Electricity costs rise amid data center boom
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Electricity costs are rising nationwide — and could get even higher for some amid the explosion in data centers powering AI and more.
Why it matters: Surging power bills could further stress many Americans' budgets as pretty much everything else gets more expensive, too.
By the numbers: The nationwide average retail residential price for 1 kilowatt-hour of electricity rose from 16.41 cents to 17.47 cents between May 2024 and May 2025, per the latest available data from the U.S. Energy Information Administration, a gain of about 6.5%.
- Some states saw much larger increases, such as Maine (+36.3%), Connecticut (+18.4%) and Utah (+15.2%).
- Just five states saw a decrease, including Nevada (-17.7%) and Hawai'i (-7%).
Between the lines: Electricity prices vary regionally and have many influences, from basic supply and demand to fuel rates and infrastructure costs.
- Yet many analysts point to power-hungry data centers as a driver of rising rates, especially in data center hotspots.
- That's partly because of data centers' immediate demand for energy, but also because grid operators are investing in new transmission lines and other gear to handle their expected proliferation — and passing those costs along to customers.
What they're saying: "Anywhere you're seeing a massive takeoff in load growth, the most likely cause is data centers, and that is almost certainly going to have an impact on electric rates," says Cathy Kunkel, energy consultant at the Institute for Energy Economics and Financial Analysis.
- A new IEEFA analysis highlights a dramatic spike in capacity market prices set at auction by PJM — an electric grid operator covering many Mid-Atlantic and Midwest states — largely tied to data centers, like those in Northern Virginia's "data center alley."
- One estimate found that data centers accounted for over 60% of the increase in prices in a PJM auction held last year, the report says — representing $9.3 billion that will be passed along to customers.
Zoom in: A December 2024 report from the Virginia General Assembly's Joint Legislative Audit and Review Commission found that data centers in the area are covering their own usage for now, but predicts that locals could see a $14-$37 increase in their monthly bills by 2040, before inflation.
Friction point: Data centers' need for power may outstrip electric utilities' ability to feed them, the JLARC report found, slowing their growth.
- Meanwhile, utilities that invest in new infrastructure to power the AI boom could find themselves in trouble should that boom turn out to be a bubble.
- What good are a bunch of new transmission lines if there's no power-thirsty customer at the other end?
What's next: The Trump administration is pushing "coal, natural gas, nuclear and hydropower plants to feed AI demand," Axios' Daniel Moore reports — but is hostile towards wind and solar.
- Adding new generation of any kind, meanwhile, takes time and money.
The bottom line: Many of us are paying for the AI boom, whether we use the tech or not.
