By John (JD) Hammerly, CEO, The Glarus Group, and Dr. Mani Vadari, President, Modern Grid Solutions
For decades, U.S. electricity demand grew slowly and predictably. That era is over. AI Data Centers, electrified manufacturing, and reshored industrial supply chains are driving load requests in the hundreds of megawatts — often on 18–24-month timelines. Utilities now face a historic surge in Large Load Interconnections (LLIs) and could experience annual electrical load growth exceeding 10%, reshaping planning, investment, and regulatory expectations.
The central challenge is clear: How do utilities capture the economic benefits of LLIs without exposing existing customers to rate shock, stranded asset risk, or delays in the clean energy transition?
Below is a concise guide to the core challenges and opportunities LLIs create—and how utilities can strategically manage both to benefit both the LLI and the ratepayer.
LLIs require rapid, large-scale investment in substations, transmission, and resource adequacy. Traditionally, these costs were included in the rate base, but when investment grows faster than customer count, existing customers face higher bills for no additional benefit. Public resistance often stems from this dynamic — not from the LLIs themselves, but from the cost shift they can trigger.
Serving LLIs demands immediate capital outlays: new substations, high-voltage lines, dual-supply resiliency, and accelerated engineering. AI/data center timelines — 250 M W in two years, scaling to 1 GW in five — compress planning cycles and strain utility budgets. Classically, these costs for rapid, non-discretionary upgrades are spread across the entire rate base. When utility investments rise faster than growth in customer count or existing load, its customers suffer rate shock. Without careful cost allocation, utilities risk overextending capital and under recovering costs.
LLIs are arriving just as utilities transition from dispatchable fossil generation to weather variable resources (WVRs). Even when renewables are cost-competitive, achieving 24/7 reliability requires overbuilding capacity or adding storage. These investments raise the system’s average cost of power unless LLIs bear their fair share of the incremental cost – both for access to resources and for delivery.
If an LLI downsizes or relocates, utilities and customers can be left paying for infrastructure built solely for that load. Strong contractual protections — minimum billing demand, take-or-pay structures, early termination penalties, and upfront contributions — are essential to prevent long-term financial exposure. See the MI example in the inset, put in place to mitigate financial risk to the public.
While the costs are real, they must be balanced against the equally substantial—and often transformative—benefits that large‑scale new demand brings to both utilities and their communities. When managed strategically, this growth becomes a powerful engine for accelerating grid and supply modernization, ultimately benefiting ratepayers.
Instead of patching an aging grid, LLIs force utilities to build brand-new, high-capacity infrastructure sooner. Instead of incremental upgrades, utilities can align LLI-driven capital with long-term utility and community growth management plans to deploy modern substations, advanced transmission, automation, and digital infrastructure far sooner than traditional budgets would allow. This accelerates the necessary transition to a more resilient, digitalized, decarbonized, and modern grid structure.
Under the approved structure, contracts include a five‑year ramp‑up period to full service, followed by a 15‑year standard term. The minimum billing demand provision requires LLI customers to pay on‑peak demand, transmission demand, and maximum demand charges based on 80% of their contracted capacity—regardless of actual usage. Early termination triggers a fee equal to the customer’s minimum billing demand multiplied by the number of months remaining on the contract.
Large, predictable loads reduce financing risk for WVR projects. Hybrid designs — renewables plus storage — become more viable, improving dispatchability and system flexibility. LLIs with on-site generation or storage can also support reliability during scarcity events.
Gigawatt-scale demand from LLIs changes the economics of renewable energy projects.
LLIs often invest $5–10 billion in local facilities, expanding the tax base and enabling communities to fund infrastructure without raising taxes, a critical benefit for economically distressed or poor counties. Construction jobs surge, and long-term operations bring highly competitive, technical, and maintenance jobs to the area.
The greatest opportunity lies in the potential for strategic alignment between the LLI and the utility. LLIs can provide demand flexibility, reduce load during peak periods, and support grid services, turning the large load into a valuable, responsive grid resource. Utilities can protect customers by ensuring LLIs pay the full incremental cost of service and by incorporating land, water, and environmental considerations into planning.
LLIs are not simply new customers. They are catalysts for a once-in-a-century grid transformation. But utilities must approach them strategically, not transactionally. That means developing a formal LLI Strategic Engagement Plan that aligns:
The most persistent tension is time. LLIs expect solutions in 12–24 months; utilities plan in 5-, 10-, and 20-year increments. This gap can be narrowed through pre-engineered designs, standardized contractual structures, dedicated LLI teams, regulatory pre-approval of investment categories, early signal monitoring of development activity, and bringing other stakeholders, such as city governments, into the process.
Utilities that adapt will capture economic development opportunities and accelerate modernization. Those that don’t will lose projects — and the associated tax base, jobs, and grid investment — to regions that can move faster.
Key Takeaways:
The LLIs can bring capital to invest at levels the utility could only dream of. Handled well, they can help build the resilient, clean, future-ready grid the nation needs. The opportunity is real, and utilities that seize it will lead the next era of electric system transformation.
