Infrastructure in focus: The cost-of-living concerns affecting utilities

Infrastructure in focus: The cost-of-living concerns affecting utilities

AI data centre investment is booming. Hyperscalers, the largest data centre operators, are expected to spend more than US$700 billion in capital investment in 20261 alone. As investment surges, there is growing concern about the impacts on electricity systems, and particularly on energy affordability. Coming off the back of the US midterm elections this month, this is as topical as ever.

Source: US Bureau of Labor Statistics (BLS), Magellan analysis. Data is for September of each year shown. Affordability is calculated as average price data divided by average hourly earnings of production and nonsupervisory employees.

  • Policymakers have been growing increasingly sensitive to this concern, as it gains groundswell in local communities. Whether this is a current reality or prospective fear is important to distinguish, for its impact on those regulated utilities whose role is powering these data centres going forward.

  • Looking across the affordability of common household purchases over time, it is apparent that the cost-of-living pressures households are feeling are not currently coming from utility costs.

  • For an average US worker on an hourly wage, electricity represents a far lower share of an hour’s pay (0.60% for a kWh) than gasoline (14.2% for a gallon), or other staples (e.g. 12.6% of an hour’s pay for a gallon of milk). There are broader cost-of-living concerns for households, which are amplified by surging gasoline prices this year. What’s more, for utilities, the rapid data centre expansion and accelerating construction costs are strong signals to consumers of price rises to come.

  • This environment can change the trajectory of data centre development. Right now, this is apparent in new moratoriums on data centres in some locations, tighter rules for development applicants and queuing protocols. This is consolidating existing pipelines into viable, mature investments. Such strong anticipation of price-rise impacts is also changing how costs and risks related to grid and infrastructure upgrades are allocated, including with large load tariffs and new requirements for renewable generation, and storage.

  • Over time, the resulting pipeline and scale of new utilities investment required is still enormous. For regulated utilities, it suggests ongoing, robust growth in capex and earnings. Cost-of-living concerns are sensitive and unlikely to diminish anytime soon. Careful management of the data centre pipeline can mitigate the noise affecting regulated utilities, even as broader price pressures keep rising. Post the US midterms, this will be important to look for.

    1 International Energy Agency, October 2026.

By The Magellan Infrastructure Team

 

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