Excessive forecasts of data center growth are behind the push to build two large natural gas pipelines in the southeast

Two related gas pipeline proposals exemplify another attempt by utilities to force their customers into subsidizing data centers. That is a key conclusion of comments that IEEFA submitted to the Federal Energy Regulatory Commission (FERC) in June on the proposed South System Expansion 4 (SSE4) and Mississippi Crossing (MSX) pipeline projects. Both southeastern projects require FERC approval to move forward.

The MSX pipeline is proposed to transport up to 2.1 billion cubic feet (bcf) per day of natural gas over 199 miles of new pipeline from Greenville, Mississippi to Butler, Alabama at an estimated cost of $1.7 billion. The pipeline is proposed by Tennessee Gas PipelineCompany, a Kinder Morgan subsidiary. Utilities in the southeast (Atlanta Gas Light Company, Dominion Energy South Carolina, Southern Company Services, Oglethorpe Power, and the Tennessee Valley Authority) have entered into contracts for more than 90% of the pipeline’s capacity. These utilities will pass the cost of building and shipping natural gas on the pipeline onto their customers. 

The SSE4 project is designed to increase capacity on the Southern Natural Gas Company’s South Main Line by about 1.3 bcf/day at an estimated cost of $3.5 billion. It is sponsored by Southern Natural Gas (a joint venture of the Southern Company and Kinder Morgan) and Elba Express, LLC (a subsidiary of Kinder Morgan). Utilities Dominion Energy South Carolina, Southern Company, and Oglethorpe Power have entered into contracts for more than 98% of the capacity.

The pipelines are proposed to enter service in late 2028.

In its application and materials submitted to FERC in pursuit of a Certificate of Public Convenience and Necessity for each pipeline, Kinder Morgan argued natural gas demand in the southeast states to be served by the projects (Mississippi, Alabama, Georgia, and South Carolina) has been growing over the past decade and will continue to increase. Kinder Morgan presented a “high growth” scenario in which average unmet winter gas demand peaks at 2.45 bcf/day in 2035. In its base case scenario, unmet regional demand peaks at only 0.46 bcf/day, less than 15% of the proposed new pipeline capacity. 

But IEEFA’s comments to FERC explain that natural gas demand in the southeast has not been growing. While Kinder Morgan highlighted a spike in demand that occurred during a severe winter storm in 2025, overall natural gas demand has been flat-to-declining in the region over the past decade. Demand declined by an average of 0.78% between 2017 and 2025, while the peak demand spikes are variable rather than trending upward. Although regions need to plan for the likelihood of sporadic weather events, constructing a large pipeline (or two) for a demand spike that occurs on only occasional days is very likely not the most cost-effective approach to energy management.

Also, IEEFA notes that Kinder Morgan’s projections for rapid growth in regional natural gas demand hinges on an overblown, excessive forecast of data center electricity needs, coupled with the assumption that much of this need would be met by natural gas power generation. 

IEEFA’s comments reveal that Kinder Morgan’s projections of data center-driven electricity demand growth in the southeast are significantly higher than those of the North American Electric Reliability Corporation (NERC), the international regulatory body dedicated to grid reliability. Kinder Morgan’s assumptions also exceed projections of some local utilities, including Georgia Power, which itself has been criticized for over-forecasting data center demand. A more granular analysis of the natural gas demands of the specific utilities that have contracted for capacity on the MSX and SSE4 pipelines, conducted by London Economics International, found the natural gas needs are likely overstated.

Kinder Morgan’s analysis of demand for the MSX and SSE4 pipelines does not take into account the financial risks around the artificial intelligence (AI) business model, which is the main driver of the forecasted data center buildout. As detailed in IEEFA’s comments to FERC, leading AI companies have yet to turn profitable, and the sector is beset by growing headwinds including: increasing (and likely understated) depreciation expenses; delays in data center construction; and evidence that AI adoption is less transformative than tech industry leaders have predicted. 

IEEFA is concerned that if and when the AI bubble bursts, it will likely lead to bankruptcies, a cooling off of investment in the sector, and very likely fewer operational data centers than currently forecasted. This poses a financial risk for electricity and natural gas ratepayers, who may be left paying for the costs of unused or underused infrastructure capacity—potentially including the MSX and SSE4 pipelines.

Utilities face little risk in contracting for more natural gas capacity than needed because they are able to pass these costs through to their customers—who are often called “captive ratepayers,” as they generally have no readily available energy purchasing option other than to pay whatever rate the utility charges. The Southern Company will even be able to earn a FERC-approved profit on its share of the construction of the SSE4 pipeline, with which its subsidiaries have contracted for nearly half of the capacity. It is the customers who bear the cost risk of overbuilding.

IEEFA’s comments urge that FERC should revisit the analysis of the MSX and SSE4 projects. The issues raised in the comments go to the heart of the question of whether the two pipeline projects meet the requirements for a Certificate of Public Convenience and Necessity, which would be required to construct and operate the pipeline. 

Cathy Kunkel’s contribution to this project is based upon work supported by Alfred
P. Sloan Foundation under Grant No. G-2025-79193