Electricity prices are surging, voters are growing angry, and the artificial intelligence industry’s data centers are increasingly a target for blame with U.S. mid-term elections on the horizon.
Residential utility bills rose 6% on average nationwide in August compared with the same period in the previous year, according to the U.S. Energy Information Administration.
The reasons for price increases are often complex and vary by region. But in at least three states with high concentrations of data centers, electric bills climbed much faster than the national average during that period. Prices, for example, surged by 13% in Virginia, 16% in Illinois and 12% in Ohio.
The tech companies and AI labs are building data centers that consume a gigawatt or more of electricity in some cases, equivalent to more than 800,000 homes, the size of a city essentially.
Virginia has the highest concentration of data centers in the world. Democrat Abigail Spanberger won the state’s recent governor’s race in a landslide by campaigning on cost of living. Spanberger put at least part of the blame for rising electricity prices on data centers, promising to make tech companies “pay their own way and their fair share” of the escalating costs.
The governor’s race could be a harbinger of political headwinds for the AI industry’s data center buildout with the mid-term elections just a year away and Democrats zeroing in on affordability as their central issue. In Washington, some Democratic senators are targeting the close relationship that President Donald Trump has developed with the leaders of the major tech companies and AI labs.
Sen. Richard Blumenthal of Connecticut and Sen. Bernie Sanders of Vermont took aim this week at what they described as the White House’s “sweetheart deals with Big Tech companies,” accusing the administration of failing to protect consumers from “being forced to subsidize the cost of data centers.”
“The techlash is real,” said Abraham Silverman, who served as general counsel for New Jersey’s public utility board from 2019 until 2023 under outgoing Democratic Gov. Phil Murphy.
“Data centers aren’t always great neighbors,” said Silverman, now a researcher at Johns Hopkins University. “They tend to be loud, they can be dirty and there’s a number of communities, particularly in places with really high concentrations of data centers, that just don’t want more data centers.”
Virginia, Ohio and Illinois
Looking at the top fives states for data centers can help sort out some of the politics of data centers from what is actually happening to electricity prices.
Virginia, Illinois and Ohio are among those states and are mostly served by the same grid operator, PJM Interconnection. PJM is the largest grid in the U.S., serving more than 65 million people across 13 states including New Jersey where Silverman advised the state utility board.
The PJM grid is facing a major imbalance between demand and supply. It holds auctions to secure electric capacity from power plants to ensure the grid remains reliable. The auction for 2024 to 2025 resulted in a bill of $2.2 billion. The bill then surged more than 500% to $14.7 billion for 2025 to 2026.
An independent watchdog that monitors those PJM auctions found that data center demand, actual and forecast, made up $9.3 billion, or 63% of the total power capacity bill for 2025 to 2026. In the latest auction, prices jumped another 10% to $16.1 billion.
“Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices,” the firm Monitoring Analytics said in its June Independent Market Monitor report.
Those capacity prices get passed down to consumers in their utility bills, Silverman said. The data center load in PJM is also impacting prices in states that are not industry leaders such as New Jersey, where prices jumped about 20% year over year. Democrat Mikie Sherrill won the governor’s race in the Garden State in part on promising to freeze electric bill increases.
“It is an extremely large component of the affordability crisis we’re experiencing right now,” Silverman said of data center impact on capacity prices.
There are other reasons for rising electricity prices, Silverman said. The aging electric grid needs upgrades at a time of broad inflation and the cost of building new transmission lines has gone up by double digits, he said.
The utilities also point to rising demand from the expansion of domestic manufacturing and the broader electrification of the economy, such as electric vehicles and the adoption of electric heat pumps in some regions.
Although some Democrats are blaming the White House, the conditions that led to rising electricity prices in the PJM region began before the second Trump administration took office.
PJM’s process for bringing new electric supply online has “crashed and burned,” Silverman said. Tax subsidies under the Inflation Reduction Act led to a surge of renewable energy projects waiting for grid connection. PJM is struggling to keep up with approvals, which can take five years in some cases, he said.
PJM’s watchdog said the grid may have seen tight power supplies without data centers, but the demand growth would have been slower and allowed more time for the market to address it.
“It is misleading to assert that the capacity market results are simply just a reflection of supply and demand,” the watchdog said, describing the rapid load growth from data centers as “unprecendented.”
Trump promised to cut electricity prices in half during his first year in office. That has not happened and is unlikely to happen in the coming years due to tight supply and demand.
“It’s hard to see utility bills coming down in this decade,” said Rob Gramlich, president of Grid Strategies, a power sector consulting firm.
Texas and California
In other states, however, the relationship between rising electricity prices and data centers is less clear. Texas, for example, is second only to Virginia with more than 400 data centers. But prices in the Lone Star state increased about 4% year over year in August, lower than the national average.
Texas operates its own grid, ERCOT, with a relatively fast process that can connect new electric supply to the grid in around three years, according to a February 2024 report from the Brattle Group.
California, meanwhile, has the third most data centers in the nation and the second highest residential electricity prices, nearly 80% above the national average. But prices in the Golden State increased about 1% in August 2024 over the prior year period, far below the average hike nationwide.
One of the reasons California’s electricity rates are so much higher than most of the country is the costs associated with preventing wildfires. PG&E, the largest utility in the state, said in March that it expects rates to remain stable this year as costs associated with wildfire prevention are taken out of customers’ bills.
