Why millions of Americans pay for unfinished electricity projects

Millions of Americans are unknowingly financing electric grid projects before they get any benefit.

Policy-makers, in an urgent bid to overhaul the nation’s aging electric grid, are increasingly letting utilities charge customers for power plants and transmission lines long before they’ve been built, boosting near-term bills in exchange for promised savings decades down the road, according to a Reuters review of regulatory disclosures.

The incentives aim to supercharge ​grid upgrades at a time of soaring demand from data centers that power artificial intelligence, but are also raising power bills for households and businesses already reeling from rising energy costs.

Traditionally, utilities seeking to build expensive infrastructure projects have had to secure loans from ‌banks and investors, and are only allowed to pass along those costs to customers after the projects are finished.

But those projects also can be financed in advance under the so-called Construction Work In Progress (CWIP) incentive, a benefit that supercharges cash flow and reduces borrowing costs for electric utilities. The fees typically total several dollars per month on an average household bill, multiplied across millions of customers.

At least 40 U.S. states now have some form of CWIP incentive, according to a Reuters review of several thousand pages of electric utility rate disclosures. That’s twice as many as a decade ago, when a survey by economic consultant The Brattle Group found fewer than 20 states with CWIP provisions.

Details on how widely CWIP policies have spread in the past five years ​alongside the boom in data center construction have not been previously reported. Reuters also interviewed two dozen industry officials, analysts, and consumer watchdogs to reflect the impact of these policies on the buildout and repair of the grid and on the electricity bills of American households and businesses.

Reuters ​found that CWIP policies have been used to finance a range of large energy and infrastructure projects, including the Vogtle nuclear reactors in Georgia, which experienced significant cost overruns and delays; a Nevada transmission project that is increasing bills now ⁠for financial benefits expected decades in the future; and a Virginia offshore wind farm that has already collected about $2 billion in ratepayer charges before beginning operations.

After decades of relatively flat demand for power, the U.S. electric grid’s reserve buffer has become dangerously thin in several regions, increasing the chances for rotating blackouts, according ​to U.S. energy regulators. Grid operators predict electricity demand will increase more than 2% per year through at least 2045, after experiencing average annual growth of about 0.5% from 2009 to 2024.

Many of the new state CWIP policies have been introduced in just the past few years, as the tightness on the grid has worsened, ​according to the Reuters reporting.

Missouri Governor Mike Kehoe, for example, last year reversed a 50-year ban in the state on CWIP incentives to meet rising power demand from data centers. Arkansas, Kansas, Oklahoma, and North Carolina have also adopted CWIP provisions since 2024.

“Governor Kehoe believes CWIP incentivizes new power generation while reducing long-term financing costs passed on to ratepayers,” the governor’s office said in a statement. “Without CWIP, customers see dramatic increases in their monthly utility bills when a new facility comes online. CWIP allows these costs to be recouped over a longer period, reducing price shocks to customers.”

The National Governors Association, which represents state governors, said it does not take a position on whether CWIP is appropriate for individual states or specific projects.

But business and ​consumer groups criticize CWIP for forcing up power costs for projects that may never benefit them.

“All this does is shift the financial risk to the ratepayer,” said Paul Cicio, president of the Industrial Energy Consumers of America, a trade group that represents large manufacturers. “The average ratepayer has no idea this is happening.”

WAITING DECADES FOR ​A PAYOUT?

U.S. power prices have already risen by about 40% over the past five years to pay for massive investment in a creaky electric grid, according to the U.S. Energy Information Administration, with double-digit increases over the past year in data center hotspots like Virginia, Maryland, and Pennsylvania.

“Huge rate increases have caused a monumental affordability crisis for electricity,” said ‌Ben Inskeep, program ⁠director for Citizens Action Coalition of Indiana, an Indianapolis-based consumer watchdog group. “CWIP incentives are adding insult to injury for these customers.”

Utilities and states say CWIP incentives are critical to kicking off the kinds of projects needed to shore up the grid to meet growing demand following decades of underinvestment, and that the provisions can also lower costs to ratepayers over the long term by reducing financing costs.

In Nevada, for example, Berkshire Hathaway-owned utility NV Energy is charging an average customer around $4 a month to cover financing charges on long-range, high-voltage power lines scheduled to be in service in 2028, according to the utility’s disclosures to regulators.

The utility says using CWIP to help finance the project is cheaper than raising money from Wall Street, something that will ultimately save ratepayers money.

But the calculated benefit – in the form of lower rates – could be as little as 0.1% and take half a century to materialize, says Mark Garrett, a consultant for Nevada’s Bureau of Consumer Protection.

“A ratepayer would need to stay ​on the system for 52 years before receiving any net benefit from the ​CWIP model,” Garrett said. “This means that an average 40-year-old ratepayer would be ⁠92 before seeing any benefit from the CWIP approach.”

NV Energy did not return messages seeking comment on Garrett’s analysis.

In Virginia, home to the biggest concentration of data centers in the world, electric customers have already paid utility Dominion Energy about $2 billion for an $11.5 billion offshore wind farm still under construction, amounting currently to a peak charge of $11.23 on an average monthly bill, according to regulatory disclosures.

Dominion executives say the CWIP structure will save ratepayers $2 billion over the entire 30-year lifespan of the ​project.

Overall, Wall Street analysts describe the capital spending by U.S. electric utilities as an investment super-cycle that will exceed $1 trillion over the next five years. That spending is a big win for utility company profits because they earn ​a regulated rate of return on capital spending ⁠that ranges from 9% to 12%, according to financial results analyzed by Reuters.

ARE GEORGIA’S NUKES A CAUTIONARY TALE?

CWIP incentives are often coupled with provisions that shield utilities from delays, cancellations and cost overruns, leaving ratepayers to pick up the tab, said Jason Walter, a University of Tulsa economics professor.

That’s a worry because the U.S. power sector has a history of failed, delayed and over-budget projects.

“If a project, particularly a nuclear one, cannot attract private capital without a public backstop, it is a clear signal that it may not be a financially responsible investment,” Walter said. “Forcing captive ratepayers to act as the bank for speculative projects serves no clear public purpose.”

The structure has triggered public backlash in ⁠some cases already.

In November, ​Georgia voters unseated two Republican public service commissioners, fueled by an anti-CWIP referendum over massive cost overruns from the construction of the state’s two Vogtle nuclear reactors.

That project ran seven years behind ​schedule and cost about $35 billion, or more than double the original estimate of $14 billion, according to Georgia regulators. Households in the state, meanwhile, paid around $1,000 each in CWIP expenses since 2009 as power rates moved sharply higher, Georgia regulatory filings show.

“What’s important is that Georgia’s nuclear pursuit is seen as a cautionary tale across the country for the nuclear hype that is underway,” said Patty Durand, director ​of Georgians for Affordable Energy. “Georgia ratepayers were severely harmed, and any electeds that support these high-risk, expensive projects may suffer the same fate from consumer outrage as the two commissioners who lost their seats did.”