A corporate merger that would form the is underway. It’s just one of many as electric utilities enter a period of rapid growth.
On May 18, 2026, NextEra Energy announced it would buy Dominion Energy .
What’s driving this deal and others like it is not an increase in residential electricity demand. Rather, it’s based on rising demand for power to data centers for artificial intelligence systems and a desire to increase corporate profits.
As a , I seek to understand how and why the electricity grid and the companies that run it are changing. In my book “” I explain that a primary force in the industry is not the desire to improve service for the rate-paying public, nor even for . Rather, stock market investors and Wall Street businesses are changing how electric utilities make money in the U.S.
A variety of electricity suppliers
In every state, the majority of companies that distribute and deliver electricity to homes and businesses over the wires are regulated monopolies with specific geographic service areas. But where that electricity comes from varies widely.
Many cities, , get their power from a municipally owned utility. Many rural areas get theirs from . These organizations are nonprofits whose general goals are to serve their customers with reliable, affordable power.
However, around get their electricity from private companies. Most are controlled by large holding companies, such as , which customers know through subsidiaries such as Florida Power and Light and , which operates local subsidiaries in Virginia, North Carolina, South Carolina and Utah. These companies’ main goal is to make money for their shareholders.
Regulated and unregulated markets
How a for-profit electric utility company makes money depends on where it operates.
In 28 states, electricity markets are traditionally regulated, meaning that – from the generators, wires and poles to the meter on the side of your house. Customers in these states cannot choose their provider, but the prices they pay are set by a state regulator based on negotiations with the company. Those prices are set so the utility can earn a profit on the money it spends improving the electricity system – a margin that is .
The other 22 states are considered deregulated markets, in which , but neither are potential losses. In those markets, companies that own power plants compete to sell electricity on a wholesale market. In 14 states, a middleman company buys the power and competes to find customers, in effect providing households with a choice of electricity providers. In the rest, distribution companies buy the power from wholesalers and deliver it to their customers.
Since states began in the late 1990s, utilities that historically operated in a single state have expanded to other states, both with and without regulated markets. The result is holding companies with complicated corporate structures and various ways of earning profits. In , I have found that that have mastered four overlapping ways of making money.
1. Monopoly operations
First, utilities need to operate successfully in monopoly territories.
In general, utility companies in monopoly markets aren’t allowed to make any profit on . Rather, their profits depend on their investments in the infrastructure to generate and distribute electricity. For example, if a company builds a $100 million power plant expected to last 30 years, utilities can add that cost plus an additional $10 million – their 10% profit – to customer bills over the next three decades.
Utilities therefore have a financial incentive to than it actually does. They can use those predictions to , such as wires, transformers and substations, to handle those future loads. The ratepayers pick up the tab, and the company makes its 10% profit, even if the new equipment ends up being unnecessary.
For investors, monopoly utilities are not typically considered growth stocks, but they and returns for investors.
2. Deregulated markets
Wall Street also likes utilities that can succeed in deregulated markets, in which utilities are allowed to earn profits if they can generate electricity cheaply and sell it at high prices. In reality, utilities see periods of rapid demand growth and resulting high electricity prices, followed by the collapse of both.
This volatility is attractive to investors who are comfortable with risk, such as , which use borrowed money to buy shares in companies.
As states such as California began deregulating in the late 1990s, by trying to time the sale of electricity to maximize revenue, as well as timing the purchase and sale of power plants themselves in order to that either raise or lower electricity prices. Most companies that .
NextEra, however, has succeeded in deregulated markets by that deliver cheap energy into markets with rising demand for renewables. The company uses long-term contracts that mimic regulated returns, avoiding the fluctuations customary in deregulated markets.
3. Mergers and acquisitions
Buying and selling power plants themselves is part of the third way electricity utilities can make profits: mergers and acquisitions. That’s what’s behind NextEra’s acquisition of Dominion.
NextEra’s has introduced more risk than its investors are keen to bear.
The company hopes that buying a regulated company like Dominion, which holds a monopoly over providing electricity in what some call northern Virginia’s “,” will rebalance its risk, improve its credit rating and help it raise money to build the next round of profit-generating infrastructure to support the data center boom.
4. Controlling regulations
For all this to work, NextEra and Dominion need to excel in the final way that utilities make profits – . In Florida, NextEra famously .
Crucial to electric utilities’ profitability is their power to , get lawmakers to pass laws that and – as with the massive NextEra-Dominion deal – gain approval of mergers by existing customers.
As the data center building boom and its growing demand for electricity roll along, utilities are jostling for prime position to benefit. For many companies, that means trying to become larger companies with more market and lobbying power. But whether bigger is better for residential customers is another question entirely.
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