The Sierra Nevada tourist hub—home to ski resorts, lakeside casinos, and roughly 25 to 28 million annual visitors—is facing an energy crisis with a familiar culprit: the data centers powering the AI boom.

NV Energy, the Nevada utility that has supplied the bulk of Lake Tahoe’s electricity for decades, told Liberty Utilities—the small California company that services the region—that it will stop providing power after May 2027. The reason? NV Energy needs the capacity for data centers. As in: the energy supplier for the Lake Tahoe region is telling the utility company that it has less than a year to find another power source.

Northern Nevada has become one of the fastest-growing data-center corridors in the country. Google, Apple, and Microsoft have either built or are planning facilities around the Tahoe-Reno Industrial Center east of Reno. The Desert Research Institute, using data from NV Energy’s 2024 Integrated Resource Plan, found that the 12 data center projects located overwhelmingly in Northern Nevada could drive 5,900 megawatts of new demand by 2033. At a regional business event last fall, NV Energy’s director of business development called the moment “unprecedented,” saying the company was eager to serve the new industrial load but that it would not “impact our existing customer base.”

But Liberty’s 49,000 California customers may already be bearing the cost. Liberty Utilities generates about 25% of its power from solar facilities it owns in Nevada. The other 75% comes from NV Energy, and that source will no longer be supplied to the region by this time next year. 

“It’s like we don’t exist,” Danielle Hughes told Fortune. Hughes is a North Lake Tahoe resident, CEO of the nonprofit Tahoe Spark, and a supervisor within the California Energy Commission’s Efficiency Division. 

A jurisdictional knot with no easy fix

What makes Tahoe’s crisis so difficult is that no single regulator oversees the entire chain from power generation to customer bills.

Liberty is a California investor-owned utility. Its customers live in California and pay rates approved by the California Public Utilities Commission. But Liberty’s grid sits inside NV Energy’s balancing authority, connects to NV Energy at 38 points, and relies entirely on Nevada transmission lines, according to a Liberty filing with state regulators. Liberty’s territory is a small sliver along California’s eastern border, sitting within NV Energy’s balancing zone rather than the California Independent System Operator, which coordinates the grid for virtually every other ratepayer in the state.

Building a direct connection to California’s grid would require a new transmission line west over the Sierra, a project Liberty President Eric Schwarzrock said would cost “hundreds of millions of dollars” with significant land impacts.

The CPUC approves Liberty’s rates and procurement requests, but it cannot order NV Energy to keep selling wholesale power or dictate how Nevada plans for data centers. That falls to the Federal Energy Regulatory Commission, which regulates interstate transmission and wholesale electricity sales. With NV Energy and Nevada regulators controlling the upstream grid, the result is a system where California sets the rules, Nevada runs the wires, federal jurisdiction applies to the wholesale market, and no single entity is accountable for the outcome.

In March 2026, Liberty asked the CPUC to authorize an expedited request for proposals for replacement energy beginning June 1, 2027. In that filing, Liberty said NV Energy had cited data centers in the Tahoe-Reno Industrial Center area and northern Nevada transmission constraints, among other reasons, for ending full-requirements service.

Hughes and the Sierra Club’s Tahoe Area Group want the commission to reject that approach and instead open a full proceeding. In an April 1, 2026, letter to CPUC commissioners shared with Fortune, Sierra Club Vice Chair Tobi Tyler argued that the scale of the procurement—affecting 49,000 ratepayers dependent on an isolated, rapidly transforming grid—demands the transparency and public participation that only a formal proceeding provides. Tahoe Spark’s underlying protest states that “California does not produce a Liberty-specific forecast of demand, peak conditions, or procurement needed for numerous California communities in a high wildfire risk area.”

“You need to open a full proceeding and do a transparent process and understand what we look like in California policy, and what the long-term game is,” Hughes said. Even regulators are still sorting through the legal boundaries, she added: “They’re basically trying to decide what to do right now, or even what they legally can do.”

Even the regulators are still sorting through the legal boundaries, she added: “The procurement will have to be approved by the CPUC. They’re basically trying to decide what to do right now, or even what they legally can do.”

The data center next door

Data centers used 22% of Nevada’s electricity in 2024, and that share could rise to 35% by 2030. In NV Energy’s own 2024 resource plan, about 75% of major-project load growth is attributed to data centers, according to Sierra Club expert testimony filed with Nevada regulators and reviewed by Fortune, and most of it is concentrated in Northern Nevada—using the same system that feeds power to Lake Tahoe. 

NV Energy is building Greenlink West, a 525-kV, $4.2 billion transmission line from Las Vegas to Yerington, expected online in May 2027. Schwarzrock said Liberty would be “first in the waiting line” when Greenlink opens, giving it access to a wider pool of energy providers. But that timeline matches the contract deadline exactly, leaving almost no margin for error. About 70% of the project’s costs will be borne by Southern Nevada customers.

But this is nothing new, at least according to NV Energy.

Katie Jo Collier, a spokesperson for the utility, said the transition was rooted in a longtime understanding with Liberty “well before data center load growth was a consideration,” calling it “a planned transition for many years, not a reaction to recent developments.” NV Energy sold its California electric assets to Liberty in 2009 and agreed to keep supplying power temporarily. That arrangement was extended in 2015, again in 2020, and once more in late 2025, and each time because Liberty had not yet secured an independent supply, a timeline corroborated by regulatory documents reviewed by Fortune.

But independent experts have questioned whether NV Energy’s own demand projections are reliable. In testimony filed with Nevada regulators in Oct. 2024, energy economist Rose Anderson of Synapse Energy Economics warned that NV Energy’s major-project load forecast is ‘highly uncertain’ and that existing customers could end up paying for infrastructure built to serve industrial demand that never materializes.

Rates were already climbing

The supply crisis arrives on top of an existing affordability fight. In its 2025 general rate case, Liberty originally sought a 19.1% revenue increase—about $37.51 more per month for the average residential customer, according to CPUC filings. The CPUC approved a smaller increase: 11.4%, with a 9.75% return on equity rather than Liberty’s requested 11%.

The rate case spotlighted wildfire costs, insurance premiums, and infrastructure spending in a high-risk mountain region. The CPUC decision noted Liberty’s wildfire exposure and its exclusion from California’s AB 1054 Wildfire Fund, suggesting that rising insurance costs (quoted at over $30 million alone) for small utilities could warrant future rule making.

Tahoe Spark opposed the rate-case settlement, arguing that it failed to examine the interstate wholesale power structure underlying the costs paid by California ratepayers. Hughes said the problem is not merely high rates but the way costs are allocated in a region where visitor demand, second homes, ski resorts, and development projects drive infrastructure needs that permanent residents pay for.

“We’re the cost of being redistributed onto a declining community, and that is a crisis,” Hughes said.

Hughes argues that Tahoe is treated as a wealthy vacation-home market even though its year-round residents include low-income communities and essential workers. “Even though we have low-income communities in both South Lake Tahoe and North Lake Tahoe, Kings Beach, both the Energy Commission and the California Public Utility Commission do not include us in any of their socioeconomic plans,” she said.

The basin’s government structure compounds the accountability problem. Lake Tahoe spans two states, multiple counties, one incorporated city, and the Tahoe Regional Planning Agency. County supervisors, state appointees, utility regulators, and resort developers all touch parts of the system, but no single body owns the whole problem. Liberty’s demand pattern illustrates how different this territory is from the rest of California: while most regional utilities peak in summer, Liberty’s demand crests around Christmas, when second-home owners arrive for ski season — driving infrastructure costs that year-round residents bear.

What happens next

Liberty has told customers that NV Energy will remain the transmission provider—the wires aren’t going anywhere. The question is who supplies the electricity that flows over them, what it costs, and whether California regulators can protect customers whose upstream grid sits outside California’s usual planning structure.

Schwarzrock said the utility plans to bid the replacement contract to “anybody and everybody,” focusing first on meeting California’s renewable energy requirements. Liberty anticipates issuing a formal RFP in summer 2026, with replacement power most likely coming from sources outside California, delivered over NV Energy’s transmission system.

Hughes said short-term replacement power is likely available from elsewhere in the West—but she’s not optimistic about what comes after. “Short term, you can commonly get good deals, but it’s unstable,” she said. “The short-term deal gets you through. But then you’re in the Western market, competing against PG&E, Southern California Edison, data centers, and mining companies. We’re 49,000 customers. We have no leverage.”

Her larger concern is that as California and Nevada move toward a more integrated Western electricity market, Tahoe’s small customer base will be increasingly exposed to competition from larger utilities and industrial buyers with far more purchasing power.

“We have no representation,” Hughes said. “It’s resource extraction.”