How Data Centers Are Driving Up Your Electricity Costs
How Big Tech is driving up electricity demand and forcing consumers to foot the bill.
By Brock Hrehor, More Perfect Union
There’s a hidden cost to data centers—and it could be in your electric bill.
As massive tech companies pour billions into the AI race, data centers are springing up across the country to keep up with the demand for computing power. As a result of the record demand for electricity these centers incur, many ratepayers have found that their electricity bills are rising at an alarming pace.
This year alone, the tech industry is expected to spend $475 billion on data centers, a 45 percent increase since last year. This is projected to be especially taxing on electricity supply. While data centers make up about four percent of U.S. electricity demand today, that’s expected to triple in the next three years.
As a result of this increasing demand, electricity prices are rapidly following suit. According to an independent market monitor for PJM , the world’s largest energy market that covers 13 U.S. states from Illinois to Washington, D.C., it’s estimated that data centers were responsible for an added $9.3 billion in additional costs for ratepayers.
But more often than not, residents are left in the dark about the details of these plans. Negotiations surrounding the planning and construction of these centers are often shrouded by non-disclosure agreements. Residents often lack crucial information about the new costs these centers would incur or the companies behind the centers — or a meaningful voice in the conversation.
Meanwhile, the companies behind data centers, tech giants like Amazon and Meta, are frequently able to score reduced rates with localities and utilities companies for themselves while consumers must grapple with the rate increases. For example, one utility company in Louisiana proposed spending over $3 billion on a new power plant to meet demand for a data center that Meta had proposed.
“Meta has signed a 15 year deal and it only obligates them to pay for about half of that $3 to $4 billion of infrastructure, which means that there's a big risk that everyone else in Louisiana will get stuck with the rest of that bill,” Ari Peskoe, a professor at Harvard Law School and author of a recent report on how data centers affect energy markets, told More Perfect Union.
“Meta saw an opportunity to negotiate a massive data center deal without the public having any input,” Tyson Slocum, director of Public Citizen’s Energy Program, told More Perfect Union. “And to this day, there is still massive amounts of detail about that massive Meta AI complex that the people of Louisiana have no information about.”
Given the monopolistic nature of the electricity market, ratepayers aren’t able to shop around for other options in the same way that customers can in other industries. This means that they’re left with few avenues to advocate for themselves or their communities as the price of electricity continues to rise.
For a deeper look into how data centers are driving up utility prices for consumers while shirking the costs themselves, watch the video below.
Reporting by Samuel Black. See below for a full transcription of the video.
CASSANDRA LAINEZ, New Jersey Resident: When I noticed my electric bill had gone up, I started asking my neighbors, is your bill also going up? And they had no idea that this was happening.
SAM, More Perfect Union: If you live in any of these states, your electric bill is higher this summer. It's not because of anything you did. You're paying more because the world's biggest tech companies are building so many data centers.
SAM ALTMAN, OpenAI CEO: I do guess that a lot of the world gets covered in data centers over time, but I don’t know, because maybe put them in space.
SATYA NADELLA, Microsoft CEO: Is this something where we are committed to building out data centers across our 60 regions? We are absolutely going to.
SAM: Big Tech's quest for artificial intelligence is creating a tidal wave of new costs that are about to hit all of us, even if you live nowhere near a data center.
ARI: The big problem is that we're all subsidizing the wealthiest corporations in the world in their pursuit of artificial intelligence.
TYSON: Americans' utility bills are rising while Big Tech's profits are going through the roof.
SAM: We traveled into data center country and found a hidden wealth transfer. Everyday people covering the power costs of the data center buildout. Companies like Amazon and Meta striking secret deals with utilities.
TYSON: It's all proprietary. It's all behind non-disclosure agreements and blacked out documents.
SAM: And lobbying for a system that leaves all of us footing their bill, unless we do something about it.
CASSANDRA: So I've always paid attention to my electric bill, mainly for environmental-friendly reasons. I wanted to make sure I'm not using too much light and what room am I using the most light.
SAM: Cassandra Lainez lives in northern New Jersey. In July, she got an electric bill that caught her attention.
CASSANDRA: The thing I noticed right away was compared to the same time last year, my bill has gone up, but also I noticed my usage went down. I started to pay attention to this box area where it describes your supply charges, and I noticed a $29 increase on my bill. To me, honestly, it felt almost like a slap in the face to use less energy and then get charged more for it. A lot of folks sometimes work two to three jobs to be able to pay their bills and don't take the time or have the time and luxury to even look down at their bill. I sat down with a neighbor and I asked her about her electric bill, if it's gone up. And she was like, well, where would I check that? And she brought it out and I checked and her bill looks the same as mine. It's also gone up in the supply section.
SAM: I wanted to understand why Cassandra and her neighbors are suddenly paying so much more for electricity every month. To figure that out, I ended up having to travel 300 miles south.
JULIE BOLTHOUSE, Director of Land Use, Piedmont Environmental Council: This is like the Wall Street of the data center industry.
SAM: Julie Bolthouse researches the dramatic growth of an area of northern Virginia known as Data Center Alley.
JULIE: So there's already over 200 data centers that are built or approved in Loudoun County. We have the largest data center market in the world by far. And so there's a race to ensure that these companies have enough space to grow out what they hope to be the future of AI.
JENSEN HUANG, Interview with Bloomberg: The demand is just off the charts.
JON GRAY, Blackstone President and COO, CBS Interview: We’re the biggest owner, the biggest developer of data centers. And our pipeline right now is up 25% year on year.
SAM: Between 2021 and 2024, the number of data centers nationwide nearly doubled. And that's because companies like Amazon, Meta, Microsoft, and Google have decided to invest billions on technology that requires an enormous amount of computing power.
ELON MUSK, Interview: For AI, that means you've got to have the most powerful training computer. Training computer is kind of like the engine. How many, it’s the horsepower of the engine?
MARK ZUCKERBERG, Interview with The Information: We are basically all-in on this. We’re building multiple multi-gigawatt data centers.
ARI PESKOE, Director of the Electricity Law Initiative, Harvard Law School: As the tech industry is currently conceiving of artificial intelligence, it just requires a massive amount of energy-intensive, power-hungry computer chips.
SAM: Ari Peskoe wrote a recent report about how data centers are affecting energy markets.
ARI: We've seen announcements from Meta and from OpenAI that they intend to develop five gigawatt data center campuses.
MARK ZUCKERBERG: I mean, just to, I guess, put this in perspective, I think a gigawatt, it's like around the size of like a meaningful nuclear power plant only going towards training a model.
ARI: These AI development companies want to get these gigawatt size facilities online. They want many of them around the country and they want to do it within the next few years.
SAM: In 2025, the tech industry is expected to spend about $475 billion on data centers, up 42% since last year. Today, data centers make up about 4% of U.S.electricity demand. In just the next three years, that's expected to triple.
TYSON SLOCUM, Director, Public Citizen’s Energy Program: The United States has never generated more electricity in our history than we are today. The problem is, is that data centers are bursting through the envelope of energy demand and we're seeing record energy demand almost entirely being driven by data centers.
SAM: Tyson Slocum works on energy and utility issues at Public Citizen.
TYSON: And so, let's take an example in the world's largest power market, which is called PJM, it covers 13 US states from Illinois to Washington, DC, about 65 million Americans live within its footprint.
SAM: Many factors determine what we pay for electricity. But to understand how data centers are making it more expensive, it's important to know that the price that utility companies pay for power is set in regional markets. The biggest of those is a market known as the PJM.
TYSON: They had a big, what’s known as a capacity auction last year. Last year’s capacity option broke all records.
DAVID LAPP, People’s Counsel: And what happened last summer in the auction is the prices went up by 800%, a massive increase in costs.
SAM: David Lapp represents ratepayers in Maryland, another PJM state. He explained to me that when utilities have to pay a higher capacity price, they pass it on to consumers in the form of supply charges. According to the PJM's independent monitor, data centers were responsible for 63% of last year's price increase.
DAVID: We saw customers with bills $900, over $1,000. It's unfathomable that they are having to pay higher rates to support wealthy corporations building data centers.
TYSON: And it's not just PJM, we're seeing this happen across the country. We're seeing data center loads from coast to coast. It's affecting every energy market.
SAM: One way to start addressing this supply and demand problem would be to bring new power supply to the grid. But then the big question is, who's going to pay for that new infrastructure? The way the system currently works, we all pay for it.
ARI: So the utility business model is more than 100 years old and it was designed to spread electricity service at the beginning of the 20th century. The basic idea is that utility builds something and you socialize the costs to all of the rate payers that have no choice but to take that utility's service.
SAM: The cost of new infrastructure mostly shows up on another part of your electric bill, sometimes called delivery charges. Utility companies are allowed to set those charges high enough to recoup every dollar they spent building, plus a regulated rate of profit, usually around 10%.
ARI: So this is a huge profit opportunity. This growth in demand is a great excuse to build the sort of infrastructure that they're very comfortable building. If you look at sort of any of the earnings calls that these companies do, they're touting data center growth in their region.
SAM: To lure data centers to their service areas, utilities have started cutting direct deals with big tech.
ARI: One way the utilities might attract new data center customers is by offering them a good deal on electricity. This is a competition between utilities to attract these data centers.
SAM: Ari and his team looked at nearly 50 regulatory proceedings across the country about utility rates for data centers. What they found is that the deals between tech companies and utilities are typically hidden from the public. And there's good reason to believe we should be concerned about that.
ARI: The concern with these deals is that the data center may be underpaying, that it's not covering the cost that the utility is incurring to provide service to that data center. And there's going to be a shortfall for the utility, and it's going to look to the rest of us, to ordinary ratepayers, to make up that difference. And so our rates will go up in order to finance a sweetheart deal for a data center. One recent example is happening right now in Louisiana with a data center being developed by Meta.
SAM: Last year, a utility company in Louisiana proposed to spend $3 billion on a new power plant to meet electricity demand from a Meta data center. The full terms of its deal with Meta are secret, but redacted regulatory filings have revealed that the public is on the hook for Meta’s power plant.
ARI: Meta has signed a 15-year deal, and it only obligates them to pay for about half of that $3 to $4 billion of infrastructure, which means that there's a big risk that everyone else in Louisiana will get stuck with the rest of that bill.
MARK ZUCKERBERG: I believe deeply in building personal superintelligence for everyone. And at Meta, we have the resources to build the massive infrastructure required and the ability to deliver new technology to billions of people.
TYSON: Meta saw an opportunity to negotiate a massive data center deal without the public having any input. And to this day, there is still massive amounts of detail about that Meta AI complex that the people of Louisiana have no information about.
SAM: In Virginia, the utility company Dominion Energy has proposed to build six new power plants to meet data center demand, the first at a cost of $4.5 billion. According to one estimate, only 30% of that will be paid for by the customer class that includes data centers.
AD, Dominion Energy: At Dominion Energy, we know power is personal.
SAM: Residential customers will pay about half the cost, despite the fact that residential demand for electricity has flatlined. Dominion projects that average residential electric bills will more than double to $315 a month in the next 15 years, primarily due to data centers.
JULIE: We should not be having to pay the bill for the infrastructure that is supporting private companies that are making a ton of money off of this infrastructure. They're not building AI just because it's fun to build AI. They're building AI because it's making them money.
ARI: The right way to do it is to make sure that the data centers pay for every penny of this infrastructure.
SAM: In Maryland this year, ratepayers and advocates came together to try to address this problem and passed a state bill that creates a new customer class for data centers.
DAVID: So what this legislation does, and it's an important step forward, is it says these data centers don't fit within any of those customer classes and we need a new customer class for large loads.
ARI: Once you have a ratepayer class, then you can actually specifically charge that class for infrastructure that's being built for them, and you can isolate them from other ratepayers. Isolating these data centers is an important first step, and a number of states are taking that step.
SAM: The Oregon legislature also passed a law this spring that isolates data centers from other ratepayers. But taking that step in other states will not be easy, because big tech companies have other plans. A group called the Data Center Coalition is opposing these efforts at state capitals across the country. It's a membership organization made up of Amazon, Meta, Google, Microsoft, and dozens of other data center operators. And it claims that its members are already paying their fair share for power.
DAVID: We hear the data centers say, we welcome paying those costs, but we're not seeing them advocate for reforms where they really take on those costs.
TYSON: The data center coalition is corporate public relations, right? They're not paying their fair share. The numbers don't lie.
SAM: In the last few years, the data center coalition has raised millions of dollars from its corporate members. In Virginia last year, its PAC gave over $2 million to state legislators. The investment paid off this spring, when state leaders voted down several bills that would have regulated data centers.
TYSON: Big tech is literally the wealthiest, most profitable industry in the world. They have the capacity to pull out their pocketbooks and cover their costs associated with this data center expansion. Instead, the American people and small businesses that aren't data centers are covering their costs.
SAM: In the next 15 years, data centers are expected to add an additional $160 billion to grid costs in the U.S. If policymakers fail to change anything, by one estimate, electricity rates for average households will spike by as much as 70%.
CASSANDRA: I think if the tech companies are the ones that want to do this, are the ones that are in competition with each other, want to create this open market and have this business, I think they're the ones that need to pay for these infrastructures, you know, not myself.
SAM: Thanks so much for watching our video. If you'd like to see more stories like this, be sure to like and subscribe to our channel to get more More Perfect Union in your feed. And if you have ideas for other stories we should investigate, just drop them in the comments below.