Data Centers Hiked Electricity Prices by $23 Billion: Who Pays?
Data centers have hiked electricity prices on the public by $23B
I explain how data centers have driven a $23 billion surge in electricity costs for PJM customers through complex rate-setting loopholes. While these facilities can manipulate their usage to avoid peak demand charges, residential users often bear the burden of grid upgrades. With consumer advocates frequently barred from challenging cost allocations, ordinary households are left paying for infrastructure that may never be fully utilized by the tech giants.
Some states have specific state-government agencies to do some of this work on behalf of particular commercial groups, but regulators don't always get a good sense of residential customers' voices.
- kmod
This $23B number that gets thrown around is not the increase to the public. The wording in the referenced report is
> Based on actual auction clearing prices and quantities and uplift MW, inclusion of existing and forecast data center load growth resulted in a combined total increase in capacity market revenue for the 2025/2026 BRA, the 2026/2027 BRA, and the 2027/2028 BRA of $23,100,955,341.
This is the increase in revenue to PJM from adding datacenter customers, and includes both the amount that datacenters paid as well as the amount that other customers paid due to higher prices from datacenters. So Fortune calling it an increase to "the public" means that they didn't read the report they are using as their source and are probably just repeating what they thought someone else meant.
Bloomberg in the past worded it as "data centers will add at least $23 billion to customer bills" in April and "added a minimum of $23 billion to customer bills" in February. Which while technically correct (datacenters are customers) seems meant to be misleading. And now that's the number that's getting thrown around as the increase to "the public".
The part I don't get is that the journalists could just give the actual number for the quantity that they are referring to (the amount that non-datacenters paid due to higher rates due to datacenter loads): when I calculated it a few months ago I think it was something like $16 billion rather than $23 billion. I feel like the story would have the s […]
- m-hodges
> But what if the power company needs to upgrade the substation to handle the increased needs of the data center? Or secure additional sources of electricity? In these cases, the investments are part of the electricity grid that everyone uses. These costs will likely be shared among all customers.
Okay but this is a policy choice. It doesn’t have to be that way.
- anubistheta
It's important to ground the increase in raw numbers.
The total revenue for electricity generation was $514b in 2024. So this was a 4-5% increase in costs. And if it is being invested in better generation and our aging infrastructure, that seems fine.
- jbellis
This just isn't true. On balance, data centers are turning out to be more like the "anchor tenant" of the power grid, financing improvements for everyone.
Overview article with links to actual studies: https://cityjournal.substack.com/p/data-centers-arent-raisin...
- thelastgallon
Consumers pay for everything -- increased RAM, SSD, CPU, GPU prices, either directly (for DIY) or indirectly (apple/android phones). We pay dramatically increased prices for every device. We pay more because servers (non AI) cost a lot more now, which means cloud (or your own DC) bills increases for all companies and they are all going to raise prices.
Electricity will cost more because AI DCs need to be cheap, all upgrades cost will be borne by consumers.
Water will be less available and/or cost more because all forms of energy (except solar, wind, hydro) need a TON of water[1]. Which was ~48 trillion gallons in 2021.
As a consequence, nearly everything will cost a lot more. And this is the price we pay for AI. AI has hijacked the supply chains built for existing uses, taken over all the low cost ones. Forcing the rest of humanity to bear the costs of building everything new at a high cost, both high CapEx/OpEx.
These externalities must be accounted for when thinking about how 'cheap' AI is.
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[1]From: https://www.eia.gov/todayinenergy/detail.php?id=56820
U.S. electric power sector water withdrawals for power plant cooling: 47.7 trillion gallons of water.
The electric power sector uses a large amount of water, mostly for cooling. Thermoelectric power plants (including natural gas, nuclear, and coal plants) boil water to create steam, which spins a turbine to generate electricity. The steam leaving the turbine must be cooled back into water to be used to generate more elect […]
- seanmcdirmid
Isn't this the classic overcapacity leads to lower prices that also represses investments that would increase capacity. But those lower prices also stimulate new demand that lead to higher prices...which then motivate investments that increase capacity?
Perhaps I'm just spoiled because I live in the PNW, where are best use for overcapacity was to ship power off to California. But in the past, cheap hydro attracted aluminum production that then attracted also attracted a whole airplane production industry.
I think most people are just debating whether the extra demand generated by AI is worth it, they weren't necessarily debating the same thing when it came aluminum or airplane production (albeit in the 1930s).
- ChrisArchitect
Maybe what they're doing in Oregon with POWER Act hikes on data centers is the way:
Oregon approves PGE’s 29.7% rate hike for data centers under landmark law
https://www.opb.org/article/2026/07/07/oregon-data-center-ge...
- jillesvangurp
There are a few things going on at the same time that mean that electricity cost might actually go down.
The reasons for that are complex but have to do with how electricity pricing works. In many markets the price includes a lot of taxes, fixed cost for providers and infrastructure. Generation is only a minor cost. And on top of that the prices are set in a way that isn't really that flexible.
Infrastructure utilization is a very important here. Grid operators are very conservative with their infrastructure. They want to ensure there's enough to handle the worst case. That means there are a lot of assets that are nowhere near 100% utilized (e.g. cables and long distance transmission). It also means they are very inflexible serving new demand like data centers.
Adding batteries as energy buffers enables a lot better utilization of all these assets. That enables more revenue for the same infrastructure cost. Electricity prices can actually go down if you do that right. With renewables, there is very low marginal cost for generation. It's all infrastructure cost. Anything that improves infrastructure utilization enables more customers to have power that then share the infrastructure cost.
Data centers that are currently powered by things like on site gas turbines are not being very cost efficient. There's an obvious incentive for hyper scalers to invest in infrastructure that will lower their cost. They have access to many billions. They are spending on anything that will get t […]