By Avi Salzman

There's always been something strange about Dominion Energy, the Virginia utility involved in the largest electricity merger ever -- this week's $67 billion acquisition by NextEra Energy.

Dominion has been riding the gravy train for years, but its shareholders haven't gotten any gravy. Dominion serves more data-center customers than any other utility in the world by far, having connected at least 450 data center buildings to the grid as of March.

Data centers account for 28% of its electricity sales in Virginia, at least five times as high a percentage as the average utility. And yet Dominion stock has been a dog. While other utilities with data-center exposure like Entergy have seen their stocks double over the past five years on the promise of new AI data center deals, Dominion's shares have lagged behind, falling 13% over the same period. Dominion and its shareholders simply haven't extracted much value from these extremely attractive customers.

One reason Dominion hasn't profited much from the data-center boom is because of timing. Dominion was providing power to data centers well before the current AI boom, and it was signing the data-center deals at inexpensive rates by current standards.

At the same time, the company loaded up on debt to pay for infrastructure upgrades that saddled it with interest payments and forced it to sell assets.

There have also been regulatory challenges. Because of the way Virginia's market is set up, Dominion sometimes has to buy expensive power produced out-of-state to serve its growing base of customers. Average electricity customers in Virginia have also gotten the short end of the data-center boom, critics say. Regular customers often paid for much of the cost of transmission lines that served data centers, adding to a backlash against the massive warehouses. The data-center boom has often seemed like a burden on Dominion and its customers, rather than a boon.

Elsewhere, utilities have found unique ways to profit off the data-center boom without saddling their regular customers with high bills. Entergy got Meta Platforms to pay upfront for much of the power equipment it's using for its data centers in Louisiana. Regulators in states like Indiana have changed their electricity pricing structures, to force big tech firms to pay more for power infrastructure in advance, and sign on to longer deals that protect both the utilities and their regular customers even if the data center is never built.

In Virginia, regulators just approved a similar deal that's set to start next year -- just in time to benefit NextEra if its deal for Dominion is completed.

The new Virginia rules will force large customers like data centers to agree to 14-year deals, and to pay for at least 80% of transmission and distribution costs, as well as at least 60% of generation costs. Presumably, both customers and the utility will benefit more from data centers than they did in the past.

NextEra also brings other attributes that will make it easier to profit off the data center boom. The combined company, with a $420 billion enterprise value, will have access to much more capital than Dominion has today. And NextEra has expertise in building solar, wind, and battery storage installations that data centers desire.

NextEra is buying into a data-center leader at just the right time -- and at an attractive price given Dominion's struggles in the past few years. As of the end of the first quarter, Dominion had contracts to provide 51 gigawatts worth of power to data centers in Virginia and its other service territories.

Even though NextEra is paying a 23% premium above Dominion's pre-deal stock price, the premium looks much less juicy in historical terms.

After years of underperformance, Dominion stock is depressed, and trades at 18 times its expected earnings over the next four quarters. NextEra's stock hit new highs this year and is trading at 21 times (the premium advantage was wider before Monday's deal, which boosted Dominion's stock and hurt NextEra's). By using its own stock to pay for the deal, NextEra is benefiting from its valuation advantage.

The data-center boom passed Dominion shareholders by. It's fair to assume NextEra won't let that happen.

Write to Avi Salzman at avi.salzman@barrons.com

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May 22, 2026 21:30 ET (01:30 GMT)

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