Data centers are shifting from a welcome economic development tool for US states to a highly sensitive issue in the 2026 midterm elections. The intersection of AI power demand, residential electricity bill pressure, and local approval authority is pushing utility stocks into a valuation reassessment phase.
According to a Bank of America utilities team report, among the 36 gubernatorial races on Tuesday's ballot, 20 already feature data center moratorium or ban proposals, covering key load-growth states including Texas, Georgia, and Ohio. BofA believes the core market impact lies in regulatory appointments, large-load interconnection rules, and how campaign promises translate into reality before state legislatures, legal frameworks, and public utility commissions.
This shock has already transcended any single-party narrative. Texas Governor Abbott, who once positioned the state as an AI development hub, has now pushed for audits, moratoriums, and even freezes on data center permits. In Ohio, candidates from both parties have proposed some form of moratorium. Georgia may see its regulatory direction shift through public utility commission elections.
For investors, the short-term focus is not election night itself; the regulatory calendar in the following months is more critical. BofA believes moratorium measures are more likely to slow the marginal pace of construction and raise development costs rather than directly end the broader data center investment cycle. However, in states like Texas, Georgia, and Ohio, the earnings trajectories and valuation premiums of utilities, grid operators, and power generators already need repricing.
Electricity bill pressure pushes data centers onto the election stage
The data center controversy begins with electricity bills. According to Goldman Sachs, accelerating electricity bill inflation combined with this year's dense election cycle has brought utility bills into the national political spotlight. Projects once packaged as job creation, tax revenue, and technology investment are now, in campaign ads and local hearings, more often tied to residents' monthly bills.
Wells Fargo warned in September that the number of active local moratoriums had quadrupled. BofA economists, citing data from datacentertracker.org, noted that state-level data center-related bills have risen from a fringe issue in 2024 to approximately 80 bills already enacted or still under consideration this year. Local moratoriums, zoning restrictions, and ordinances have expanded to more than 250.
Political advertising also reflects this shift. According to AdImpact as reported by Time, television ad spending on data centers this cycle reached $137.6 million, with 77% coming from Democratic camps. However, only 7% of voters rank data centers as their top issue. The ads are actually targeting the electricity bill burden that data centers are perceived to have driven up.
BofA's assessment is relatively measured. Its team believes most moratorium discussions are a "sequencing" issue, aimed at first establishing cost-sharing and interconnection rules before deciding the pace of new load additions. Post-election capital is expected to redirect toward markets with clearer frameworks such as Wyoming, Minnesota, Iowa, Wisconsin, Kansas, Nevada, South Carolina, and Tennessee. Apart from the Texas TCEQ review, existing projects may still receive vested rights protection after moratoriums are introduced.
Risk map: Five states are most critical, and market misjudgment is widening
BofA divides the 36 gubernatorial races into four categories. The most noteworthy are Texas, Georgia, Ohio, Pennsylvania, and Oregon. The second category includes states where markets may overestimate election risk: Arizona, Florida, Iowa, Kansas, Michigan, and Wisconsin. The third category covers states with more stable regulatory foundations and lower election risk, represented by Wyoming, Minnesota, Colorado, and Idaho. The fourth category includes Alabama, Arkansas, and Oklahoma, where a genuine surprise would only materialize if an electoral upset occurs.
This classification implies that the headline risk across 36 races exceeds the actual stock risk. For utility stocks, the most important variables include whom the new governor will appoint to regulatory commissions, whether large-load cost-sharing mechanisms have already taken shape, and the extent to which campaign statements on moratoriums, bans, tax incentives, and ratepayer protections can penetrate existing institutional frameworks.
According to Morgan Stanley data, approximately 60GW of data center capacity is located in key November election states, with Texas alone accounting for about 24GW. This concentration of capacity means the market cannot trade this theme solely on a national narrative; state-level differences are becoming the core of valuation divergence.
Texas: The largest load story faces the largest policy discount
Texas is the most critical state in this cycle for utilities and power markets, according to BofA. The next governor will inherit 474GW of interconnection queue capacity, approximately 90% of which comes from data centers, a total exceeding five times the state's historical system peak.
Abbott completed a policy pivot in just a few weeks. On August 3, he directed PUCT and ERCOT to audit all data centers in the interconnection process. On the same day, ERCOT suspended the Batch Zero study process and stopped approving energization for data centers and crypto loads of 75MW and above. On September 14, he required water agencies to enforce water usage reporting. On September 21, he ordered TCEQ to suspend all data center permits.
BofA described this measure as an all-of-government shutdown covering air, wastewater, stormwater, and water rights permits. More importantly, the freeze also applies to data centers relying on behind-the-meter generation that theoretically provide their own power. This weakens some market expectations that "building your own power source can bypass grid constraints."
Democratic candidate Gina Hinojosa has called for going further. She labeled the existing moratorium a "scam" and said it would disappear on November 4, advocating for an emergency moratorium and special session covering union labor, local veto power, bans on non-disclosure agreements, and ratepayer protections. A YouGov poll conducted from September 28 to October 5 showed Hinojosa leading Abbott 48% to 47%, within the margin of error. BofA noted that the stock market has barely priced in the probability of a change in the governor's office.
The real timing point is the first half of 2027. On September 3, ERCOT conditionally listed 204 projects totaling 66.4GW as base load and 158 projects totaling 127.9GW as study load, all requiring verification audits completed by December 10. Final megawatt allocations are nominally expected in spring 2027, but ERCOT has already hinted at possible delays. According to Bloomberg estimates, nearly 50GW—roughly 20% of the US national data center pipeline—could be affected by the Texas moratorium, with related revenue impact reaching up to $8 billion by the first quarter of 2027.
Transmission and taxes are also variables. PUCT has approved Import Paths 1 and 3 of the $33 billion Permian Basin Reliability Plan but sent Import Path 2 back for review. ERCOT management has testified that without new transmission, the Permian region could face rolling blackout risks by summer 2027. The 90th Texas Legislature's pre-filing opens on November 9, and BofA expects at least 60 data center-related bills. The data center sales tax exemption currently costs about $3.3 billion, far exceeding the original "no significant impact" estimate, and has entered the review scope, potentially affecting already-authorized projects. Of the 20 facilities recently audited, 6 failed to meet job creation requirements.
For companies like Sempra (SRE, through Oncor), the market-implied outcome range is narrow. Texas remains one of the clearest long-term demand growth stories, but audits, transmission permits, tax incentives, and the legislative agenda have formed independent momentum sufficient to raise stock volatility and risk premiums.
Georgia and Ohio: Regulatory commissions and local votes amplify the impact
Georgia's risk has a more binary character. Democratic candidate Keisha Lance Bottoms supports a temporary statewide moratorium on new data centers and has said it would be one of her priorities. BofA defines this as the most restrictive candidate position among major data center states. She also supports PSC Commissioner Peter Hubbard's framework, requiring data centers to pay for infrastructure, use clean energy, eliminate non-disclosure agreements, and adopt union labor where possible. Republican candidate Rick Jackson opposes a statewide moratorium and supports local control.
The key in Georgia is the public utility regulatory commission. The state elects its utility regulators, and two of the five PSC seats are on Tuesday's ballot. Republicans currently hold a 3-2 majority; if Democrats win both seats, they would control the commission. BofA believes a Democratic-controlled commission could advance the Hubbard plan, and this could happen independently of the gubernatorial election outcome. For Southern Co. (SO), this is a direct valuation risk. Its subsidiary Georgia Power has already responded to affordability pressure through a base rate freeze through 2028.
Ohio shows broader bipartisan consensus. Democratic candidate Amy Acton supports a "conditional moratorium" until data centers bear 100% of utility costs, use union labor, meet air and water standards, achieve full transparency, and accept clawback mechanisms for tax incentives. Republican candidate Vivek Ramaswamy has proposed an "Ohioans First Data Center Pledge," requiring a moratorium until legislation ensures multiple conditions, including providing free electricity to residents near data centers.
Local-level votes are more dense. Of the 35 local data center measures nationwide on Tuesday, Ohio accounts for 21, with no state-level referendums. BofA has a 2027 list in which 16 measures would directly ban or restrict facilities, with a common cap of 25MW, while about 12 others point in the opposite direction, mainly concentrated in Illinois and Ohio rezoning referendums. BofA believes these votes measure local acceptance more than they directly change state-level policy.
The real "main battlefield" for repricing is 2027
The federal role is relatively limited. Piper Sandler's policy team gives a 55% probability of a Democratic sweep, but Goldman's Alec Phillips cautions that prediction markets tend to overestimate challenger sweep probabilities at this stage of the cycle. Regardless of the congressional makeup, BofA economists expect federal-level restrictions on AI to remain limited over the next two years.
The real constraints remain at the state and local levels. Land use, zoning, permitting, and development agreements are mostly controlled by local and state governments, and these levels have a more direct impact on project timelines. The House has passed a bill requiring data centers to bear their own energy costs, but in the short term, state-level rate design and interconnection rules will still dominate the investment path.
Permitting reform could become a federal-level variable. Piper Sandler believes the Bipartisan American Affordability and Jobs Act has a 50% chance of passing during the lame-duck session. On data centers, the bill requires more energy to be located behind the meter and establishes rules ensuring data centers bear energy costs until all incremental cost recovery is complete, even after contract termination. Goldman also expects that by 2030, behind-the-meter generation will support 25% of all data center power supply.
The first reaction after Election Day may amplify headline risk, but the real valuation catalysts will emerge in the subsequent calendar. On November 9, Texas legislative pre-filing opens. On December 10, the ERCOT Batch Zero audit reaches its verification milestone. In the first to second quarter of 2027, final megawatt allocations are expected to surface.
BofA's base case is that capital will redirect, the overall investment cycle is unlikely to halt, and most moratoriums will ultimately manifest as phased sequencing. For investors, a more prudent framework is to re-identify who bears incremental costs. Data centers that can pay for their own infrastructure costs and provide self-supply or behind-the-meter power will find it easier to gain regulatory acceptance. Utility companies in states with clear cost-sharing and stable regulatory structures will have more resilient valuations. Companies in policy-reset states like Texas, Georgia, and Ohio will need higher risk premiums to reflect uncertainty around permitting, rates, tax incentives, and local acceptance.
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