NEW YORK (Reuters) -Blackstone Infrastructure's plans for data centers in New Mexico will be a deciding factor in whether stakeholders challenge the private equity group's $11.5-billion proposed acquisition of electric company TXNM Energy ( TXNM ), the group that blocked TXNM's previous merger plan told Reuters this week.

TXNM, which is a holding company for regulated utilities, including PNM in New Mexico, announced its sale agreement with Blackstone on Monday in the latest of several recent U.S. power industry deals propelled by rising electricity demand from Big Tech's AI data centers.

The agreement will require the approval of state regulators, with input from PNM stakeholders, including the New Mexico Department of Justice, consumer advocates and clean power groups such as New Energy Economy.

New Energy led the effort to ultimately thwart TXNM's last agreement to sell to power company Avangrid, the U.S. unit of Spanish electric company Iberdrola. After the fight over the proposed acquisition escalated to the New Mexico Supreme Court, Avangrid abandoned its $8.3-billion bid for TXNM in late 2023.

Since the foiled deal, data centers have emerged as the biggest driving force behind U.S. electricity demand, which is on track to reach record highs this year and in 2026.

How Blackstone plans to capitalize on that demand in New Mexico will be a key issue in New Energy Economy's scrutiny of the TXNM purchase, the nonprofit's director, Mariel Nanasi, said.

Among the considerations are whether Blackstone intends to own data centers in New Mexico, either directly or through affiliates, and how it handles the costs of upgrading electrical systems to connect the large energy loads, Nanasi said.

"We are going to want to have real guardrails around that," she said.

TXNM and Blackstone representatives, on a call with investors shortly after the acquisition announcement, said they planned to meet with stakeholders over the next 90 days before filing their plan with the state.

As artificial intelligence data centers proliferate and grow to use record amounts of electricity, regulatory fights have emerged over who pays for additional infrastructure and upgrades needed for the giant energy consumers.

The regulated utilities under TXNM can power data centers, but they are barred by state regulations from developing, owning, or operating the centers for third parties, said one person familiar with the Blackstone-TXNM arrangement, who spoke on condition of anonymity.

Any transmission upgrades or power generation built to serve data centers would be paid for by the data center companies, the person said.