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At a recent NextGrid Alliance working group session, one idea surfaced repeatedly across discussions on data centers, affordability, innovation, and grid planning: The central challenge facing utility regulation is no longer cost recovery. It's throughput. 

Can utilities connect new load faster? Can they extract more capacity from existing infrastructure? Can they deploy solutions quickly enough to keep pace with demand while maintaining affordability and reliability? 

For decades, the answer was simple: Build more infrastructure. Today, that answer is no longer sufficient -- and the regulatory frameworks built around it are showing their age.

Traditional utility regulation was designed for a predictable world: Forecast demand, build infrastructure, recover costs over time, and ensure prudent spending. That model worked when load grew slowly and infrastructure was the primary constraint. 

Today’s grid is under fundamentally different pressure. Electrification is accelerating across transportation, buildings, and industry. Data center demand is surging -- some large-load interconnection queues have doubled in size in under two years. At the same time, customers are acutely sensitive to rate increases; reliability expectations have risen; and regulators face intense political scrutiny over both cost and speed of grid development. 

The core insight from the NGA working group: Utilities will continue to build, but they'll also need to optimize, orchestrate, and unlock far more value from existing infrastructure. The regulatory frameworks that reward only capital deployment are leaving significant system capacity and customer value on the table.

The Grid Has Changed. Regulation Hasn’t Kept Up.

Lessons from the United Kingdom, Texas, and California show that while utilities may not yet have found the right answer to these challenges, many have stopped pretending the old answer still works. 

In the UK, a recent trial involving National Grid, Emerald AI, EPRI, Nebius, and NVIDIA demonstrated something that would have seemed implausible a few years ago: AI data centers operating as active grid assets. Across more than 200 simulated grid events, participating facilities reduced demand by up to 40% and shed roughly 30% of load within seconds -- without disrupting critical workloads. This was made possible by Ofgem’s Strategic Innovation Fund, which ties innovation spending to measurable network outcomes. Critically, the UK framework does not fund experimentation for its own sake; it funds solutions that demonstrably move system performance metrics. That outcome orientation is what gave utilities and data center operators the incentive structure to run a trial this ambitious. 

In Texas, the regulatory response to explosive large-load growth has been notably direct. ERCOT and the Public Utilities Commission have introduced stronger interconnection requirements that shift more financial risk to large customers seeking expedited connections. New large loads must now demonstrate operational readiness and post deposits tied to their interconnection timelines. The underlying logic is straightforward: If you want to jump the queue, you have to have real skin in the game. This has reduced speculative interconnection requests and focused queue capacity on projects that are genuinely shovel-ready -- a meaningful throughput gain achieved not through new infrastructure but through smarter rules. 

California’s EPIC program takes a longer-horizon view. Now in its fourth cycle, EPIC provides multi-year funding for technologies that advance affordability, reliability, resilience, and decarbonization -- but with an increasingly stringent requirement for funded projects to demonstrate a credible path to utility-scale deployment. Early EPIC cycles supported a wide portfolio of exploratory research. More recent cycles have shifted weight toward grid-edge technologies and demand flexibility tools that can be commercially deployed within a five-to-seven-year window. The program is effectively serving as a deployment pipeline, not just a research fund. 

These three models differ significantly in design. But they share a common recognition that distinguishes them from more traditional regulatory approaches: They treat innovation as operational infrastructure, not a discretionary line item.

What Leading Jurisdictions Are Proving in Practice

As all three jurisdictions make clear, the regulatory frameworks that will best define the next decade aren't the ones that most carefully review utility spending. They're the ones that most effectively increase the throughput of the electric system -- connecting demand faster, extracting more value from existing assets, and delivering measurable benefits to customers at acceptable cost. 

That requires a shift which may be uncomfortable for many commissions: From evaluating what utilities have done to actively shaping what utilities can do. Regulators will need to set outcome targets, not just review inputs. They will need to allow and, in some cases, require utilities to deploy demand flexibility tools, engage large loads as grid resources, and recover costs for solutions that defer capital rather than add it. 

The grid cannot wait for regulatory frameworks to catch up organically. Every year of interconnection backlog, every deferred flexibility program, every innovation fund that rewards novelty over deployment is a cost imposed on customers and the climate alike. Regulators who treat throughput as someone else’s problem will find that the grid and the customers it serves have moved on without them.

The Mandate Is Clear, and Regulators Need to Own It

To learn more about how NGA members and other utilities think regulators can keep up with new technologies and soaring power demand, look for our third annual Utility Innovation Survey, coming here to our blog Sept. 17.

Utility Regulation Can No Longer Just Oversee the Power Grid -- It Has to Increase Throughput