A version of this story was published in the AI-Energy Nexus newsletter on September 9, 2026. Subscribe to get pieces like this — plus expert analysis, original reporting, and curated resources — in your inbox every Wednesday.
Yesterday, a Bank of America Securities note that helped me parse the potential role of the “GenCo” in the U.S. power sector landed in my inbox. It’s a structure where a utility affiliate owns and finances generation assets for a specific customer (often, of course, a data center); then the affiliate sells electricity from those assets to the utility via a power purchase agreement, and the utility in turn sells it to the customer.
The idea, the analyst laid out, is to wall off all the generation a new data center might need, so it’s not owned by the parent utility directly and therefore regular ratepayers don’t finance any of it — and therefore are not exposed to risks if things go south. As such, the model could be a solution for data centers’ speed-to-power problem, while also giving shareholders a new contracted source of growth, the note continues.
This is still mostly theoretical. The first and only utility to implement the structure has been NiSource’s subsidiary NIPSCO, in Indiana. In September 2025, the utility won approval from the Indiana Utility Regulatory Commission for a new subsidiary called NIPSCO Generation LLC to build and own generation dedicated to data centers and other “megaloads.” The GenCo has since entered into PPAs with NIPSCO to serve loads from Amazon and Alphabet. (My colleague Maeve Allsup covered the structure in her feature about the Indiana data center fight back in May.)
But interest is spreading. In a July earnings call, FirstEnergy president and CEO Brian Tierney said the utility was evaluating a GenCo “to support future growth” in West Virginia, pointing to speed to power as a potential benefit.
The BofA note looks at NIPSCO’s process as a case study for achieving that promised speed to power:
The GenCo’s first customer contract with Amazon was approved in roughly seven months, having been submitted in November 2025 and approved in June 2026. And the first project to be built under the GenCo structure, which includes two 1.3-gigawatt combined-cycle fossil gas facilities and a 400-megawatt battery, was approved in less than five months; NiSource filed the initial application in early February 2026 and received IURC approval in June.
Those timelines are far faster than the norm. And the speed is partly because the GenCo does not have to undergo a utility’s standard Certificate of Public Convenience and Necessity process, which evaluates whether it really needs the generation it wants to build and if the cost estimate is correct. In Indiana, that process alone has a 240-day statutory timeline, or roughly eight months.
A second benefit of the GenCo, the note added, is that keeping data center generation out of the utility’s revenue requirements can insulate existing customers from its costs and risks.
The assets inside the GenCo belong to its shareholders, which in NIPSCO’s case are parent company NiSource and Blackstone; the latter agreed to acquire a 19.9% stake in October 2025. That means that they’re also the ones responsible if the assets end up stranded. Plus, NiSource expects over $1 billion in savings to come from the executed large load customers’ contracts, to be credited to residential customers.
Shareholders can also benefit from the structure. The GenCo structure gives NiSource’s shareholders a majority ownership of a large generation investment, with a long-term contract and predictable cash flow, leading to expected returns “above the traditional regulated rate under its base case,” BofA says.
Benefits aside, GenCos are still controversial. The benefits don’t settle the broader argument over how data centers are weighing on everyone’s electricity costs, given that data centers still lean on the existing utility system, especially when it comes to poles and wires.
And even shifting risks from customers to shareholders can be complicated, as NRG’s chief growth and policy officer Caroline Golin noted in a May 2026 episode of Open Circuit: “The problem is, if the load doesn’t show up and they hold it on the balance sheet of the overall balancing authority, what are the regulatory treatments for absorbing that back into sort of the local rate regulated entity?” That said, Golin professed herself a fan of the structure.
There are also transparency concerns, as local Indiana sources told Maeve for her piece on the pushback the NIPSCO GenCo has received. Given that GenCos serve data centers via special contracts negotiated on a project-by-project basis, there’s a risk that there’s less visibility into those contracts, and that they could vary depending on who the customer is.
And none of this works without specific guardrails, BofA adds. The framework only works if the GenCo is properly “ringfenced” — with separate books, separate bank accounts, separate financing, and each project, PPA and customer contract subject to its own approval. “Streamlined regulation, not deregulation,” the note says.
