Inside America’s First Data Center-Only Utility

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NORTHWEST INDIANA — The defining scenes of the era of artificial intelligence look nothing like science fiction. They are bright yellow, neon orange, dusty, sweaty, greasy, and loud. 

They are excavators parked in a tallgrass field in rural Indiana. They are backhoes trundling down an Ohio farming town’s lone road. They are the neon vests worn by sunburnt utility workers raising power lines in a Wisconsin county where cows outnumber humans tenfold. 

Small Great Lakes communities — entrenched in the construction of hyperscale data centers and the energy infrastructure they require — are the begrudging backbone of the AI boom. 

These pockets of slow living could not be more different from the fast-moving Silicon Valley cities where tech leaders profess idealistic visions of an AI age. To be sure, corporate rhetoric means very little to the poorer, older, often less-educated residents of small-town middle America who find themselves staring across fields of crops at the windowless facades of a so-called future whose espoused benefits are nebulous at best. 

The country has stood on a revolutionary industrial precipice like this before. The transition from sail to steam, the paving of interstate highways, the electrification of rural America, and the advent of the Internet all wrote new chapters for the country’s economy and environment. Each was supported by the aligned visions of the federal government and private industry. Each bulldozed and exploited the powerless, when necessary, to come to fruition.  

The newest chapter in this story is distinctive for the speed of its development, the scale of its infrastructure, and the immensity of its financial investment. At its heart, a rising need for electricity — and the uncertainty of how this will be achieved — will drive its plot. 

The potential negative consequences of this energetic boom are becoming better understood. According to a new report from the U.S. Department of Energy, “blackout frequency could increase by up to 100 times by 2030” nationwide as a result of hyperscale data centers’ strain on the grid. This demand, combined with the Trump administration’s shift to prioritize fossil fuels over renewable energy projects, is expected to increase annual household electricity costs by $460 by 2035, and $490 by 2040. 

But Northwest Indiana — where nearly a dozen hyperscale data centers are planned, under construction, or already operating in the region — thinks it has a solution that will simultaneously protect ratepayers while continuing to embrace the industry’s growth: the state has approved a first-of-its-kind utility that will provide electricity exclusively for data centers. 

The new model has been met with a mix of intrigue and skepticism from Indiana residents and grid experts, as some have expressed concerns stemming both directly and indirectly from the plan. Certain exemptions granted to the new utility may place fresh waters and air quality at risk, advocates warn. A lack of mandated competition could mean that only the largest, potentially most disruptive data center projects are considered for construction. The capacity of community power lines may be stretched thin, resulting in higher bills for residents. And as the rapid pace of building continues, not all construction jobs — a major selling point touted by local officials courting the industry — are being filled by Indiana crews. 

“I think this really shows that we’re kind of in the early Wild West stages of the data center boom, where there aren’t these defined connection queues or processes for data center developers and utilities,” says Ben Inskeep, the program director of the Citizens Action Coalition of Indiana. “They’re kind of all just winging it.”

A Grid Exclusively for Data Centers 

Residents of rural Northwest Indiana have few options, many of them expensive, when it comes to powering their homes. 

The Northern Indiana Public Service Company (NIPSCO) operates a regulated monopoly in the state’s northern third, serving as the top natural gas distributor and the go-to electricity provider for some 1.4 million Hoosiers. The company has been credited as having the highest rates of all other large utilities in the region, with a decades-old coal plant serving as its top energy producer. 

So eyebrows were raised two summers ago when NIPSCO announced that its power load in the state — which currently reaches 2,300 megawatts on peak days — was likely to quadruple over the next decade. 

“The overwhelming majority of the inquiries NIPSCO is seeing are for hundreds of megawatts, and in some cases thousands of megawatts, and they are generally related to development of data centers,” Vincent Parisi, NIPSCO’s CEO, testified last July to the Indiana Utility Regulatory Commission (IURC). 

Parisi’s comments came as part of a months-long negotiation with the IURC, from which NIPSCO sought approval to power Indiana’s AI boom in a revolutionary way: by creating a separate subsidiary utility—NIPSCO Generation LLC, better known as GenCo—that would provide electricity exclusively to data centers. 

The first-in-the-nation proposal was drawn up to shield regular ratepayers from extra costs of adding mega-users, like hyperscale data centers, to NIPSCO’s network. Under the agreement, GenCo would generate and sell electricity to NIPSCO, its only customer, at wholesale prices, and NIPSCO would then sell this electricity to data center customers. The buffer for residents’ rates would come from the mathematical accounting of these transactions, which in theory would remain separate from household bills. 

In an emailed statement to Circle of Blue, representatives from NiSource, the parent company of both utilities, say they preferred “customer protection” as a better characterization for how the model works, rather than “mathematics.”

“The purpose of the model is not to create a separate grid,” they say. “It is to protect customers, support reliability and preserve long-term affordability.” 

While GenCo is still a regulated utility, the proposal provided the new company with pivotal exemptions from traditional IURC oversight. The commission, for example, does not need to approve all aspects of financing for projects GenCo accepts, and the subsidiary has the freedom to pick and choose which companies it wants to work with. The combination, critics say, is likely to expedite the construction of many data centers for —possibly exclusively — well-financed suitors. 

“Without a legal obligation to serve all customers, GenCo can elect to serve the customers that will make them the most money,” says Sarah Freeman, now a principal at the Regulatory Assistance Project, and who last year voted to approve GenCo’s creation as an IURC regulator.   “I think that’s where the real speed to power part is going to come in.” 

As a case in point, the proposal received testimonial support from existing data centers that were already serviced by NIPSCO, and are looking to grow in big ways. This included the Digital Crossroads campus located on the shores of Lake Michigan in Hammond, Indiana. Managers of the site said that their $7 billion plans to expand AI computing capacity by 19 times their current output — a feat requiring “more than 200 megawatts of incremental power” — would be jeopardized without GenCo’s approval. 

“Any uncertainty of delivery or delay in securing the required generation assets will jeopardize plans to expand the Digital Crossroads Campus… and the resulting investments and benefits to the Northwest Indiana region,” wrote David Pavlik, an indirect managing member of the site, in testimony last April. 

NiSource representatives say that the IURC still needs to approve each commercial agreement, “evaluated on its merits.” 

“The objective is not to favor a particular industry or company,” NiSource says in a statement. “The objective is to ensure that large-load customers support the infrastructure needed to serve their growth while protecting existing customers from additional costs and risks.”

GenCo’s creation as a utility with IURC exemptions passed unanimously, 8-0, last September. Almost immediately, the speed-to-power advantage of the utility was flexed. NIPSCO, GenCo, and Amazon announced in November plans to build two 1.3 GW natural gas-fired power plants beside the R.M. Schahfer Generating Station, a coal-fired power plant in the town of Wheatfield. The generators, which were officially approved in June by the IURC, will supply electricity exclusively for a new $7 billion Amazon data center planned for construction next door. 

According to Inskeep, the gas plant’s status as a GenCo facility also means it did not need to submit to the state a Certificate of Public Convenience and Necessity (CPCN), a document which normally holds new developments to a number of community impact standards. Past CPCNs for natural gas-fired turbines in Indiana have included community and expert testimony, economic forecasts, and environmental discussions. 

“If NIPSCO was building the same gas plant for its other existing customers, it would have to go through a longer, more vetted process,” Inskeep says. “But since it’s using GenCo, and it’s going to the data center, they don’t have to.”

The new Wheatfield facility is one of 74 planned or already built natural gas plants across the country specifically dedicated for data centers featured in a report released this month by the Environmental Integrity Project, a climate watchdog. According to the organization’s analysis, these dozens of plants are poised to emit 662 million tons of greenhouse gasses per year, equivalent to the annual emissions of Australia. 

At a public hearing held online in early June by the Indiana Department of Environmental Management, Wheatfield residents voiced their concerns about the natural gas facility’s impending construction and its uncertain impacts on the community’s health. Many shared experiences with asthma stemming from poor air quality. 

“They threw as many projects at the wall to see what would stick, and they just decided to proceed with all of them,” says Ashley Williams, director of Just Transition Northwest Indiana, an environmental non-profit that has been campaigning against pollution at the Schahfer site for years. “It’s a trifecta of injustice, and I think this is an omen of what’s to come for communities across Indiana and the country.”

Grid experts are curious to see how the GenCo experiment, from an electricity delivery perspective, plays out. 

“As an overall idea, it seems that it can somehow help compensate for some of the negative aspects that data centers are having now,” says Jaoa Ferreira, the acting director of the Center for Economic and Policy Studies at the University of Virginia. “I’m not against the business model. One important thing for me is that this actually results in adding production to the grid, and not just splitting electricity from everyone else to just satisfy data centers.”

GenCo estimates that electricity credits for its customers over the next 15 years will sum to $1.4 billion.

But significant questions also remain, Ferreira acknowledges, regarding the efficiency of how electricity is delivered to everyone who needs it. The GenCo model is based on mathematics, not a physically separate grid, meaning that new power plants and data centers in the GenCo network will be relying on the transmission lines that also connect to homes, schools, and businesses.

“As long as there isn’t congestion on a line, the electrons are just going to keep going to wherever they need to be,” Freeman says. 

But transmission line congestion — which occurs when these power lines cannot physically transmit more electricity than they already are — is already proving to be a real and expensive concern in the region’s data center hotspots. This spring, PJM, the largest utility in the Rust Belt and a central distributor of electricity for data centers, reported a 300 percent increase in congestion costs — expenses that arise when transmission lines reach capacity, and are pushed onto consumers — from the first quarter of 2025 to the first quarter of 2026. 

“Traditionally, in many states, those congestion costs are disproportionately distributed to residents and small businesses,” Ferreira says. 

A former NIPSCO union representative, who spoke with Circle of Blue on the condition of anonymity, says that as demand for construction increases, a large share of the energy-related construction jobs in Indiana are being outsourced to crews from different states, a necessity which undermines officials’ claims that the data center boom is a boon for local jobs. 

Meanwhile, he says, the utility is “pushing more costs off to the customer” amid rising demand for construction. The building of power lines, substations, wires, and transformers are routinely recouped by utilities in customers’ bills. 

“They are really screwing the customer over bad right now,” he says. “To me, a company like NIPSCO, they don’t care if the customer hates them.”

NiSource representatives tell Circle of Blue that NIPSCO “is not allowed to recover the costs to serve large load customers from its other existing customers,” but that “construction costs that create or improve a long-lived utility asset are generally treated as capital because they relate to building infrastructure.” 

In Indiana, according to the IURC, residential electricity bills in the state rose $77 per month between July 1, 2023, and July 1, 2025. This was “by far the largest increase of any utility in Indiana,” Inskeep says. 

Surrounded by Energy Infrastructure 

Frustration in Wheatfield over the natural gas plant’s data center-exclusive-service is compounded by lingering hard feelings over a 2021 NIPSCO project to install 2.4 million solar panels in fields along the town’s roads. 

Some community members thought the installation was a blight on what could have been more productive agricultural land. Others have expressed displeasure by how susceptible the panels have been to destruction from strong summer storms and winds, with debris cleanup taking too long. 

Most unbelievable of all to Barb Deardorff, a lifelong Wheatfield resident, is the energy paradox the town now finds itself in. 

With the coal plant, natural gas turbines, and the solar panel fields, she estimates that nearly 40 percent of the land in Wheatfield is used to produce electricity for NISPCO. Astoundingly, the town is one of the few small pockets of northern Indiana that is not serviced by the giant utility — most homes get their electricity from a separate utility, called Jasper County REMC, which does not purchase electricity from NIPSCO. 

Jay Hunter, a Wheatfield farmer whose kitchen window will look out onto the new data center, says he came home one afternoon in June to crews replacing the power line that runs through his front lawn, and continues on toward the Schahfer plant, with an even larger one. The old pole was left splayed on his grass. It was a reminder that NIPSCO retains eminent domain authority to build transmission lines connecting GenCo power plants and data centers to the existing grid. 

In other states, such as Wisconsin, the construction of new, higher-capacity lines for data center electrification is currently putting homes, habitat, and water resources at risk. 

“They couldn’t give two shouts about us,” Chris Hunter, Jay’s brother and a retired Wheatfield farmer, says. “It’s all about the money nowadays.”

Top image: The St. Joseph Energy Center is a 720-megawatt natural gas power plant located in New Carlisle, Indiana, where Amazon Web Services has invested billions of dollars to build new hyperscale data centers. Photo © J. Carl Ganter / Circle of Blue