Black Hills Corp said on Tuesday it had signed agreements to supply electricity to a proposed Google data center in Cheyenne, Wyoming, as the utility plans to invest $1.8 billion between 2027 and 2029 to expand generation capacity amid a surge in power demand from artificial intelligence infrastructure.
The agreement highlights the growing competition among technology companies to secure reliable electricity for power-intensive data centers. For utilities, the rapid expansion of AI computing is creating a new source of electricity demand while opening opportunities for large capital investments and long-term contracts with major technology companies.
Black Hills said it will build 564 megawatts of new generation capacity specifically for the Cheyenne project. Power deliveries are expected to begin in late 2027, with the data center’s electricity demand reaching its peak in 2030. The project is expected to draw on a 2.7-gigawatt resource mix, including reserve margins, giving Black Hills access to substantially more capacity than the facility’s initial dedicated generation requirement.
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Under the agreement, the utility will supply up to 590 MW from the grid, with most of that electricity expected to come from a new gas-fired plant at its Cheyenne Prairie Generating Station.
Black Hills will also manage about 2.1 GW of third-party resources in Wyoming through a privately managed microgrid, giving the project access to a broader pool of electricity resources while helping the utility coordinate supply around the data center’s requirements.
The scale of the arrangement illustrates how the electricity needs of AI data centers are increasingly shaping utility investment decisions. Large computing facilities can require power loads comparable to those of sizeable industrial operations, forcing utilities to expand generation, transmission, and other infrastructure to accommodate demand.
For Black Hills, the agreement could become a significant contributor to earnings. The company expects the Google project to add about $150 million to net income by 2030.
An important feature of the agreement is that Google will cover the full cost of supplying electricity to the data center. That provision is designed to prevent the costs associated with serving the large new customer from being passed on to other utility customers.
The arrangement could provide a model for utilities seeking to capture the economic benefits of data-center expansion while limiting concerns that households and smaller businesses could ultimately bear the cost of infrastructure built to serve large technology companies.
AI Data Centers Intensify Power Race
Google’s agreement with Black Hills comes as technology companies accelerate efforts to secure electricity for AI infrastructure. Google has separately signed a 3.59-GW power contract with Constellation Energy. Constellation plans to invest more than $4.3 billion in its generating fleet under the arrangement.
The deals demonstrate the enormous scale of electricity procurement now being pursued by major technology companies as AI models require increasingly large computing resources. The pressure is extending beyond data-center operators to utilities and power generators, which must determine how to finance and build additional capacity while maintaining reliability for existing customers.
Black Hills’ planned $1.8 billion investment from 2027 to 2029 represents a substantial expansion of its generation capacity. The company’s decision to combine new gas generation with third-party resources also illustrates the complex power arrangements being developed to support large data centers.
Gas-fired generation can provide dispatchable power that is available when needed, complementing intermittent renewable resources and helping utilities manage the continuous electricity requirements of data centers.
The Cheyenne project is also significant for Wyoming, where data-center development could create additional demand for local electricity generation and infrastructure.
Black Hills, based in South Dakota, has been pursuing a broader expansion of its regulated utility operations. In August last year, the company agreed to merge with NorthWestern Energy in an all-stock transaction that would create a $15.4 billion regulated electric and natural gas utility. The proposed combination would give the enlarged company a larger footprint across the region and potentially greater scale as electricity demand rises.
For Google, securing long-term power supplies is becoming a crucial component of its AI infrastructure strategy. The company is competing for electricity alongside other data-center operators at a time when utilities in several US regions are confronting rapid increases in expected power demand.
The Black Hills agreement also underscores the economics of that competition. Rather than relying solely on existing grid capacity, Google is effectively supporting the development of new generation and associated infrastructure needed to serve its future load. That approach could become more common as hyperscalers seek dedicated power arrangements to avoid delays caused by constrained grid capacity.
But the financial implications extend beyond the technology sector. Utilities stand to gain from new long-term demand, but they must balance the capital required to build generation against the need to protect existing customers from higher costs.
Black Hills’ agreement addresses part of that issue by requiring Google to bear the full cost of supplying the data center. The $150 million expected addition to net income by 2030 also gives investors a clear indication of the potential financial contribution from the project.