Utilities Weigh GENCO Model for AI Revenue as New York Customer Arrears Hit $1.8 Billion
With 1.2 million New York households already behind on energy bills, the debate over who absorbs costs from AI-driven utility investment is sharpening.
A debate over whether utilities should adopt GENCO structures, separating generating assets into standalone companies to capture AI-linked electricity revenues, surfaced in trade coverage on Monday (2026-09-14). OilPrice.com examined whether the model could let the electric industry participate in AI growth without compromising regulated utility finances or shifting new costs onto captive customers.7
The timing is awkward for the sector. In New York state, 1.2 million households were more than 60 days behind on utility bills in 2025, and $1.8 billion in utility arrears had accumulated, according to analysis by Brad Cebulko of Current Energy Group and Sarah Steinberg of Advanced Energy United, published by Utility Dive on August 24 (2026-08-24). Infrastructure and delivery costs account for 75% of New York heating bills and a similar share of electric bills, making them the largest driver of the pressure on those households.6
Some of those delivery costs are being built on contested assumptions. Cebulko and Steinberg identified a specific case: a gas utility planning to spend $550 million by 2029 to support customer growth, based on a forecast of stagnant electrification. Its own electric arm does not share that forecast.6
The gap carries stranded asset implications. If the gas side's electrification assumptions prove too conservative, the $550 million could sit on customer rate bases long after the load it was meant to serve has migrated to electric infrastructure. OilPrice.com flagged this risk class in a June 1 (2026-06-01) piece noting that utility stocks' appeal rests on high dividends, steady growth, captive customers and government backstops — assumptions that could unravel if capital spending outruns demand.3,6
National Grid's rising rates in New York are landing on a customer base already at its limit. The question of who absorbs costs when internal forecasts diverge carries direct consequences for those 1.2 million households behind on bills.6
The GENCO model discussed in Monday's (2026-09-14) OilPrice.com piece is an attempt to draw a cleaner line around new investment risk. By ring-fencing generating assets into separate entities, utilities could in theory allow AI and data-center developers to bear capital risk directly, rather than socializing it across residential and commercial rate payers. The piece did not resolve whether regulators would permit such structures, and the picture varies by jurisdiction.7
Infrastructure hardening is adding another layer of cost pressure. Power magazine reported on June 8 (2026-06-08) that undergrounding power lines in Colorado's high-wildfire-risk areas carries an estimated capital cost of $80.3 million, or $3.12 million per mile, with utility wildfire mitigation plans covering around 50 miles in Colorado. That work is defensible on reliability grounds, but it feeds into delivery costs, the same category already consuming 75% of New York energy bills.4,6
Legacy billing systems constrain what utilities can do before new capacity becomes necessary. GridX chief commercial officer Scott Engstrom, writing for Utility Dive on August 7 (2026-08-07), argued that outdated billing platforms make it impractical to design and deploy dynamic rates quickly, limiting the ability to shift load away from peak periods without building more infrastructure.5
Smart thermostat aggregation offers a partial alternative. Canary Media reported on April 20 (2026-04-20) that Renew Home, working with EnergyHub, demonstrated that aggregated smart thermostats could provide demand response for utilities. The utility involved did not disclose financial terms for future arrangements, with Renew Home expecting results to be "extremely cost-effective" for the utility. The savings outcome for residential customers was not specified.2
Duke Energy has been exploring risk-sharing with customers on fuel costs rather than passing fossil fuel price swings through to bills unchanged, Canary Media reported on April 1 (2026-04-01). The piece noted that conflict in the Middle East had shown how quickly gas feedstock prices can shift.1
The more immediate pressure sits in New York, where National Grid's rates are climbing toward a customer base holding $1.8 billion in arrears. Whether the $550 million gas investment ends up as productive infrastructure or a stranded cost depends on which of two contradictory internal electrification forecasts the grid ultimately follows, and neither the gas utility nor its electric arm has resolved the discrepancy.6,7