Watts Cooking: PJM; PNW; SR; FERC

Research evidence excerpt

Watts Cooking: PJM; PNW; SR; FERC

TD Cowen

Global Research June 21, 2026

■Fitch downgraded its North American utilities outlook to “deteriorating.” Fitch highlighted

affordability pressures tied to elevated capex and data center load are materializing faster

than expected and increasingly driving regulatory resistance to rate increases. Our view:

We view demand fundamentals as robust and continuing to underpin a strong long-term

rate base growth trajectory, even if near-term affordability pressures are rising.

While political scrutiny and dynamics may moderate near-term rate outcomes, we see

regulatory frameworks increasingly evolving to balance affordability with continued

capital recovery. The sector has demonstrated lower pending rate cases (~$16B vs. >$20B

last year) and reduced reliance on rate hikes, which we believe supports a more stable

outlook than Fitch suggests. We maintain confidence in utilities’ ability to fund elevated

capex without impairing shareholder returns.

■On Monday, DOJ lawyers intervened in the ongoing NAACP lawsuit against xAI, alleging

the company's onsite BTM gas generator deployment at its Collosus 2 site (currently rented

by Google) is not following the Clean Air Act. The request for dismissal argues both that

the State of Mississippi was ultimately responsible for deciding on the need for air permits

and that xAI's AI models are critical to the economy and the Department of War. Our view:

The DOJ intervention seems to confirm the administration's stance on domestic data

center development being critical for national security and its willingness to defend

them from scrutiny. While we still believe that customer affordability remains the one

issue that could bring federal scrutiny, the administration's willingness to defend a ring-