Electricity bills in states with the most data centers are surging

Electricity prices are rising, voters are angry, and with the US midterm elections on the horizon, the AI ​​industry’s data centers are increasingly being blamed.

According to the U.S. Energy Information Administration, residential bills rose an average of 6% nationwide in August compared to the same period the previous year.

The reasons for price increases are often complex and vary by region. But in at least three states where data centers are concentrated, electricity bills rose much faster than the national average during that period. For example, prices rose 13% in Virginia, 16% in Illinois, and 12% in Ohio.

Tech companies and AI labs are building data centers the size of a city, in some cases consuming a gigawatt or more of electricity — the equivalent of more than 800,000 homes.

Virginia has the highest data center density in the world. Democrat Abigail Spanberger overwhelmingly won the state’s last gubernatorial race by running the cost-of-living campaign. Spanberger vowed to start tech companies by blaming at least some of the rising electricity prices on data centers”pay their way and their fair share“due to rising costs.

The governor’s race could herald political headwinds for the AI ​​industry’s data center build-out, with the midterm elections just a year away and Democrats focusing on affordability as their main issue. In Washington, some Democratic senators are taking aim at the close relationship President Donald Trump has developed with leaders of major technology companies and artificial intelligence laboratories.

Sen. Richard Blumenthal of Connecticut and Sen. Bernie Sanders of Vermont this week took aim at what they described as the White House’s “sweetheart deals with Big Tech companies” and accused the administration of failing to protect consumers from being “forced to subsidize the cost of data centers.”

“The backlash that technology has created is real,” said Abraham Silverman, who served as general counsel to New Jersey’s utilities board from 2019 to 2023 under outgoing Democratic Gov. Phil Murphy.

“Data centers are not always perfect neighbors,” said Silverman, now a researcher at Johns Hopkins University. “They tend to be noisy, they can be dirty, and there are a lot of communities that don’t want more data centers, especially in places where there are really high concentrations of data centers.”

Virginia, Illinois, and Ohio are among these states and are often served by the same network operator. PJM Interconnection. PJM is the largest network in the United States, serving more than 65 million people in 13 states, including New Jersey, where Silverman advises the state utility board.

The PJM grid faces a major imbalance between supply and demand. It holds auctions to secure electrical capacity from power plants to ensure the grid remains reliable. An invoice of 2.2 billion dollars was revealed in the auction between 2024-2025. The bill was later increased by more than 500% to $14.7 billion for 2025-2026.

An independent observer monitoring these PJM auctions found that actual and projected data center demand accounted for $9.3 billion, or 63% of the total power capacity bill from 2025-2026. In the latest auction, prices rose another 10% to $16.1 billion.

“The increase in data center load is the primary driver of current and expected capacity market conditions, including total forecast load growth, tight supply and demand balance, and higher prices,” the firm Monitoring Analytics said in June. he said. Independent Market Monitor report.

These capacity prices are reflected in consumers’ electricity bills, Silverman said. Data center load at PJM is also impacting prices in non-industry-leading states like New Jersey, where prices are up nearly 20% year over year. Democrat Mikie Sherrill won the governor’s race in the Garden State in part by promising to freeze utility bill increases.

“This is an extremely large component of the affordability crisis we have right now,” Silverman said of the data center impact on capacity prices.

Silverman said there are other reasons why electricity prices are rising. He said the aging power grid needs upgrades at a time of widespread inflation and the cost of building new transmission lines is rising by double digits.

Utilities also point to increased demand from the expansion of domestic manufacturing and broader electrification of the economy, such as electric vehicles and the adoption of electric heat pumps in some regions.

Although some Democrats blame the White House, the conditions that led to increased electricity prices in the PJM region began before the second Trump administration took office.

Silverman said PJM’s process for commissioning the new electricity supply “crashed and burned.” Tax subsidies under the Inflation Reduction Act have led to an increase in renewable energy projects awaiting grid connection. He said PJM is struggling to keep up with approvals, which can take five years in some cases.

PJM’s watchdog said that without the grid’s data centres, there might be a shortage of power supplies, but demand growth would be slower, giving the market more time to resolve the issue.

“It is misleading to claim that capacity market results are merely a reflection of supply and demand,” the watchdog said, calling the rapid load growth from data centers “unprecedented.” he said.

Trump has promised to cut electricity prices in half in his first year in office. This has not happened and is unlikely to happen in the coming years due to tight supply and demand.

“It’s hard to see electricity bills going down this decade,” said Rob Gramlich, president of energy industry consulting firm Grid Strategies.

Texas operates its own grid, ERCOTA relatively rapid process that could connect new electricity supplies to the grid in about three years, according to a February 2024 report Brattle Group.

California, meanwhile, has the third-most data centers in the country and the second-highest residential electricity prices, nearly 80% above the national average. However, prices in the Golden State increased by approximately 1% in August 2024 compared to the previous year period; this was well below the average increase nationwide.

One of the reasons why California’s electricity prices are much higher than most of the country is the costs associated with preventing wildfires. PG&EThe state’s largest utility said in March that it expected rates to remain flat this year due to costs associated with preventing wildfires. deducted from customers’ invoices.