Utility CEO on the data center crunch: America’s ‘check engine light’ is on and ‘no one’s going to pay attention until it breaks down’

The rapid proliferation of artificial intelligence and data centers is pushing the U.S. electrical grid into uncharted territory, prompting one of the nation’s top utility executives to issue a stark warning to regulators: The system is flashing warning signs that can no longer be ignored. Calvin Butler, CEO of Exelon , the nation’s largest utility company by customer count, compared the current state of the U.S. energy grid to a vehicle being driven to the brink of failure, in conversation with Fortune ‘s Executive Editorial Director Diane Brady at the Fortune Brainstorm AI conference in San Francisco. “We are telling policy makers the warning lights are on,” Butler said. It’s like you’re driving your car, the check engine light is on, and you just don’t want to take it into the shop. “You’re like, I’m going to keep pushing this and no one’s going to pay attention until it breaks down,” Butler told Brady. From his perspective, he sees a malfunction as inevitable. “I’m telling you on that hottest day or that coldest day, you might have a supply crunch and people are going to suffer. I’m telling you, you have to fix it now.” Butler’s warning comes, of course, amidst a historic surge in electricity demand as AI usage gobbles up compute, which in turn gobbles up energy across the country. There’s a bit more to it than that, Butler said, with pressure coming from a “convergence” of factors, including the onshoring of manufacturing and the broader electrification of the economy. “I’ve been in the utility industry for about 25 years ... and probably the last four decades we have never had a moment of this amount of load growth,” Butler said. The supply crunch The crux of the problem, according to Butler, is a disconnect between rising demand and the incentives to build new power generation. Exelon, which spun off its generation business (Constellation Energy) three years ago, now operates as a regulated utility that delivers power but does not generate it. Butler argued independent power producers currently lack the financial motivation to construct new power plants. “The independent power producers have no incentive to build anything new because they’re maximizing their assets,” he explained, allowing that this is a fair thing to do under current market conditions. But because producers are squeezing maximum revenue from existing infrastructure rather than expanding capacity, the risk of a shortfall is growing, on the one hand, and price hikes are also inevitable. When asked for a prediction regarding electricity prices for the coming year, Butler offered no comforting ambiguities. “I can tell you with certainty the prices are going to go up,” Butler said. He pointed to market dynamics within the massive PJM Interconnection-a regional transmission organization serving 13 states and the District of Columbia-as a driver. State governors in the region previously implemented a price cap that saved customers roughly $3 billion, but as those caps face expiration or adjustment, the suppressed costs will likely resurface. (Pennsylvania Governor Josh Shapiro...

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