and that’s a major concern if this acquisition goes through,” Green commented.

NextEra responded via email, asserting that since acquiring Gulf Power in Northwest Florida in 2019, those customers are now paying 19% less for electricity after adjusting for inflation. The company emphasized that both NextEra and Dominion operate in different states and are subject to distinct rates and regulations, which would remain unchanged if the merger is approved.

Natural disaster damage and power-hungry AI data centers only complicates the issue

The size and structure of a utility are not the only factors influencing electricity costs. Natural disasters that damage the grid and the rising costs of equipment for repairing power lines also contribute to customer expenses. Climate change has increased the frequency of extreme weather events.

In recent years, NextEra has secured deals with tech giants Google and Meta to supply electricity to their data centers. Despite this, predicting future demand from AI data centers remains challenging. If electricity providers build too much infrastructure without matching demand, customers may end up paying for unused power.

Forecasting energy demand is complex. One projection suggests data centers will account for a substantial 16% of total U.S. power consumption by 2030, while a more conservative estimate places it at less than 7%.

The process won’t be immediate—NextEra estimates that the merger and its review will take between 12 and 18 months to complete.