Feb 5 (Reuters) - U.S. utility Xcel Energy XEL.O reported a 22% rise in fourth-quarter profit on Thursday, as higher demand for electricity from data centers offset rising expenses.

Utilities have been adding billions of dollars to their capital expenditure budgets as they field massive requests for new power capacity from Big Tech firms scouring the country for viable locations for data centers, which could support complex artificial intelligence-related tasks.

Power consumption is expected to hit record highs in 2026, driven by a surge in demand from the data centers, according to the U.S. Energy Information Administration.

Earlier this week, Xcel signed deals with utilities NextEra Energy NEE.N and GE Vernova GEV.N to speed up electricity generation.

Xcel also completed several major projects last year, including Phase 2 of its Sherco Solar facility, the conversion of the Harrington coal plant to natural gas and the initial segments of the Colorado Power Pathway transmission project.

Earnings growth was supported by increased recovery of electric and natural gas infrastructure investments and higher electric sales, the company said.

Operating revenue at its electric segment rose 16.55% to $2.81 billion in the quarter ended December 31, compared with a year ago.

But total operating expenses rose to $2.98  billion from $2.77  billion a year ago.

The Minneapolis, Minnesota-based company's net income rose to $567 million, or 95 cents per share, for the three months ended December 31, compared with $464 million, or 81 cents per share, a year earlier.

(Reporting by Varun Sahay in Bengaluru; Editing by Sahal Muhammed)

((Varun.Sahay@thomsonreuters.com;))