For two decades, U.S. electricity demand barely moved. AI data centers just ended that — and the “boring” essential-service companies that kept the grid running through the quiet years are now at the center of a structural repricing most investors haven’t caught up to. Robert Rapier has spent 30+ years covering exactly these companies; here’s what he’s watching as the demand surge accelerates.

I hope a visit to Hoover Dam wasn’t on your agenda this week.

The engineering marvel has been closed since Monday as maintenance crews work to repair a damaged cable system. For a tourist attraction that welcomes over a million ticketed visitors annually, the unexpected closure is a letdown. Fortunately, the site’s power generating operations continue to run without interruption.

Hoover Dam’s giant turbines can produce about 4 billion kilowatt hours of electricity annually. According to the Energy Information Administration (EIA), total power consumption across the United States reached 4.2 trillion kilowatt hours last year.

In other words, we need about 1,000 Hoover Dams to keep the lights on. And that’s still not nearly enough to meet tomorrow’s demand — which for investors, means opportunity.

That wasn’t always the case.

There was a long dry spell between 2003 and 2023. During that stretch, U.S. power demand barely budged… inching at a meager 0.5% pace. EIA data shows an even slower 0.1% crawl over most of that time frame.

Population growth didn’t stall. Nor did residential and commercial construction. But ask any regional utility or local power co-op, and they would tell you that natural growth was offset by improved efficiency, leaving demand flattish.

A 100-watt light bulb turned on for 10 hours runs up 1,000 watt-hours (WH) on the meter, whereas a 60-watt bulb will add only 600 WH to the monthly tab. So even with many more lightbulbs, customers didn’t pull too many more kilowatt hours.

But then came a bombshell study in 2023 entitled “the Era of Flat Power Demand is Over.” After compiling data from 700 grid planners across all 50 states, the summary report filed with the Federal Energy Regulatory Commission gave a clear heads-up to government policymakers.

The low and falling levels of load growth for the last 20 years have decisively reversed to a new mode.

Grid strategists said to prepare for a 4.7% increase in national electricity demand over the next five years, versus a prior estimate of 2.6%. That’s a dramatic 80% upward revision. The new figure wasn’t just plucked out of thin air, but reflects the internal projections of large-scale utilities like Duke Energy, Georgia Power Company and The Tennessee Valley Authority.

And the pace could accelerate from there.

A new study from Bank of America is forecasting 2.5% annual growth in U.S. electricity usage by 2030. Keep in mind, that’s about five times quicker than what we’ve been seeing.

Grid planners aren’t even sure we have enough high-voltage transmission lines to accommodate this unexpected surge. As for the power generators, they can handle baseline needs, but peak loads (during weather extremes, for example) were already overwhelming at times. Like any other resource, we could be headed for a supply deficit.

One model shows a large (170 gigawatt) gap between current power generation and projected peak demand in 2030. Numerous utilities have already lifted their near-term peak power demand forecasts by 100% or more. For an industry content with steady half-a-percent growth rates, terms like “doubled” aren’t thrown around too often.

So what changed?

Well, some of the incremental demand is fueled by the continued electrification of cars, trucks, and mass transit systems.

The reshoring of manufacturing activity is shaping up to be an even larger catalyst. Dozens of major companies are shifting overseas production back home, spurred in part by recent legislation to incentivize domestic investment in semiconductors, batteries, infrastructure, and green energy.

Over the past few years, developers have poured hundreds of billions into new industrial plants and manufacturing facilities. These new automotive factories and chip foundries are quite energy intensive.

But it’s the third growth driver that is really pushing the needle. You think your power bill is high? Imagine what Microsoft NSDQ: MSFT) and Amazon (NSDQ: AMZN) pay each month.

Yes, I’m talking about data centers.

A single ChatGPT query requires 10 times the energy of a simple Google search. So you can imagine the exorbitant power requirements needed for heavier applications. Of course, these facilities were power-hungry long before the introduction of AI. Server racks (and the equipment to keep them cool) have an insatiable appetite.

There are currently about 4,500 data centers in the United States, many clustered in big metro areas such as Atlanta, Dallas, and Washington, DC.

Data centers already account for roughly one-quarter of the electricity consumption in Northern Virginia. The state’s top provider, Dominion Energy (NYSE: D), is anticipating an 85% increase in consumption over the next 15 years. And that outlook may prove conservative, considering one of the newest permits in the region is for a sprawling facility that will require up to 2.4 gigawatts — enough to power 600,000 homes.

And the spending continues to accelerate.

Last week, Google parent Alphabet (NSDQ: GOOG) shocked the market by forecasting $200+ billion in capital expenditures this year. Microsoft has set its capex budget at $175 to $190 billion. Meta (NSDQ: META) has just lifted its guidance to between $130 and $145 billion.

That’s a half-trillion being deployed this year… from just three companies. The lion’s share of that capital is being funneled into AI initiatives, which means more data center construction.

One of my High-Yield Investing holdings, Digital Realty (NYSE: DLR), is on the receiving end of all this. Over the past few weeks alone, it has signed new hyperscale data center leases that will generate another $400 million in annual base rental income.

But let’s take this a step further. Data centers can’t function without power.

That’s what led me to Black Hills (NYSE: BKH).

Through subsidiaries such as Colorado Electric, Black Hills serves 1.4 million residential and commercial customers across parts of Kansas, Nebraska, Iowa, South Dakota, and several other states.

These operations are safeguarded by regulators who allow the company to recoup its expenses and earn fair returns on equity, generally in the 9% to 10% range. The vertically integrated business also owns various coal, wind and natural gas-powered generating assets with 1,400 megawatts of capacity.

Black Hills has catered to the specialized power needs of data centers for over a decade and built a large roster of hungry customers. That includes Microsoft, which operates three facilities in Cheyenne, Wyoming. And Meta, whose newest data center is just a few miles away. These large-scale users pay tariffs under a special industrial power service contract.

Black Hills is currently finalizing an accretive merger that will add more than 700,000 new accounts. In the meantime, management is aiming for a full-year profit of $4.35 per share. From that, the board targets a 55% to 65% dividend payout ratio, depending on capital requirements.

With little fanfare, Black Hills has quietly distributed a steadily growing pile of income to its small base of stockholders. In fact, the company has dependably raised its distributions for 56 consecutive years… a longer streak than Target or Pepsi. The current annualized payout now stands at $2.81, providing a hefty yield approaching 4%.

If the combination of unwavering demand, transparent cash flows and rising dividends sounds appealing, then you’ll want to check out Utility Forecaster, a publication dedicated specifically to “essential-service” stocks. It’s run by my colleague Robert Rapier, an expert in this field with more than 30 years of experience.