Utilities face cost-recovery risk as infrastructure costs, demand rise: Morningstar

Electric utilities are preparing for a major infrastructure buildout to meet growing demand while the cost for key transmission and distribution equipment is rising, sparking cost-recovery concerns, according to a brief released Wednesday by Morningstar DBRS.

AI data centers are driving demand growth forecasts, but are also leading to inflation in the cost of the metals and grid-critical materials that are used in data centers, analysts with the credit ratings agency said in the brief, Beyond Power Demand: How AI-Driven Metals Inflation Is Testing Utility Regulation.

“For regulated utilities, this dynamic represents a shift from a pure demand-growth narrative toward a system-cost stress test, where rising capital intensity, regulatory recovery mechanisms, and customer affordability increasingly intersect,” the Morningstar analysts said

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