Data centers strain grid as electricity costs climb
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Illustration: Aïda Amer/Axios
AI's exploding power demand is colliding with an aging electric grid, fueling statewide electricity price hikes that analysts say will keep rising.
The big picture: Sweltering summer heat drove electricity demand to a 14-year high this year — leading to soaring electric bills that strained Pittsburghers' pocketbooks.
- Many factors influence electricity prices, but massive new data centers are increasingly expected to play a role in stressing the regional grid that powers Pennsylvania.
What they're saying: Khamil Bailey, co-founder of Emerald City coworking space in Downtown, watched her business's Duquesne Light bill more than double in the past three months — soaring past $3,500.
- "It feels criminal," she tells Axios.
Between the lines: Utility providers say this summer's extreme heat, and the extra electricity needed to keep homes and businesses cool, was the biggest reason bills skyrocketed.
- But many Pennsylvanians, including Duquesne Light customers, were also hit with double-digit default rate hikes in June as power generation costs rose. State regulators point to two key pressures: higher prices in power grid operator PJM's capacity auctions and the rapid expansion of data centers.
How it works: PJM Interconnection holds annual capacity auctions to match projected demand with supply across the mid-Atlantic and Midwest — including Pennsylvania — setting the prices that utilities like Duquesne pay for power.
- In the past two years, rising energy demands and dwindling power supply have pushed capacity auction prices up nearly 1,000%, per Reuters — costs then passed on to consumers.
By the numbers: Duquesne Light customers are paying 11% more for electricity than last year, as prices climb across Pennsylvania's three biggest utilities, state fiscal analysts say.
Stunning stat: A new analysis from the Union of Concerned Scientists found Pennsylvania ratepayers paid an additional $491.7 million for electricity infrastructure projects approved last year to connect private data centers.
Catch up quick: PJM in January agreed to cap capacity prices for the next two auctions after Gov. Josh Shapiro filed a complaint with federal regulators, a move Shapiro says saved Pennsylvanians more than $1.6 billion on electricity bills.
- Still, PJM expects customers' bills to climb 1.5% to 5% next year.
Zoom out: Duquesne Light in a statement said the company recognizes affordability is a concern for many in the Pittsburgh area amid seasonal weather shifts and rising energy rates. The utility pointed to customer assistance programs designed to help ratepayers manage their energy costs.
- Customers can also lower costs by cutting energy use, adjusting thermostats, scheduling a free energy audit, and tapping rebates, the company said.
The latest: Shapiro and a bipartisan group of governors accused PJM last week of slow-walking permitting for new power projects and called for states to have a stronger hand in how the grid operator functions.
What's next: The Public Utility Commission and state lawmakers are weighing new rules for utility rates and services, focusing on big power users like data centers, and how to shield consumers when these heavy hitters plug into the grid.
Editor's note: This story has been updated with comment from Duquesne Light.