April 10 (Reuters) - U.S. electric utilities predict a

tidal wave of new demand from data centers powering technology

like generative AI, with some power companies projecting

electricity sales growth several times higher than estimates

just months earlier.

Nine of the top 10 U.S. electric utilities said data centers

were a main source of customer growth, leading many to revise up

capital expenditure plans and demand forecasts, according to a

Reuters analysis of company earnings reports from the first

three months of the year.

During the same earnings period last year, only two of the

companies mentioned data centers.

"The growth is going to kick in faster than it has in

decades," said Jim Lydotes, head of equity income for Newton

Investment Management, a BNY Mellon IM firm that is shifting its

holdings in European electric utilities to U.S. companies.

In 2023, the country's electric utility shares

fell by more than 10%, the largest yearly drop since 2008, as

rising inflation pushed investors to chase higher yields. The

companies, which suffered a prolonged demand lull after the

introduction of new energy efficiencies at the start of the

millennium, are up about 4% so far this year.

Overall, power use from the thousands of giant computing

warehouses that comprise data centers is expected to triple

globally from less than 15 terawatt-hours (TWh) in 2023 to 46

TWh this year, according to Morgan Stanley research.

"The truth of the matter is these things (data centers) are

pigs when it comes to energy use, and now they're the size of an

elephant," said Eric Woodell, an expert who specializes in data

center operations.

Longer term power demand from IT equipment in U.S. data

centers is expected to reach more than 50 gigawatts (GW) by

2030, up from 21 GW in 2023, according to consulting firm

McKinsey's latest estimates. Last year, it had forecasted demand

rising to over 35 GW by 2030.

Surging electricity demand from data centers, along with an

increase in U.S. manufacturing and the electrification of

sectors like transportation, was evident in the most recent

round of utility earnings calls with investors.

Southern Co expects data centers to propel its electricity

sales growth to 6% each year from 2025 to 2028, up from

predicted growth of 1% to 2% annually through next year. Sales

from its Georgia Power ( GPJA ) business unit are seen jumping to an

unprecedented 9% a year.

Florida-based NextEra Energy, the world's largest renewable

energy company, said it had of data centers in its project queue

that would use more than three GW, or nearly enough to power all

homes in the state of Minnesota.

Executives from American Electric Power ( AEP ), an electric utility

based in Ohio, said the company's retail customer demand grew

2.5% in 2023, much faster than its earlier 0.7% projection, due

primarily to the acceleration of data center power use.

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The rapid growth has raised concerns that the U.S. electric

utility industry, historically known for slow and steady

returns, will be unable to respond quickly to the rise in power

demand because of a swelling backlog of power generation and

transmission projects in line to connect to the grid.

"What we're seeing in the market is that these projects are

not coming online fast enough to meet the local demand for the

for the data centers," said Rystad Energy analyst Geoff

Hebertson.

The jump in overall demand has added to a nationwide queue

of requests for power generation and energy storage projects to

connect to the grid, which swelled to 2,600 gigawatts in 2023

from 2,000 gigawatts in 2022, according to the latest data from

Lawrence Berkeley National Laboratory (LBNL).

Scrutiny from some state legislators who have grown

concerned about how data centers strain power grids, raise

emissions, and sometimes fail to boost state economies, has also

emerged as a threat to electricity demand in certain regions.

The Georgia Senate voted last month to suspend some tax

breaks for data centers, saying the businesses failed to create

enough jobs to stimulate the state's economy.

That decision was "unfortunate" but will not be enough to

undercut the lure the state has for new data center

development," said Raul Martynek, CEO of DataBank, which is

developing 225 megawatts of data center capacity across 14 U.S.

markets, including the Atlanta area.