The Utilities Stock at the Center of AI and Rising Electric Bills

Even for Americans living outside of the service areas of giant utilities companies, they’ve earned a reputation for market dominance. NextEra Energy (NYSE: NEE), Southern Company (NYSE: SO), and Duke Energy (NYSE: DUK) command a collective market cap of $344.24 billion and have been reliable investments.  

Dominion Energy (NYSE: D) has a market cap of nearly $50 billion—roughly half of any of those big three—but its burgeoning role in the AI energy landscape, hefty dividend yield, and 3.6 million homes and businesses serviced across Virginia and the Carolinas has made it just as popular.   

The company has roots dating back to 1909. But the legacy power producer and distributor is evolving with renewables like solar, wind, and hydroelectric joining its repertoire alongside natural gas and nuclear. But it’s Dominion’s role in addressing the energy demands of AI that make the company an intriguing play for the latter part of 2025 and into the new year. 

AI Causing Electric Bills to Surge

Over the past month, utilities has been the worst-performing S&P 500 sector. Its 3.38% loss makes it the only one in the red. On the year, it’s held its own with a gain of 10.28%, 7.72% of which has come over the past year. And because of AI, the sector has tailwinds.

AI currently accounts for 4.4% of all U.S. electricity consumption. By 2030, that’s expected to balloon to 12% to 20%. Until the data centers servicing AI tech companies are independently powered, that growing consumption’s likely to help utilities build on the momentum it’s seen over the past six months, carrying it through the final quarter and into 2026. 

Virginia—where Dominion is headquartered—is the home of Data Center Valley. An incredible 133 of the facilities are located in Ashburn, Virginia, alone. Overall, the “valley” comprises 35 million square feet of data centers supporting over 3,500 tech companies. 

Incidentally, their electricity consumption is causing Americans’ electric bills to soar. In part, that’s due to the favorable conditions Dominion has put in place to allure data center operators and tech companies. As the local power provider in Loudon County, for example, the utility charges data center companies rates that are on average 28% lower than the national average. 

Meanwhile, the CPI for urban electricity increased nearly 26% from January 2020 to December 2024, with residents of Virginia paying the 11th highest average rate in the nation at $155 per month. South Carolina and North Carolina aren’t far behind, and those bills are about to increase.

In April, Dominion announced that residential customers will see both a base and fuel rates increase beginning in 2026.

AI and Renewables Fuel Dominion’s Growth

In October 2024, Dominion and Amazon (NASDAQ: AMZN) entered into a memorandum of understanding that entails the two companies exploring “innovative new development structures that would help advance potential Small Modular Reactor (SMR) nuclear development in Virginia.”

The agreement aims to bring “new sources of carbon-free energy to the grid,” meaning any of Dominion’s SMR-generated electricity won’t be for the exclusive, off-grid use of Amazon, but will be accessible through its distribution network.  

Since that announcement, shares of Dominion are down 3.90%. But as a development agreement, the fruits of that partnership weren’t expected to show up on the books this year. Nonetheless, when the company announced its Q2 financial results on Aug. 1, it outperformed expectations with revenue of $3.81 billion and earnings of 77 cents per share, marking the fourth straight quarter of surpassing EPS forecasts. Additionally, it maintained its 2025 guidance of $3.28 to $3.52 per share. 

But the big takeaways from its earnings call were forward-looking:

• 60% completion of the Coastal Virginia Offshore Wind project, which will deliver electricity in early 2026. 
• That project represents the fastest and most economical means of delivering ~3GW to Virginia’s grid to support AI, among other commercial needs.
• The Chesterfield Energy Reliability Center, a gas-fired electric generating facility, is proposed and would produce ~1 GW once in service in 2029.

All of that points to future growth that should help Dominion extend a run that has already seen pretax income climb 16% since 2021, rising from $1.88 billion to $2.18 billion. The stock may have marginally underperformed the market by about 3.5% this year, but its dividend has more than compensated, making Dominion a name that should catch the eye of both yield hunters and cyclical traders.

Speaking of Dominion’s Dividend

The stock pays a dividend currently yielding 4.59%, or 67 cents per quarter.

Its 92% payout ratio may raise eyebrows, but even if that yield comes down in subsequent quarters, the tailwinds the company’s enjoying should help offset a lower dividend with share appreciation. 

Dominion has an institutional ownership of 73.04%, with inflows of $6.17 billion outweighing outflows of $3.18 billion in the past year. The short interest is relatively low at 4.22%. 

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