Fifteen years ago, data centers were big – the size of a Walmart Supercenter, perhaps. Then, they became as massive as ten Costcos. Now, thanks to AI’s ravenous hunger for power, they have morphed into sprawling behemoths ten times bigger than the Pentagon, or even the size of a small city. As tech companies compete to develop the biggest, most powerful AI models and the US government pushes to keep data center construction on American soil, these mega datacenters are also rising at a breakneck pace.
To feed the AI, data centers need electricity. Lots of it. In a gold rush-like atmosphere, electric utilities across the U.S., but particularly in the South, are seeking to capitalize on the demand by bringing these AI data centers to their states. Big Tech customers ensure a steady and predictable revenue stream with long-term contracts. They also allow rate-regulated utilities to justify new profit-capped power generation projects, and bring economic development wins with area jobs and investment.
One of the major players is Louisiana-based Entergy, a Fortune 500 utility serving customers in Louisiana, Mississippi, Arkansas, and Texas. In December 2024, Facebook-parent company Meta announced plans for a $10 billion AI data center in Richland Parish, a rural county in northeast Louisiana, which it said will create 500 new full-time, long-term jobs in a struggling, economically-depressed area. Spanning over 4 million square feet, it will be Meta’s largest data center to date. To meet the energy demands, Entergy plans to construct three new natural gas plants near the site at a cost of $3 billion. Since the announcement, Entergy’s stock has hit record highs – gaining 14% so far this year. The stock has increased nearly 75% over the past 12 months and is now trading at its highest level in decades.
In a recent interview with Fortune, Entergy CEO Drew Marsh said that “if you do the math,” Meta will be Entergy’s largest customer, thanks to two gigawatts of power running 24/7.
Marsh also touted the company’s role in attracting Meta to Louisiana. “As a rate regulated utility, we are integrally involved in economic development in every industry that might come into Louisiana or Arkansas, Mississippi or our portion of East Texas, anybody that is likely going to have a large power need,” he said. “We have relationships with communities all over the state, we have relationships with the governor, and the legislature, and, of course, the Public Service Commission and other regulatory bodies that may be out there,” he said.
Entergy has wooed both AWS and Meta so far
Entergy is accustomed to large, energy-hungry industrial customers like chemical refineries and oil and gas processing facilities. But they all pale in scale to the current crop of Big Tech data centers.
Marsh recalled that a decade ago many investors asked whether the company would be “getting a whole bunch of data centers” as customers. At the time, data centers, while sizable, were significantly smaller than they are now.
“My response was, our customers eat data centers for breakfast, because they just weren’t that big,” said Marsh.
That all changed with the arrival of Amazon: In 2019, Entergy Mississippi began discussions with Amazon’s cloud arm, Amazon Web Services, about locating one of its largest data center campuses in the state. Five years later, in 2024, Entergy announced Amazon’s $10 billion investment in Madison County as one of the “biggest economic development wins in Mississippi history.” In addition to AWS, Entergy worked closely with the Mississippi Development Authority, Governor Tate Reeves and the Mississippi Legislature, who passed and signed key legislation that helped make Mississippi an attractive choice for the company.
The Amazon deal put Entergy in a prime position to get Meta to consider a 2,250 acre site on a former agriculture operation called Franklin Farm. A recent New Orleans Times-Picayune report detailed how in January 2024, Entergy hosted half a dozen Meta executives at its New Orleans headquarters after hearing Meta was looking for a site in the South to build a data center.
According to the report, Meta told Entergy that they would consider Louisiana but that the state would have to move fast to come up with an attractive deal. Entergy executives worked with recently-elected Governor Jeff Landry to forge agreements with legislative leaders, cabinet secretaries and local government officials. Meta ultimately received a sales tax exemption on the billions of dollars it would spend on servers and equipment.
A Meta spokesperson provided the following statement to Fortune: “We are excited that construction is underway at our data center in Richland Parish, LA. We selected this location for a number of reasons—it has good access to infrastructure, a reliable grid, a business-friendly climate, and great community partners that helped us move this project forward.”
Entergy’s profit motive aligns with Meta’s data center expansion
Many rate-regulated utilities, like Entergy, operate as vertically integrated monopolies. That means they own the power plants that generate the electricity as well as the high-voltage and low-voltage power lines that deliver electricity. Its rates are set by public utility commissions in those states, including for corporate customers like Meta (who offer the benefit of long-term, steady contracts). But they also can profit from the regulated returns on infrastructure investments like new power plants.
That leads to a desire to build: Betsy Soehren Jones, a managing partner at consultancy West Monroe who advises utilities, explained that state regulators set a maximum allowed rate of return on capital investments. This means utilities can earn a regulated return (e.g., 7%) on their infrastructure investments, but they need to invest in new assets (like power plants or transmission lines) to increase their total earnings.
“They have to build something in order to make money,” Jones, told Fortune. “If I’m Entergy and I can only make it up 7% off of all of my capital expenses, if there’s not new companies coming into my service territory, my revenue is going to stay flat.”
Marsh says that owning the various pieces of the puzzle is a key advantage for Entergy in making data center deals. “We are a vertically integrated utility, and we’re that one-stop shop where we can provide all of the technical things, the generation, the transmission, the retail access, the conversation with the regional transmission operator, and we can then interface with all of the stakeholders,” he said.
But critics say that monopoly, as well as a cozy relationship with regulators, may leave consumers paying up down the line.
“Entergy is asking to build like gangbusters and making huge plans for lots of new gas facilities in the state,” said Logan Burke, the executive director for the Alliance for Affordable Energy. “They have this profit motive to build new stuff, because that’s part of their business model,” she added, explaining that while the regulatory commission needs to approve the gas plants, “it sounds like a foregone conclusion.”
It is reminiscent, she said, of early 2024 when Mississippi’s Governor Reeves passed legislation to attract Amazon’s data center investment. “It gave Entergy effectively carte blanche to build whatever they need to serve this customer, whatever they need, and that a prudence review would come later,” she explained, adding that it “neuters the Mississippi Public Service Commission’s ability to regulate what the utility builds in service of its customers, and that includes residential customers and commercial customers.”
How cozy the relationship is between state regulators and vertically-integrated monopoly utilities like Entergy differs from state to state, Jones said. “There is no one model with regulatory commissions,” she said. “Some are five people, some are three. Some are appointed by the governor, some are not.” In California, for example, “they are going to heavily challenge utilities,” she said, adding that Illinois and New York are similar. “It’s not a blue vs. red state thing,” she emphasized. “It really is dictated by how the commissions happen.”
Now, the Alliance for Affordable Energy, as well as the Union for Concerned Scientists, are urging Louisiana regulators to reject Entergy’s plan to “fast track” the three gas power plants meant to serve the new Meta data center in Richland Parish. Earthjustice recently filed a motion on behalf of the two nonprofits, asking the Louisiana Public Service Commission to deny the $3 billion proposal until Entergy “follows standard regulatory procedures.” The groups argue that the utility has not proven the plants are the most cost-effective option for meeting electricity demands.
In a press release about the motion, Paul Arbaje, an energy analyst in the Climate & Energy program at the Union of Concerned Scientists, said that Louisiana ratepayers “already suffer the consequences of overreliance on gas, from higher electricity costs due to gas price spikes to unreliability during extreme weather events,” If Meta chooses not to re-sign its 15-year contract, or terminates its initial 15-year electricity supply contract early, “Louisianans will be left to foot the bill for these massive new gas plants.”
Marsh, however, said that Entergy has considered those risks and prepared for them, saying that if there is extra electrical capacity, as well as available equipment and infrastructure, another customer could potentially come in to use it. But even if there was no other need for it, Entergy could retire older, less efficient assets “and save our customers money.” But either way, he said, Entergy’s agreement with Meta includes minimum payments that fully cover the cost of the new generation that is being built. Meta has also pledged to match its electricity use from the data center with 100% clean and renewable energy, including by working with Entergy to bring at least 1,500MW of new solar energy and storage to its grid.
Utilities continue to race to secure long-term deals
The recent buzz around China’s DeepSeek startup, which developed efficient AI models that require fewer AI chips, has raised questions about whether Big Tech might scale back its data center investments. But utilities appear undeterred in their efforts to attract these massive facilities to their states. This push continues despite growing worries that some utilities may not have enough electricity to meet the skyrocketing demand.
For example, Fortune recently reported that the CEO of the municipal utility supporting xAI’s massive new data center in Memphis warned it might not be possible to serve it without building new infrastructure. Several other utilities have expressed concerns about their capacity to meet the escalating power demands of mega data centers, including Dominion Energy in Virginia, CenterPoint Energy in Houston, Arizona Public Service, and Pacific Gas & Electric in California.
Entergy is not through trying to bring Big Tech data centers to its service areas. Even after the Meta announcement in December, Marsh says the company is in “various levels of discussion” about five to ten gigawatts of potential data center opportunities. “Five to 10 gigawatts,” said Marsh, “there’s a lot of space there.”
