Roger Conrad: Electrical Utilities Benefit With Record Growth From Big Tech Data Centers & AI Capex

Summary

• Electricity Demand Surge: The podcast highlights a significant increase in electricity demand driven by factors such as the reshoring of manufacturing, energy exports, and the rise of data centers and AI technologies.
• Utility Investment Opportunities: Utilities are experiencing stable growth due to increased demand and are seen as attractive investments, particularly in states with favorable regulatory environments like Texas and Florida.
• Data Centers and AI: Big tech companies are heavily investing in data centers, which require substantial electricity, leading to partnerships with utility companies to ensure reliable power supply.
• Nuclear Power Renaissance: There is a renewed interest in nuclear power as a stable energy source, with tech companies negotiating to restart or expand existing nuclear plants to support data center operations.
• Natural Gas and Infrastructure: Natural gas remains a critical component of electricity generation, with infrastructure developments in Texas and other regions supporting the growing energy demands of data centers.
• Regulatory Challenges: Utility companies face challenges in navigating regulatory environments, with the ability to pass on costs to consumers being a critical factor in maintaining profitability.
• Investment Risks and Rewards: While utilities offer stable growth, potential risks include regulatory changes and the need for significant capital investment, balanced by the long-term demand from tech companies.
• Market Outlook: The podcast suggests that utilities are undervalued given their growth potential, with the ongoing tech-driven demand providing a robust outlook for the sector.

Transcript

Hi everyone, this is Jason Ber of Wall Street from Main Street. Welcome back for another Wall Street from Main Street podcast interview. We're recording this interview on Tuesday, September 9th, 2025. The consumer price index um in general, excuse me, in general, the narrative that's been repeated on business television and Trump administration press conferences by him and his press secretary and his cabinet is that inflation is coming down. It's not an issue. However, one of the big increases in the consumer price index is a huge spike in the electricity cost. I believe that's the biggest increase in the consumer price index. Today's special guest covers all those things. We've had him on before. He runs Conrad's utility forecaster and also which covers the energy electrical utility company stocks which are dividend increasers. Also actually one of the most stable growth sectors and he also co- uh co-authors the uh energy and income advisor oil and natural gas portfolio with our friend Elliot Gu over there at Capitalist Times. Roger Conrad, thank you for joining me again. >> Thanks Jason. Good to be here. So, Roger, I want to get your thoughts on that increase in the consumer price price index. Like I said, are are these electrical utility companies, why do you think they're they're raising prices? Is there a huge increase in demand? Do they have inflation offset? Why do you think the their um electricity utility costs are going up so much? And can they actually pass the costs on to their customers? >> Well, yeah, those are two very good questions and they're very fundamental to utility investing, right? Because if if utilities are seeing these higher costs and they're not able to pass along their uh those costs to to the consumer uh and they're not able to control them, then we're obviously going to be looking at compressed margins and uh lower earnings at at some point in the future because you and there's also the problem of how much you know can what can can the consumer bear you know what how much uh will the regulator allow the consumer to bear uh with with rate increases and so on. So, uh very important questions for this sector. Um why util why are utility rates going up? Well, I mean there I think one thing that's really hap that's happened here that we haven't seen um since I've been covering these these investments and that goes back to the mid1 1980s and that is um you know a real kind of secular increase in demand for electricity and that's coming from a lot of different areas. you know back in the 50s and 60s it was primarily um you know the urb the suburbanization of America. So you know all these areas that had been rural and where no one was living suddenly all these housing developments went up and you know demand for electricity mushroomed. Um it's definitely we've been going along and seeing more appliances and so forth using electricity and that's been kind of steadily increasing demand for electricity along with GDP. Uh though not as much as GDP and and not as much as inflation but what's changed in the last um really it's kind of an accelerating change. it it started the last two or three years but it's been really coming on uh particularly this year and you see that in individual company results and that's demand just sheer demand for electricity it's rising at pretty much the fastest pace that we have seen since that great suburbanization of America which you know long time a you know long before many of us were born uh taking place now what's driving this electrical electricity demand And um you one thing is just simply that we're electrifying. You know, we're using a lot more devices that are heavy power users. You know, everybody's got at least one computer in their home more than likely. Everybody has a cell phone. I mean, all these things demand electricity where they weren't before. So, that's that's one thing. The population is growing. That's another uh what's kind of new though is one a reshoring of uh manufacturing and and uh large facilities that use a lot of electricity industrial demand to the United States. Now, this didn't start with Donald Trump and and tariffs and so forth. Um but it really kicked into gear with the pandemic and with the way that supply chains were suddenly disrupted and people started worrying hey are we going to get enough product if say China shuts in its factories as it did at one point. So I think sort of a wakeup call to the world that you know they need that we needed to diversify supply chains and you know bringing many of them back to United States and in fact China's become not so much a font of lowcost labor anymore it's more uh being driven by technology and these technologies are available to uh people building factories in the United States robotics being a very good example of that um and so you don't the factories that that are coming back here are not the factories of yester year that employed all these people, but they use a lot of electricity. So, that's happening in a big way. You know, we're seeing a big uh takeoff in energy exports in the United States. So, that's another industry that uses a lot of electricity. Uh the LNG or liqufied natural gas, um the proliferation of those export facilities, they're huge energy hogs. you have to basically super cool natural gas down to a form that you can put on a ship and send it somewhere else. So, tremendous uh users of electricity and again that's uh that's been a big plus. And then that, you know, really the icing on the cake and the thing that I think we we're probably going to talk a little bit more about here is artificial intelligence and data centers, huge uh energy hogs. Um, but we are using uh artificial intelligence is is is here to stay and it's we're kind of figuring out where it's going to be most useful, where people are going to want to u employ it, what sort of applications are out there. It's obviously not good for everything and there are all sorts of examples of of where uh people have tried to kind of shove a round peg into a square hole uh to to use it, but it is very useful in a lot of other areas. And what we're seeing in real time is demand. And so you have a company say a company called Energy is an example and they serve an area of the country that's maybe not so much known for you know rapid economic development in the past. It's headquarters is New Orleans and of course everybody remembers what happened with Hurricane Katrina basically uh you know wiping out a big part of that city. So not a not traditionally a really wealthy part of the country at least in the last 100 years or so. But this is a this company is seeing um its industrial demand grow 12 to 13% a year. There's a lot of factories moving there. A lot of industry data centers are coming in there. Um they're not alone. It's happening all over the world. So that's >> and that's near cheap natural gas, right? That's near the Hannesville shell and some of the other ones, >> right? That's so they're benefiting from you know the LG exports uh they're benefiting from a reshoring of of manufacturing particularly their their Texas um area and then um you know data centers and we're and uh you know that these have to be supplied with a lot of a lot of electricity a lot of energy so um you know they're they're a big beneficiary of of this demand. Now you know the second half of the question is you know can utilities you know that cuz you know to to meet new demand you got to spend money right you got to have the generation that's what everybody thinks about but you've also got to have you know the connections the distribution and the transmission and so on and the tolerance for outages um and this was a topic that was discussed as recently as the you know back in the back in the '9s really is that with information With the proliferation of information technology, you really can afford far fewer outage time. Uh far less outage time. Um you know, and they used to call it the nines, right? How many 99.99999, you know, what's the what's the acceptable uh amount of of outages? And I'd say it's basically pretty much zero um at at this point, you know, with artificial intelligence. So you have that reliability factor and that hardening of systems at a time when you know weather has become a lot more severe. You know utilities used to have you know hundreds of millions of dollars of damages and the worst storms. Now it's you know in the billions and and and higher even. So um you know >> I think Florida had trill I think Florida had like a trillion or Texas had a trillion dollars worth of damage in a storm in the last um it was an insane amount. Yeah. >> Yeah. the uh you know that look at that winter storm Yuri you know that took place what in 2000 2021 um just a tremendous sort of cascading outages I mean some people died but also uh you know industry was shut so the economy really took a huge hit you really can't afford you know that those many outages even no matter how bad um you know weather events might be even if they're even wild from wildfires to hurricanes whatever so that's requiring a lot of spending thing too. So can utilities you know make get this money you know through in you know customer rates earn a a fair return on it? I think um that is very much depends on where in the country they're operating. Now there's some parts of the country that uh you know power prices haven't gone up as much you know uh and you know these are primarily this is another aspect of it these are primarily the states that did not uh deregulate their power sector in the 1990s in in the 1990s 15 states in the District of Columbia uh decided that competition and generation would be a very good thing and that it would drive down pricing and so they basically stripped the generation function from the utilities there. The utilities in the northeast today, for example, in New England, say a company like Eversource that serves Massachusetts and Connecticut, New Hampshire and so on, they're only transmission and distribution companies. They're not producing uh you know, they're not generating any electricity. they're just taking electricity generated elsewhere and and sending it to consumers over a basic charge. Um the states that did that, you know, you would think perhaps competition would have driven down rates, but really what's happened has been kind of u more erratic policy. And you know my opinion after studying this industry for I guess about 40 years now is that what keeps rates low over time is the ability of companies to make investments uh long-term investments. You know not think about you you know feeding the system over the next year. Have a system in place where they can reasonably assume that they can make an investment for the next 10 years. And um you know >> now now by investment it's it's vague. Do you mean like expanding the amount of electricity generation or do you mean like upgrading like to fiber optic cables or better transmission wires? What what do you mean exactly by investing in and um expanding? >> Well, I mean it it pretty much all the above. I mean they've you know because you it all has to go kind of hand inand and now you also have you know diversified energy sources uh and partic of which are uh intermittent fairly fairly pointed out as intermittent such as solar power. you know, it generates a lot of electricity more than ever, right? It's and it's really cheap. It's easy to build these facilities, but you can build them in maybe a fifth the time of a natural gas plant. You can build an equivalent solar array, but it's only going to produce electricity for you in the daytime. You can match it with battery storage. Um, and that can be deployed almost as fast, but it's still not that there are other nuances, right, in in how you use this electricity, how you integrate it with the grid. So that costs money too. You have to do these upgrades on the grid. We had a there was a big power outage in Spain as well as southern France. Um and one of the reasons that seems likely that that was caused is just the fact that um you know the infrastructure connecting that renewable energy to the traditional grid which is used to doing you know base load power that runs 247 except when it's down like you know a coal plant or a nuclear plant you know it now has to run on uh you know these different inputs as well. So that requires that requires a big investment. Um you know the technology is definitely there at this point to make that happen but you know you have to procure it and you've got to install it. So um and that means raising capital and that means whoever you're raising the capital from has to have a reasonable you know expectation of return. So, if you have a a regulatory system in place, and you know, one of the first companies I saw that did this was actually in Hong Kong, a company called CLP Holdings, and they do 10-year investment plans there. It doesn't mean that they don't change those. Uh, you know, there aren't things that happen and they go back and make alterations, but it does allow the company to do some really serious long-term planning. If they say, "Well, we're going to need to replace a nuclear plant, for example." That's a huge project that's probably going to take you 10 years uh to to accomplish given, you know, the the the the the kind of equipment you need, the expertise you need and so on. And you know, if you don't have a reasonable assurance that you can get a return on that, you're not going to one, you're not going to get regulators to approve it, but you're not going to get the investment. But company like CLP Holdings is able to do that. Now in the United States, we are seeing more um companies being given that ability. In Florida, for example, a deal with the leading utility there, Next Era Energy, uh between that's a four-year deal. So not as long perhaps as not 10 years, but certainly a lot of assurance that, you know, for next Energy that these investments that the regulators pre-approved um it's going to earn it's going to earn return on. So >> well well those longerterm plans I would add here Roger here in the United States is the big technology companies. So your Microsofts your metas your Googles those are the Amazons those are the ones who are stepping up and saying we want to make sure that we have reliable base level electricity generation locked in not just for 5 years out we want 10 15 20 years we want to make sure that we have a reliable electricity because we're going to start building out the infrastructure. Now you mentioned data centers. The listeners out there are not familiar. We have the existing data centers which are good for like YouTube and and uh Netflix. So streaming basic internet connection you know your uh smartphones, Wi-Fi, um using internet on those those types of things. But for the next generation data centers, I mean we're talking Elon Musk already built in Tennessee there for XAI the Colossus data center that was a 100,000 Nvidia Blackwell GPUs. He scaled that up over I think under six months. He built the first facility in record time for 100,000 GPUs up to 200,000. Roger. He's talking about like a million GPUs like in the next couple years. And then he's talking about even more than that. And I think Meta's Meta just made you mentioned deregulation. I was going to bring up Enron, but I didn't want to interrupt you. Like Meta is making like Enron type deals. Have you seen the the press releases? Meta wants to guarantee like financial backing all construction cost overruns for the data centers now. Yeah, I think that that's you know going to I mean the more the more of that kind of thing happens uh the more of these things actually do get built. I mean you mentioned um you know Elon Musk's uh data center and that that's in a really interesting place. Um it you know the land the land is fairly cheap around there. It's an old industrial uh uh park actually in my hometown of of of Memphis. It's in a an area that pretty much nobody will ever set foot in. Um there's a Valero refinery there uh pretty nearby within about a mile of it. And um yeah, it's a it's a huge energy challenge. And you know, I think it's a good segue into you know, how's this energy going to be u going to you know, where's it going to come from? Um you know as far as the I mean just to cap off you know what you said about the utilities I think you know from an investor point of view and the way I'm looking at it um some areas of the country are you know they have are giving more assurance of uh there's more assurance of that investment will be u will be earned a return on um and in those states that's where I think most of this action's taking place and I think uh ironically I I think that there'll the least effect on other uh on other rate payers. You know, in states like Texas, I think are pretty attractive for for that. Uh Florida being another one. Um but that's it's really a stateby-state thing. And um uh you know again when when it it does tend to work if if companies are allowed a return on their investment um they'll build more and then of course supply and demand kicks in right because the more uh the more upgrades are made to grids the more you know generation is in place uh the more supply the more the price comes down. So um ultimately I think that's if we encourage investment that's what will happen. Um where it won't happen is if uh when things happen where the government may discourage investment or the economic environment discourages investment or state regulators discourage it you know it's those are those are trouble spots and if you do get I think I do think that companies like Meta and so forth they are smart enough to see that trouble coming and I think that's why they're you see most most of these places most of these things located in actually favorable in regulatory environments that are favorable for utility investment um is and other parts of the country being left out but okay got let's let's get on with the other part of this right >> well I I was going to bring up how those data centers that are being planned or under construction a lot of them aren't even online yet like the Stargate one I think like is not even online yet that's the one out in the middle of nowhere in Texas but it's near all the natural gas fields so it looks like the majority of these data centers now, not here in Northern Virginia cuz we're the data center capital of the world right now in the DC metro area in Northern Virginia, but the other data centers that are under construction. Looks like the tech companies are all trying to build them what out in the middle of nowhere in the Midwest. Maybe it's cooler out there. They're trying to make sure that it's near a nuclear power plant or near like an existing lowcost natural gas supply. So then maybe they they just have to build a pipeline in a separate what sub sector um electrical substation there separate um power station there just for the data center. >> Yeah. Absolutely. I mean you know gas is huge. I mean a lot of what is the most what what is basically powering our electric system today? It's natural gas. I mean at at 40 and close 40 40 45% even higher um in in some areas of of the country. And that is also a a big variable for electricity prices, right? If yeah, because it's such an important part of generation, if the price of gas goes up, um then the cost of that electricity powering that data center is going to go up. So I think that's a real challenge for I think a lot of these data centers going forward. Where do they uh you know, and these big tech companies? I mean how much are they willing to um you know leave in play in terms of of fuel cost? How much you know margin compression will take place if say the price of natural gas goes from you know around $3 where it is now $3 per million BTU say it goes to $5. What does that do to their margins? And traditionally it's been a huge uh drag on you know the the data centers you were talking about before. These aren't the these are the traditional >> data centers not the ones that now you know have these sophisticated um you know >> 100 or more Yeah. GPUs. Yes. And then like insane cooling systems. And I mean they're talking like Roger they're talking about way more than 200,000 GPUs per day center. I mean, I've heard clusters people talk about theoretically with the new uh designs getting up to a million or more GPUs at a data center campus. It's like it's nuts. >> Yeah. Well, so you know, one avenue and we've seen this happen uh and there's three of them that are that were closed in uh and and you know, in the last 10 years and are coming back are older nuclear power plants, you know, that have been shut that were taken offline. you know, nuclear hasn't been competitive with gas uh for quite some time and u back from I guess 2011 certainly didn't help uh anybody that was you know thinking about building a new nuclear plant. In fact, finally at the end of the day just uh just two reactors have built the Southern Company ones in in Georgia. Um but >> you're talking about Fukushima for our listeners out there. Roger 2011 he's talking about the Fukushima Dichi plant. So that was a bare market that because uranium was in a bull market prior to the Fukushima disaster and then uranium and nuclear power went into a bare market for like eight or nine years. But it looks like we're finally having what a nuclear renaissance now as these tech companies and China are basically scrambling to um either expand existing nuclear power plants or restart the older ones like Roger was saying what they're restarting the old 3M island. And I think they rebranded something else. But pretty much all the tech companies, whether it's Microsoft, Amazon, Meta, Google, they're all trying to negotiate with existing nuclear power plants cuz there's permits in place, I think, to expand the existing ones. >> Yeah. So there's, you know, I started there's three of them now that uh appear to be u, you know, in good shape to restart. And there's one in in Michigan, the Palisades. There's one in uh Pennsylvania that's already pretty much locked up uh by by a big tech company. you know, the the the output. And now there's Next Era Energy is restarting um a plant in in Iowa. So that which they're also trying to get that contracted. Um you know, depending on what you read, uh the other the remaining plants that were shut down in the last 10 years, you know, for economic reasons, they just couldn't compete with gas. um those are uh it's sort of up in the air what which ones of those could be restarted but that is a there's a big effort going on there and there's at least a dozen plants that I count that uh would fall into that category you know plants that were supposed to keep running for a much longer period of time and instead were shut because just just building and and operating a natural gas plant was so much cheaper. Um you know I should explain I guess I should say what is so great about nuclear power? Why all these why are all these tech why do they want uh you know to to reopen these old plants or uh you know and and so if gas is so much more so much less expensive. Um and the reason is simply that they just they run all the time first off uh you know except for outages but we have learned how uh the the the operators of nuclear plants have learned in the last 20 years with a dramatic improvement in operating rates. These nuclear plants used to run 60 65% of their name plate capacity and now they run routinely 90 95 even higher. Uh so that's a huge difference and you know one reason they've been able to do that is because there's been consolidation of ownership. So lessons at one plant you know if one if one plant a company operates is having a problem and the problem's identified it can then at the next refueling outage fix that problem before it becomes a reason to shut the plant down you know off schedule. And so they you know that type of thing has been dramatically cut down. The operating rates are are are great. So as a result, you know, um, you know, it's very reliable energy. And then, uh, you know, number three, it's not, you know, uranium and or whatever your basic fuel is, um, you know, the the the cost cycle is much less volatile than oil and gas. So, you know, you can pretty much get a contract with a company, uh, reopen the plant, and then, you know, you're golden. You can pretty much count on that cost. Uh you can also count on the federal government to subsidize uh you know the Duke Energy for example uh collected about or took tax credits of about $550 million LA um last year just for operating its nuclear plants. Now, it has a lot of nuclear plants, but uh there are very those are very generous uh tax credits and they're available for any company that's reopening a plant as well as company that companies that continue to to operate. So, a lot of economic advantages. You can really lock things in. >> Is Duke the largest operator of nuclear power plants in the US or is it like Constellation or Dominion? >> Constellation is Yeah, large. Constellation has I think 23 operating plants uh which is about twice as many as Duke. So, um, they haven't broken down, uh, lately what exactly their savings rate is, but, uh, it's it's considerably more. And then there's also what are called zero emission credits in in many states, uh, particularly in the Northeast, states like New York, New Jersey, um, Illinois, and these are state uh, tax credits. So, um, you know, that those they're the nuclear industry is being very much helped out right now. So I think that's one reason it's it it's very attractive. I I mean I think the real problem that tech companies have and you know is it is there's no real commercial design for uh either that's you know that's econom that's at least been economic relative to gas. Um whether it's a large scale reactor or an SMR or small scale reactor. Certainly a lot of money going into trying to develop one. Um, and I I do think that uh some yeah, somebody's going to um and I think >> we're at the pilot plant. We're at the pilot plant stage, right? So there are small there I think they're going to start bringing online what small pilot plants in Texas for small modular reactors. I think I saw Wyoming or Montana somewhere in the Dakotas and Midwest. So there's a handful in the United States and a good amount in Europe. They're bring and I think in in England and the United Kingdom. So they're bringing online these next generation nuclear ones, these smaller module reactors. But there it's not at a full scale like you said to where it can handle the electricity for uh a giant data center like Elon Mus the Colossus one or can run the power for all the city. It's just we're at the pilot plant stage right now. >> Yeah, absolutely. And you know, if you listen to the industry people, they're going to tell you that, yeah, this is something that we're really interested in and we're going to commit resources to, but we're really not expecting new nuclear to really have a significant impact on, you know, our power stack until possibly the middle of the of the next decade, possibly even even longer. I mean and you know there nuclear power is uh you know widely considered to be probably the riskiest investment you can make as a power producer because you know just for one reason mainly it's that you know these projects take a long time even if you did streamline the regulatory process um and you know the administration's trying to do that now um >> well China can build China can build a nuclear power plant what in five under five years or less But the United States, it takes way way longer. >> Yeah, it takes longer. I mean, and I'm kind of two minds on this. I mean, I obviously there are things that you can do to, you know, cut through red tape and and, you know, that isn't doing anybody any good. But you can't really argue with the fact that, you know, the the US nuclear system in the last 30 years, um, you know, has really, you know, an impeccable record for safety. um you know they have focused the NRC is really focused on you know issues that you know can go wrong and in danger and so on and I think that's you have to credit that at least partly for u the fact that there is no incentive really to cheat there's every incentive to you know learn what you're doing and run these plants at faster rates but um you know if there is a threemile island or some sort of accident. Um there's a widespread recognition that that could really shut everything down even more and poss I mean we forget that just a you know what a decade ago you had a lot of people that were trying to shut down uh well really 5 years ago even I mean when Indian Point that was shut in in New York that was shut uh just earlier this decade because and as a result of a long opposition campaign that finally re definitely resonated with the public and so as a result they shut down this plant that was I don't know 25% of New York's power and it was replaced by um you know fossil fuel power you know Europe was even worse I mean like before the pandemic I think like Germany and other European Union countries the United Kingdom I mean they were talking about shutting down all of their nuclear power plants but then they had natural ga oil and natural gas drilling bans in a lot of the European Union Their energy policies just didn't make sense. They overinvested into wind and solar. Inefficient. You brought up an important point though here in the United States. It's just ridiculous. It's extremely inefficient and very costly to break to build a new nuclear power plant from scratch. I think what it costs like another 8 billion and it took like 7 to 10 more years to build that Georgia power plant. It was way over budget for the construction time. So, if you're an investor, you're a utility company or you're a big tech company making the investment with the with the utility company. I mean, like, if you're going to wait another seven years and it's going to cost you another8 billion for your nuclear power, I mean, that's you're not going to stand for that. >> Well, yeah. I mean, that that is what happened to the Vogal reactors in Georgia and why they were so far over budget. And it didn't hurt the company because they had a a deal in place with the regulator. Um, it didn't, you know, but even Southern and Southern's a huge company, right? But it it still had um you know the tremendous cost overruns that it had to eat. So he you he talks to the CEO there and he's going to say well you know we love this plant. It's great. It's a great machine and it's going to produce a lot of lowcost power without you know emissions you know um and uh but are we going to build another one? um pro you know not anytime nine anytime s you know and you know another point here is that you know why is it so expensive to build here in the United States I mean it's sure regulation is more regulation is part of it um but it's also kind of a chicken and egg thing because we just don't have the supply chains in place you know even we don't even have the supply chains in place for natural gas turbines which is why you hear companies talking about you know 5 to sevenyear window for ordering a new major, you know, base load natural gas plant because you just don't have the the production lines in place as you do in China. So, China has building nuclear plants a a very a very developed um you know, supply chain uh from you know engineers, labor, uh you know, materials, uh you know, all these various things that we don't have here because we we've only built two reactors. um you know in the last uh uh 40 years. So um you know that is also something that's very like that that's going to have to change before we can really see a whole lot of new um you know demand met by these nuclear plants. It's why these you know reopening these nuclear plants is such an intriguing idea and why so many companies are really trying to push these util you know the owners of these plants to do that. Um because it that's just a lot you know you can do that you have the site you have the connections the transmission going in you know uh you you may have workers around that you can pull out um pull back as well um so >> but also the biggest bottleneck um the so the average person Roger we were talking about this before we start recording you pull out on your phone chat GPT what you don't understand is that on the back end the servers is using way more electricity the tech companies are figuring this out the hard way that they have to have the infrastructure in place with the data centers, the reliable electricity before they can continue to build the data center. So, a lot of these data centers that we're talking about for the future, the next generation ones, most of them aren't even finished yet. Some of them haven't even started construction. They're um what these tech companies are looking to do first, Roger, is they're trying to put it in a location to where they get reliable electricity supply first. AB: >> Absolutely. I mean, that's that's got to be, you know, your number one uh priority if you're looking >> or you've built a white elephant. Yeah. Or you've built a white elephant. You built the data center in the middle of nowhere and you don't have the infrastructure and the electricity to bring the data center online. >> Yeah. Well, so you know, like you know, we talked about Elon Musk and that and and his mega center. Um you know, that's a that's an area of the country where you know, you can build infrastructure uh there there and there's available energy. So, um, you know, he may not want to run that facility on, uh, you know, natural gas forever, but at least it's a it's something that he can do and prices are still fairly low. You know, and gas is, you know, in Texas, you know, the the Peran Basin, um, you know, up until recently, they've been basically flaring gas to get the oil out. You know, the gas that occur associated gas that occurs with the oil. That's a lot of gas uh that now you see companies building, you know, gathering infrastructure, processing infrastructure, pipelines, storage facilities, and so forth. That's a lot of gas that can be uh that can be tapped. But it and it's one reason why Texas >> you could send you could you could send that that natural gas via pipeline. You could send that down to a liquify natural gas export facility with Chenier, one of the other ones in Texas or Louisiana. Or you could put it to the data center to the Colossus uh not Colossus, the Stargate one that uh OpenAI and Oracle and some of the other tech companies are building in Texas. So there's going to be more options to divert the gas into somewhere it's actually needed instead of flaring off like Roger said. So it'll be used efficiently then. >> Yeah, absolutely. I think you know and that's again what companies have to uh take into consideration but it's a huge opportunity for um anybody up and down the natural gas value chain u and you know there I don't think you know obviously not every state is pro- natural gas and there are some places where you're just not going to be able to build a pipeline I you know no matter how much the federal government may >> Yeah New York Massachusetts Yeah. Mo most of California and most of the Northeast. Yeah. >> Yeah. I mean, and places like Texas don't have that problem. So, I mean, they are going to get the business and they're going to build their infrastructure and by and you know, I you know, I don't think there'll be that much. I think the net economic benefit at least if you even if you don't factor that in I don't think there's going to be a tremendous impact on on the consumer because again they're they're they're you know they're they're able they're going to be able to do that at least in the near term without really creating a massive um you know bill shock uh you know or rate shock for for consumers. other places not so much, right? I mean, u and and it's going to be more difficult to to get that stuff through. And that's as an investor, I mean, that's that's something I really watch closely. What's going on in these rate cases? How much are they asking for? And you know, what how much are they getting? Um >> so, so far then, Roger, sorry to interrupt you. So so far if I could summarize uh you would say then that the utility companies that you covered none of them have had any difficulty passing along price increases. So that CPI number the utility companies are saying our costs are going up we have to pass on cost to the businesses and the consumers. Uh there's no huge problems across the board industrywide yet with cost with margin compression or input costs. Well, no, not so far, right? But I mean, there are signs of of trouble in some places that I think are are important to keep an eye on, you know, in terms of and when I say signs of trouble, it's basically, yeah, how much are if they're pushing through, you know, really big trying to push through really big rate increases, whether they're successful or not, um, you know, odds are they're going to take a big haircut on that. um and you know and and they're not going to get everything they want. In other words, >> are you seeing that like it's the is it like small business and regular consumers like families that are fighting back? Because I mean if you're Google or Microsoft paying a little bit more for secure supply, I don't really see it as a big issue. Now I I think we could see some cut back in capital expenditure for some of these tech companies on some of the budgets for data centers, but they seem like really really committed to it. I I know a lot of people have been saying >> I I know a lot of people have been saying that like oh their capex budget is about to be slashed. I mean I've heard that for over 12 months >> that like they're calling it top that like Meta is done, Google's done. They're going to cut all their budget for spending on capex for data centers and stuff like that. But I thought they already spent a lot of it and those data centers are just waiting online to start construction. >> Yeah, I think that's I think that's right. I mean that we've been hearing people, you know, kind of saying, well, you know, it's a it's a big bust. you know these app no one has demand for these applications and so on they're not going to spend they're not going to make the or but everything it it's it's it's it's 180 degrees from that on the ground I mean you even see new you know a lot of companies talking you know really increasing their you know all and all around the country they're increasing their the backlog >> I I had a friend who's a computer programmer in tech and he was comparing this to the '9s build out with like fiber optics and those data centers those were smaller scale but he's basically saying cuz I see all the, you know, the the uh the charts up saying that like only about $18 billion a year in profits from artificial intelligence so far. Well, they're building out the infrastructure first. So, they're figuring out how to use it. They're upgrading the software. The costs are coming down. There uh other businesses and other industries are applying the software. It's very similar to that. Well, at first, right, with all the websites and the eyeballs, there was the tech bubble crash, right? And then after the tech bubble crash and all those tech stocks crashed, then out of it came what a profitable Amazon, profitable Google, profitable profitable Meta. >> Oh yeah. The the the you know the the best of the biggest you know came to dominate and the industry they changed the world forever but I mean you you you you did go through a tough period I guess in the in the stock market. I I one more point I just wanted to make about the utilities though. I mean cuz we're talking about you know are they is there like a trouble spot coming and that is that um you know they basically are building to to demand these days. You know back in the 70s and and 60s and 70s when they were you know when all the the giant coal plants nuclear plants were built companies would basically build and then ask for you know regulators to approve what they'd spent. Nowadays, um, the companies, you know, submit their plans and they don't really don't turn a spade full of earth until, uh, it's signed off on. So, they're taking far less, uh, financial risk now than they were back in that day. Now, there's there examples where that, you know, that may not be the case. I mean, at at some point, but that is >> that is what we're seeing. I mean, especially if the tech company especially if the tech companies are saying, "Look, we're starting construction right away on this data center. Here's like a couple billion dollars to go upgrade your your uh power station or we want a new power station, a substation built right next to our data center like Stargate AI." So, I mean, if the the tech companies are going to do that, it looks like smart partnerships, things are being done more efficiently for the infrastructure, which hasn't been uh been done in the US in a long time. Yeah, I I think that's a a hopeful way of looking at I I do think that that is how things will evolve and you know there are some you know there will be some trouble spots there will be some you know some states that u where you know white elephants as you as you say will uh will be built and and probably never used but um I think for the most part it's you know from what I see and you know just utility capital spending um you know pretty much it it's all companies the the EEI the Edison Electric Institute which is the primary trade group puts together information and projections on what utility capex is going to be capital spending and they're routinely what util and it's just based on what utilities tell them it they're you know just chronically um underestimating what is actually spent and you see almost every time guidance is updated by these companies um you know another increase in what they what they expect to spend. So >> well I have the capex for the tech companies Roger the six largest one it's around $300 billion that was projected for 2025 and that's not counting Europe it's not counting China it's not counting those tech companies that are building data centers and building out the artificial intelligence infrastructure so they're going to need reliable um basal electricity generation and pipelines and nuclear power plants and stuff too. So, I mean it's it's absolutely massive going forward. Do do you expect then would would it be fair to say that the electrical utilities then have some of the most stable long-term growth you see of any industry right now? >> Yeah, I think so. I I think um you know it could be faster particularly if uh if interest rates should come back down again. I mean if uh if the Fed starts um uh uh you know reducing rates and it's not taken as uh you know cowtowing say or bowing to political pressure if it's seen as you know a prudent move to um you know reduce the cost of capital at time when the labor market's softening even though there's more inflation out there than than they'd like. Um if it's seen that way then I think borrowing costs come down for these companies and they they could potentially grow even faster. Um right now that is a big you know question mark what's going on you know what's happening with with borrowing costs and they have come down a little bit but um you know the more these the more borrowing costs go up um that's also another driver of of customer rates because that's cost of capital is one of the things that it's not a perfect relationship but it it does factor into rates in terms of return on equity that companies are allowed If if borrowing costs go up, the return on equity is going to go up simply because you know the utilities won't be able to raise capital otherwise. So >> are these utility companies are they like refinancing a lot of debt often or are they are they issuing like longer term duration corporate debt say like 10 year 20 or 30 year bonds and then if interest rates come down do they refinance? How do how do these companies usually uh capitalize themselves and finance themselves? Well, you know, back in the early part of this decade, uh, interest rates were very low, so you saw a lot of refinancing activity. And I think that's definitely helped them, uh, and not not have to issue a whole lot of debt the last several years. But you have also seen, you know, increases in interest expense pretty much across the board with every company. These have kind of moderated the last year and a half or so because you know you know the bar the well the Fed funds rates come down interest rates themselves have have kind of moderated a little bit so that's been a plus um and you do see bursts of financing activity uh refinancing mainly um uh you know but of course these companies have to borrow in order to build right the capitalization is going to be partly equity finance partly debt finance enhanced on a typical basis. So, um that's you know they're they're >> unless like Meta comes in and is guaranteeing everything like Enron. I mean that's kind of the new uh addition here to the picture cuz what you mentioned was the past. But if Meta is going to come in and they're going to take all their free cash flow, their profits or a lot of large chunk of it from Instagram and they're going to subsidize the build out of this data center and they're going to what give the utility company cuz they want a new nuclear power plant or an expansion of a natural gas one. They're going to give them what? A subsidized loan at a low cost or maybe just throw in some cash, no debt. >> Yeah. >> And um then it's a different financing picture. >> Well, yeah. I mean it's all it's all about you know having the money having the capital and where where it's going to come from and you know it's all for the utilities it's and and other power producers uh like constellation for example you know it's it's what's in the contract so right now and then and this is another good point I mean right now uh what you hear from from the power producers is that they're able to pass through you know additional costs u in into contracts and they've been able to pass through additional cost of um of from higher interest rates, from various inflationary factors like you know labor cost and so forth. The the impact of tariffs um you know as well um on on things like imported steel or even you know components u you know gas turbines or um uh solar components that are imported from other countries. They're a right now they're pretty confident if you listening in on the guidance calls they're pretty confident that they can push through these costs even so even the loss of of of tax credits which is going to happen in uh for wind and solar at the end of 2027. It's they're extended for energy storage. They're extended for nuclear energy and uh and for geothermal. for these areas where all this money's been going in to uh increase um you know output in large part because you can just build it so much faster. Um but costs have come down, efficiency has gone up, but you know uh they're saying well we can even build these things and you know absorb uh the you know the loss of the tax credits and keep our margins high. So it's a it's a very high demand environment and demand growth environment and um you know it's a it with the with the uh you know the data the big tech companies have the cash like you like you've said uh they definitely have the motivation because they want to they want to win this uh AI race they want they want their products they want their processes to be you know to be dominant. So um you know they're there willing to willing to spend all this money they're making and um you know their stock prices are historically valued now. Um so you know even equity finance is a is an easy thing for these companies. Uh you know it's um I I think it's I think you definitely have all the elements there to keep this going for a while. I mean there are obviously things that can happen to to you know kind of throw things off the rails but uh you know one would be perhaps a a crash in the stock market you know a real big dislocation in the capital markets in general um and uh you know that would make things more difficult but >> uh so so um since we're going a little off tangent here and covering the tech companies and I want to go back to your focus here since you're an electrical uh newsletter writer for many years for electrical utility companies. I know you've covered these companies for many many years. Are we are we at towards kind of the uh high end of the range here for profit margins for these electrical utility companies? Uh free cash flow margins uh growth potential. Are we like in a real sweet spot for the companies that you cover? I think, you know, if you look at because all these companies now are talking about we're going to grow our earnings and dividends, you know, 5 to 7% a year or 6 to 8% a year, some 7 to 9% a year. I think those are generally conservatively set. Um so, but they're the stocks really aren't priced for that kind of growth. So, yeah, I would say um you know, they're probably undervalued for what the opportunity that they have. that has another uh good benefit as well and that is that you know if for some reason you know things you know go you know aren't as aren't as rosy and they don't grow as fast um unlike the tech companies they're those valuations aren't baked in and that same is true for you know gas pipelines and gas producers they again by not reflecting the full uh potential of this opportunity they're um not as vulnerable if it doesn't all materialize the way everybody hopes it will. >> Yeah. Because I'm looking at the natural gas price here. Natural gas price is in a huge correction mode. What the last 6 to8 months it it went down what to $2.30 $2.40 at one point. You would think that the lower natural gas price would translate to better profit margins for some of these electrical utility companies. But then we saw the consumer price index spike with electricity. So you were saying that a lot of it's because of the demand increases for reshoring with the manufacturing but also a lot of it's because of the data center build out then the next generation ones. >> Yeah. And and you know those ga that gas price decrease actually you know that will show up probably a little bit further down the road. So that is that would be a positive. um you know the the the lower prices that we've seen in gas from April through uh really just up until you know the last few trading days when gas went back over $3. But that's all going to Yeah. I mean that will benefit um that that is actually though the fuel costs are a direct pass through. So that would benefit the utilities in terms of rate headroom investment headroom in that you know the actual cost of the consumer will come down as there fewer gas fuel cost passroughs. um it will not directly affect the utility profit margin but again it means they can probably invest more um and that component of the customer rate can go up more if the price of gas is coming down. you know, this was a really virtu a real virtuous cycle. Uh it's been a real virtuous cycle for long periods in in the last decade or so where you've seen, you know, utilities able to actually cut their rates even as they were investing more. Um and that was a lot on this on the back of low gas prices to some extent. We're still f filtering through, you know, what happened with winter storm Yuri in 2021. Um you know, when gas prices really spiked. I mean you went from two or three dollars to like 10 12 and utilities really could not pass that through to the consumer all at once. So what happened in a lot of states uh for for gas utilities but electric utilities too is you saw these costs being sec what are securitized. So um basically they took the cost they turned it into a bond and issued the bond and the bond to be paid off by rateayers uh as a search charge over time. So >> is that like a municipal bond then or something like that? >> Yeah they're low cost it's lowcost debt right and you know it's it is t you know this case tax advantaged um and so that's an advantage in terms of what the interest rate is and what the consumer has to pay. But yeah, the idea being that yeah, the utilities are made whole because they get the cash from the bond issue. Uh that pays for the the fuel cost and the consumer doesn't bear the full uh burden all at once. So this is actually a a um you're seeing a legislation in many states uh to to make this a regular thing, you know, which would cover spikes in commodity prices or fuel costs. It would cover um you know other onetime events such as the impact of a really devastating hurricane or or wildfire. Um and um that's yeah it's a that I think you're going to see more and more of that um going forward. They don't they also tend to have they don't tend to get to provoke a whole lot of you know customer um opposition because again it's a it's no one wants to you know utility to eat all the storm cost you know and and there therefore be unable to make other investment but nobody wants to pay a full-on you know high rate either. So this >> but no one wants their power out either. So everyone's connected. What that's one thing you brought up at the beginning of the interview is how electrified everything in it is. I mean everyone in their house now has like >> they have streaming, they have internet access, they have tablets, they have smartphones. So I mean like everyone's on uh Netflix or one of the other streaming platforms or they're using internet on their smart TV. >> All hell breaks loose when the power goes out, right? I mean we just don't we don't expect it. And you know and many of us uh even if you're going to an office, you're probably going to be taking some of your work home. Um, and uh, you know, you you can't Yeah, you have to be prepared. Yeah, it's um, you know, it's it's it's not a great thing. So, yeah, I'd say >> especially how young adults all want to be streamers on YouTube or other uh, live stream platforms now. Yeah, it's just getting absolutely ridiculous. So, as we wrap up here, Roger, one more question since I get asked this. Data center capital of the world in the United States, too. Data center capital of the United States. Data center capital of the world. Northern Virginia right now. by far the most data centers concentrated here. Yes. In not only the United States, in the entire world here uh for military, for the US federal government, for the tech companies that are moving out here. When I ask you about Dominion Energy, um do they have the most growth? Do you think their stock is the most overvalued? Because if if I was like a, you know, a generalist institutional investor managing money, I mean, I would probably just buy stock of Dominion to get exposure to this data center play. Is that what most of the regular generalist investors are doing? I don't think so at this point. I think actually Dominion is probably uh fairly cheaply valued and you know that sort of just is part of what's happened to this company. So um they they owned a lot of uh natural gas infrastructure uh in in the previous decade. Uh they have exited that. Um they took on they wound up but but by virtue of being pretty acquisitive uh they took on a lot of debt. So that was one problem. They also um you know when when a a state changes one of the things I'd really look at around election time is when does a state change you know political parties political control because particularly today you know energy is so politicized and everybody's got their own opinion and governments are trying to do you know they they tend to interfere more with the private sector than they have in the past. So in the state of Virginia we had a Republican governor. We had a Democratic governor in the previous decade that was very pro uh you know renewable energy spending. So what is you know Dominions comes up has a plan. It's approved they're investing pretty heavily in a lot of things. The main project being you know coastal Virginia uh offshore wind facility and um that's a the biggest offshore wind facility in the world when it's completed it's 2.6 gawatt. So, you know, they're building big because they have a lot of data center demand. That's a huge reason for them, particularly in Northern Virginia. So, that's a that became a big piece of it. But when uh you know, Governor Yncan was elected in 2021, um there was a completely different sort of empas focus. So, they kind of went through that. The bottom line is they have had a kind of a restructuring, not really restructuring, but kind of a a strategic plan that's required them to be more conservative. It's required them to really execute on the capital spending, the heavy capital spending they've been doing, and it's required them to stay uh very connected with the regulators because then, you know, two years later, there was another swing in the Virginia legislature and now we have an election coming up. So, uh, this year for for governor, so they've really had to kind of with because of their heavy capital needs, they've had to really do a lot of work to stay on, you know, on on the right page, I guess, with with the government and the state. So, that's all weighed on their valuation. So, I I do think that they have tremendous potential from here because precise precisely because of that big capital plan and because of all the data center. Uh but that kind of it does kind of demonstrate the other side of the equation for a utility, right? It's spending and investment plus regulatory support equals, you know, re strong earnings and and divid and ultimately dividend growth down the road. But if you take out one part of that equation, you're not going to have that robust uh earnings and dividend growth. And I think that is still a concern for investors. not as much of one as, you know, a couple years ago, but certainly something people are watching very carefully when they look at at Dominion Energy as as as a stock and as an investment. Again, I think once they get this uh facility built, they're also building a lot of gas um once we get this next election behind. So, we see like who they have to kind of plate or, you know, whose policies do they have to kind of move along with. Um, you know, once all that's behind them, I do think we're going to see that stock at a much higher price. I I think we'll see a lot more interest in it. But, yeah, it's kind of ironic um that here you have the company that is the biggest beneficiary of this boom. There's so much more ahead for it. I I think something like 40 data center uh order contracts that are in various processes of you know of being you know of of um of completion. >> Yeah. I'm not sure I'm not sure the construction timelines on some of them but like we were discussing this over the last like 6 to 12 months. I mean, the land deals, I don't know if you've seen some of them, like uh Amazon and Microsoft. I mean, they're paying over $100 million to buy packages of forest land, uh 30, 60, 90 minutes right outside of Washington DC in Northern Virginia and DC metro area. They're paying way over hund00 million and Amazon's talking about building entire campuses of data center. Microsoft is talking about it. Mark Zuckerberg just bought a mansion here in the DC metro. >> Yeah. Yeah. Yeah. Yeah. I mean, this is where you want to locate. I mean obviously it's where the it's the critical mass of the sector. You can build in you know other parts of the country and you know there's a company I I follow MDU Resources that's in in the Dakotas and and so on and you know they're just one data center out there that's now um in operation. There's another one under construction. They're going to be at taking about 10% of their demand within the next 5 years. So that's a phenomenal growth story for this company, but it's very small and we're talking about a a huge big deal. It's like that, you know, it's sort of like that u, you know, it's just a lot of a lot of leverage. But for Dominion really, it this is uh, you know, it's at it's at the epicenter. and you know state of Virginia you know even though there has been back and forth in terms of uh political control it does it has been it is a very businessfriendly state and uh you know I think uh it you know Dominion does I think will come out on the on the right side of it but it is it is a I think a stock where it's just going to this is going to happen over the next year or so rather than right away uh >> do they have the most upside then with growth potential over the next 5 or 10 years, but it sounds like there's a lot of potential whatifs then. So like how Yeah. So So like there's the large tech companies are spending buying all these land packages out here. I know Meta is spending money all over the United States, but like the a lot of the investment is just concentrated in this area by the tech companies. So you're saying that Dominion potentially long-term they have the most growth from the data center buildout. >> Yeah, I think so. And I, you know, another point that I that just occurred to me from what you said, I mean, with these, you know, big companies moving in, that's a powerful constituency for, uh, you know, supporting Dominion's investment in the states. So, that's that's pretty huge, too. I mean, you know, these governments don't o don't uh, you know, operate in a vacuum and >> Well, yeah. Look at the tax breaks that Amazon got on their new headquarters in Crystal City. >> Yeah. Yeah. Absolutely. So there. Yeah, I do think it I it is a stock I own. It is stock I recommend. Um uh but like you said, the reason that you know the the reason that it's uh not fully pricing in all this really great news as other stocks are constellation for example or uh you know being a good example. I mean the reason is is there are a lot of whatifs and um I can sit here and tell you that what I think is going to happen and what you know what should happen but you know when things graduate to the political realm uh you know it doesn't always work out that way. So >> well there's a there's a huge amount of backlash by protesters here. I mean cuz like they put some of the data centers that were either recently built smaller ones or ones that are existing. I mean they're near residential areas now. So that's really destroying property values and now there's a ton of protest over that too. >> Yeah. I I wasn't you know yeah I guess it does you know locating an industrial facility near you know residential properties. Um, you know, I think, you know, eventually I don't I mean, I guess that I guess you could I think you could also make the case that long-term it actually enhances property value because, you know, just on the basis of the fact that you're not likely to have power outages, you know, um, or you're less likely. But, >> uh, that's only part of it. I mean, like the there's, uh, you know, emissions there. There's the noise. I mean, some of the people around the data centers. I mean, there's I was reading some of the counter arguments here with some of the local Fairfax County paper articles. I mean, they were talking about the noise for the residents living around there that it's like discerning their property value, they can't sleep. Uh, I I know like I think I think Google tried to buy like an entire neighborhood out in Lowden County or it was Ashurn or Lowden County >> and they tried they offered there was town houses there that were worth maybe like 1.1 million and they they said if everyone in all these streets agreed to a buyout price of $4 million that they would just buy all the town houses and demolish them cuz they wanted all the land to build the day center campus. But they couldn't get every single person to sign off on the deal to agree to sell their town houses for four million. So the deal didn't go through. >> Well, yeah. I mean, that's politics, I suppose. I mean, that seems kind of crazy, but yes, just spending that >> that kind of money. I mean, it's a very good example of just how much money we're talking about here. It's a huge >> Oh, yeah. Nine figure land. The the average listener doesn't understand this. They track these land deals on local Northern Virginia business journals, but also like data center dynamics and some of the other data center websites and a lot of the those data center websites are headquartered here. So like the tech companies are just buying up land like an insane amount and now they're what they're building smaller data centers in the Midwest. So they're building ones here and there, but the majority of the campusized ones they want to put near natural gas or in Northern Virginia. >> Yeah, absolutely. I I think that's you know you have and again you have the most profitable companies arguably in the history of the world spending willing to spend more money than anyone's ever spent to make this happen and you know the government you know the federal government's behind it states are behind it um I think you know they're like you say and not everybody's behind it but not everybody supports it but it's uh uh >> the the majority the current administrations a lot of them are behind it under certain conditions maybe, but we'll see. I mean, things can change depending upon how the elections go or maybe they force the data centers to only have wind and solar, but then they might not be as reliable. I think wind and solar are good to complement the other uh natural gas or nuclear power at the data center. >> Yeah, they're cheap to build, but you know, there are limitations, right? I mean the the the arguments that you can just go 100% wind or solar that you see that was sort of the original energy politics I guess but I mean that's you talk to anybody that you know they're that's you know we're not there at this at this point. >> Well yeah talk to Elon Musk Elon Musk is huge on solar power what he has uh for he has solar city that company but he's huge on solar power and even he said that it's not ready to supply like the data centers he wants to build. Yeah, it's it, you know, it's it's quick. It's quick to build. It's way more efficient and cheaper than it was 10 years ago. But right, there there are limitations. I mean, even if you >> Well, it can't handle a 200,000 um chip GPU Nvidia Blackwall one that needs to be super cooled, right? Cuz the amount of like heat and electricity it's using for the cooling system and electricity is absolutely insane. It can solar can't handle that. >> Yeah. Not not alone anyway. Yeah. I I think I think you know the idea is you just build as much as you can I think and that's what most that's what that's what is actually going to wind up uh happening but um >> agreed cuz solar will keep improving the panels are improving so China is building out what enormous amounts of solar panels uh way more than any other country although I think India is like catching up pretty quick with the amount of silver they're importing for industrial purposes but yeah solar panel technology will improve the modular nuclear reactor. So, those are like um we're we're not there yet. So, probably like 5 or 10 years from now, we're still at the, you know, concept stage where we're building. They're just going to start bringing online these pilot plants for the next generation ones. >> And that's actually one area that, you know, I mean, not to get off subject, but that's one area to um you know, where I'm I'm a little bit worried about from an investment standpoint is you know, all the excitement that's gone into nuclear. really does remind me of uh the green bubble which four years ago I mean it's been deflating ever since right and so many companies you know so much gets priced I mean you know and and solar and wind have gone to be to become from just fringe sources to you know a mainstream source over >> are you talking about like a are you talking about like the speculative nuclear company like Ollo so like that's the one that Sam Alman is backing and I think like Bill Gates has won terror power so I don't think they have revenue yet? >> No, they're they're not likely to have any for some time. I mean, they're heavily dependent on subsidy and they may maybe everything works out, but I mean people are they seem to be priced right now as though, you know, they're already making money and we the same thing was true of a lot of those, you know, green companies that some of them are have are no longer exist, right? Uh many but and some of them have have continued to make money. uh and some of them made a lot of money and you know their products have have really taken off but they their stocks reached such a high level back in you know early 2021 really a lot of it before Joe Biden actually entered office um and that it was you know it was all priced in and much more and then when people got started saying hey where you know where's uh you know why isn't this immediately happening you know why is this price so high um you you saw a pretty some pretty nasty carnage uh in that sector. So, >> well, there was trillions of dollars of waste, fraud, corruption, and abuse, tens of billions of dollars stolen from the EPA and the Department of Energy. I mean, I've it's happened to in the Republican administrations in the past with their projects. I mean, I I remember Roger, you were here too in Northern Virginia. I remember when George W. Bush and Cheney were subsidizing with corn ethanol the farmers in Iowa. That was a dumb project, too. Wasteful and and inefficient. that was the food supply and they were using it for corn ethanol and then forcing it onto people's uh internal combustion engines and corn ethanol ruins the gas the gas tank faster. Uh >> yeah, there's nothing like uh nothing like, you know, unlimited subsidy, you know, to just bring out the greed in people and and and bad, frankly, bad decisions. U and uh >> it was worse than that, my friend. It was a it was uh I call it ESG energy spending grift. It was charity fraud. I mean, some of the stories we're hearing that like literally over $10 million from a lot of people who had no technology background or engineering background, no science background were setting up uh fake climate change charities and were stealing funds. So >> that's yeah lot yeah again lot of a big pool of money and that that's what's always going to uh what's always going to result um you know uh and as an investor I think you really have to be careful to to separate what you know the separate what's actually making economic sense and the company's actually making money you know uh in the here and now. >> Well the government the government's not efficient. I think the main point, Roger, is the government's not efficient in allocating capital, especially for energy because there's like corruption or political motivation behind it because like in the case of Spain or Germany, they're saying that they have to keep investing in wind, solar, bofuels, ban oil, natural gas drilling, invest in electric vehicles. And in a lot of these cases, the companies didn't work out. But now you have the utility companies and the tech companies and they're saying, "We have to build natural gas pipelines to our data center. We need nuclear power at the data center." So if they do that, that sounds more efficient than what the governments have been allocating capital and energy the last 10, 15, 20 years. >> Yeah. I um you know, again, I just I I I like companies that actually make money. >> Yeah. Which is the opposite of what the government does, right? So >> Yeah. Yeah. Yeah. Yeah. >> Well, maybe the polit the politicians are the ones making money because you got a hedge fund traders like Nancy Pelosi and Marjgerie Taylor Green. though inside Congress, but that's a topic for another day. I want to thank you so much for your time today, Roger. You're a wealth of information on utilities. It's a it's uh actually like a surprising growth sector now cuz you see that capital that's coming from the tech companies for the capital expenditure. That is a record amount of capital expenditure and they have to have the this is a key point here. They have to have the infrastructure cuz if you build out the data center and you don't have the natural gas pipelines or you don't have the uh nuclear power plant nearby, you basically made a useless white elephant and wasted all your money. >> Yes, indeed. And um you know again it's um it it's it's it's the most exciting I there's definitely been a lot's happened in the utility sector the last 40 years but at least in terms of of growth this is you know a pretty impressive uh a pretty impressive time. You know there in the 90s people were off often were talking about growth and from the information technology and a lot of that was um you know it was paired with the deregulation and and and so on and you know you saw a lot of crazy projections but one thing that's different about this this time is that you know I I do see it in real time I mean you know I mentioned that example of energy at the beginning but it's uh you know 12 to 13% annual growth of industrial demand and is in a system and you consider the size of these systems. I mean, it's uh it it it's phenomenal what's happening right now, you know, and we're always looking for things that can derail it and things that can go wrong. But right now, it just looks to me like you have, you know, the the companies that are providing say the picks and shovels of the uh uh you know, this AI gold rush, if you will, u you know, not really getting their due necessarily in the market. So, I'm I'm pretty excited about the group and u you know I um it has been a good year for utilities like you pointed out. Uh but I think there's I think there's potentially a lot more um down the road uh just as there was you know back in the 50s and 60s when you had that and the last time demand really took off like it is now. So >> and the electrical utilities also used to be called like bond substitutes. So people would buy utility stocks instead of bonds. I mean, I'd much for for growth purposes, safety purposes, efficiency purposes, in co-investments there with the tech companies. I'd much rather own electrical utility companies than a Japanese government bond or some of these longer duration US treasuries. >> Yeah, absolutely. You know, and I I've been fighting that um that characterization of utility stocks, you know, as somebody trying to sell. >> Well, I I'm a trained value investor, Roger. I'm sure I'm a trained value investor, as you were, too. So we'd get repeated ad nauseium that the utility companies are bond substitutes, right? So >> yeah. Yeah. >> So >> much for conventional wisdom, right? >> Well, I mean in the environment we're in with inflation and government finances and all the wasted funds that are coming out, the fraud exposed with Doge and a lot of it was involved with what um ESG Energy spending griff uh fake fake uh climate change charities and a lot of other garbage. It it's just good to see uh the companies making investments and it's starting to pay off and you know you've lived in the Washington DC metro area for a long time too. I mean they pass infrastructure bills every couple years in Congress and it seems the money doesn't get spent on infrastructure. >> Right. Right. Right. Um you know I much prefer actually if they're going to you know throw money at the industry I much prefer it to be tax credits for investment. Right. because then nothing gets, you know, that's just money that comes off somebody's taxes for making an investment. But yeah, the particularly like all these, you know, the direct spending, I mean, yeah, they the government does not >> historically do that very well. So, >> well, it seems like Congress pass it seems like Congress passes an infrastructure bill every two to four years and then the infrastructure doesn't improve at all. >> Right. you still uh still those rotting bridges and and so on, but >> and old power lines. I mean, like here, even here in Northern Virginia with Dominion Energy and all the tech companies, I mean, we still have old power lines here. They haven't upgraded those yet either. >> Yeah. Um, you know, it's it it I think, you know, again, u all these subject all these things we've talked about, I mean, they're uh they're very real impediments really to what people are trying to do now. And um you know it's I do think having all this money you know from the private sector going into it uh is it it is promising but there are again there there are challenges for sure and um you know as investors or even and as rateayers you know we uh you know we have we it it's important to keep a breast of them. So, I really appreciated the opportunity to, you know, to chat with you today about these things that often I just talk with myself about or I talk to Elliot about, but or I write about, but it's uh you know, I I do think they're um it it is an exciting time and these are things these are good things to to continue to talk about. >> Well, I think they're very important and the market hasn't fully figured all this out yet. some investors have. But if the companies, the tech companies are going to keep spending these capital expenditure budgets on data centers, announcing new projects or or upgrading the artificial intelligence software for the cost to come down and spending on the learning language models and all these other things to train the model, you have to have the if you're going to build out the data centers. I mean, if you don't have the power supply, the pipelines, all the infrastructure there, you've wasted all your money. So I think like you know the mainstream financial media talks about you know non-stop artificial intelligence all the tech companies Nvidia but the electrical utilities the infrastructure is more important because you have to put all those things in place before you can do all the fancy technology upgrades and investments. Yeah, they're really um a lower risk way and I think we've probably touched on this too, but yeah, it's a lower risk way to really take advantage of this as well because you know they're signing contracts, you know, so you know these are and these are the companies that uh >> probably are some of the best to to sign a contract with. >> Well, also I can't you're not a tech expert. I'm not a tech expert. I played around with chat GPT now for a month making uh economic cartoons and memes. I'm gotten pretty good at it, but I can't tell you which artificial intelligence software company's going to win this battle here. Chinese one like DeepSeek or or uh some of the other ones, the American ones like um you know, Open AI or Perplexity or Claude or some of the other ones, maybe there's another one coming, Google Google's working on the video software. But I I can tell you that as these companies keep investing and advancing the software, more people are going to use the software in other industries. That's going to cause more electricity usage. They're going to have to build more data centers. They're going to need more of these uh either Nvidia or another companies, maybe a Chinese company if they're in another country, GPU chips, and that's going to require even more electricity usage. So, it seems to me that the electricity companies are in a uh good cycle here where they don't have to bet on which tech is going to win the race. >> Yeah, I I agree with you 100%. >> Yep. They don't have to bet which GPU chip. So if Nvidia is going to lose their market share or someone's going to come out with a better product or which uh artificial intelligence software, which model, learning language model or other type of software is going to win, they don't have to bet on that. >> Yeah, you don't have to bet on that. You just get no matter who wins it. They're like the, you know, arms merchants in a war. I guess another would be another metaphor. >> Or or Levi Strauss, right? Selling uh selling jeans to the gold miners. >> Yep. Selling jeans to the gold miners. Selling the picks and shovels. I mean, they're they make money regardless of who finds the nuggets, right? So, >> yes. Well, thank you so much for your time. Please tell my listeners more about your uh utility forecaster newsletter. >> Okay. Well, uh it's actually Conrad's utility investor and uh you know, we've been uh publishing it, I guess, for about 12 years. It it it's comprehensive coverage of US US electric utilities, foreignbased electric utilities, power companies, uh also other essential services, you know, water is a big area that uh for you know the artificial intelligence revolution and so forth, data centers, um communications companies and I think actually communications uh and and spectrum I think AI will wind up as big a draw on on that as it is on uh on electricity. So there's a huge opportunity uh you know there as well. And um you know our hallmark we like companies that make money. Uh we recommend uh we have three portfolios. Um and uh conservative, aggressive and uh also a dividend reinvestment plan portfolio. Um and uh you know every issue gives you coverage of the whole universe of 170 different companies. So um you know you can you can check that check us out at uh conradsutilityinvestor.com. Um you can also check me out on Substack. I've got a a Substack uh column. It's called Dividends with Roger Conrad. So, if you're not familiar with Substack, it's a great uh platform for all kinds of all kinds of opinion, including investment. I write primarily about investment issues uh and utility issues there. So, that's a free service. Um, I do have a paid service connected with Substack, but the free service, all you have to do is just go to go to Substack, look up dividends with Roger Conrad, and um get uh you know, put in your email and you'll get my column comes out every Sunday uh as well. So, I'd uh you know, be very uh interested. anybody, you know, please come and please come and check me