Democratic wave shakes energy markets and threatens bipartisan permitting bill

Wall Street’s gains on Wednesday were offset by a sharp decline in energy shares after Democrats achieved unexpected victories in Texas and other states. Analysts at TD Cowen cut the likelihood of the Bipartisan American Affordability and Jobs Act (BAAJA) passing from 40% to 25% during the lame-duck session, citing tougher negotiating tactics from anti-fossil-fuel Democrats.

Charles Hua, executive director of the PowerLines nonprofit, described the election results as a “seismic” referendum on rising utility bills, gasoline prices and broader inflationary pressures. He noted that more than 40 local ballot measures aimed at restricting data centers were approved, with only one in North Dakota failing.

Energy companies with exposure to Texas felt the impact most acutely. NRG Energy and Vistra, which are expanding gas-fired generation to support the AI boom, saw their shares fall 12% and 15% respectively, while GE Vernova slipped 10%. Jefferies analyst Julien Dumoulin-Smith highlighted the “Texas shock,” saying the scale of Democratic wins there threatens data-center development prospects.

In contrast, utilities operating in Republican-leaning Florida posted gains, with NextEra Energy up 5% and Duke Energy rising 3%. Renewable-energy firms also benefited; First Solar climbed over 4% and solar-parts maker Nextpower jumped 13%.

The broader market reaction extended to oil. After President Donald Trump downplayed the risk of further escalation in Iran and Vice President JD Vance linked his party’s losses to the war, the benchmark crude price dropped 8%, pulling ExxonMobil and Chevron down 4% and 5% and sending refiners Marathon Petroleum and Valero Energy lower 9% and 7%.

“We had a referendum on inflation, high oil prices, and Trump in general,” said Dan Pickering, founder of Pickering Energy Partners.

Pickering warned that while there may be optimism for Iran peace talks, the conflict is unlikely to end soon and could influence U.S. policy beyond the election.

The focus now turns to data-center backlash and permitting reform. Democratic governors in Texas, Georgia and Ohio have signaled support for data-center moratoriums, though Hua cautioned that the exact nature of those measures remains unclear.

The bipartisan permitting reform effort, which would speed construction of transmission lines and other energy projects, faces a tougher path as Democrats push for a version less favorable to fossil-fuel pipelines. The legislation, sponsored by Sen. Sheldon Whitehouse (D-RI), remains dependent on President Trump’s signature.

“Democrats ran and won on affordability, and this bill lowers costs for families and will allow us to start delivering on our election promises,” Whitehouse told Fortune.

Quanta Services, a major transmission developer, saw its stock fall 12% amid uncertainty over the bill’s future.