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Soaring electricity prices fuel backlash against AI data centers
A power substation near the LC1 CloudHQ data center in Ashburn, Virginia, on March 27, 2024.
Nathan Howard | Bloomberg | Getty Images
Voter anger at surging electricity prices is fueling political backlash against the artificial intelligence industry’s data centers, with Democrats accusing the Trump administration of failing to address the issue as they zero in on affordability ahead of next year’s mid-term elections.
Abigail Spanberger won last week’s governor’s race in Virginia, home to the largest concentration of data centers in the world, after promising to make the industry “pay their own way and their fair share” of rising electricity costs.
New Jersey governor-elect Mikie Sherrill has promised to declare a state of emergency over electric bills on her first day in office and freeze prices in the Garden State. Two Democrats were elected to Georgia’s commission that regulates utilities, breaking total Republican control, with one of the candidates arguing that prices are rising in the Peach State in part due to data centers.
On the heels of the election victories, Democratic senators in Washington led by 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.”
“As a result, everyday Americans are already being forced into bidding wars with trillion-dollar companies to keep the lights on at home,” the senators wrote Monday in a letter demanding solutions from the White House.
President Donald Trump promised to cut families’ electric bills by 50% in his first year in office. But residential prices in the U.S. increased about an average 6% in August nationwide compared to the same-period in 2024, according to October data from the Energy Information Administration. Prices soared about 21% in New Jersey, 13% in Virginia and about 5% in Georgia in the same period.
The reasons for price hikes vary by state and region, 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.
But data centers are playing the main role in rising bills on the PJM Interconnection electric grid that serves New Jersey and Virginia, Silverman said. PJM is the largest grid in the U.S., reaching more than 65 million people across 13 states in the Mid-Atlantic and parts of the Midwest and South.
“We are basically adding a Philadelphia’s worth of new electricity users to the grid every year, starting in 2025 and showing no signs of slowing,” Silverman said of the national increase in demand. “Where is that load growth coming from? The answer is data centers.”
Surging prices
The conditions that led to surging household electricity prices this year, particularly in the PJM region, took root before the second Trump administration entered office, when investment in AI data centers was just starting to ramp up.
The amount PJM agreed to pay in late 2022 to secure capacity from power plants, which ensures they are available when electricity use rises, totaled $2.2 billion. In 2024, the bill soared more than 500% to $14.7 billion. This year, it jumped another 9% to $16.1 billion.
The independent watchdog that monitors PJM found the main culprit for soaring capacity prices: data centers.
“The current conditions in the capacity market are almost entirely the result of large load additions from data centers, both actual historical and forecast,” the watchdog Monitoring Analytics concluded in its independent market monitor report published in June.
Those capacity prices are ultimately passed down to household electricity bills, Silverman said. “It is an extremely large component of the affordability crisis we’re experiencing right now.”
New Jersey utility PSE&G, owned by Public Service Enterprise Group, acknowledged the impact of exploding capacity prices in a February letter to consumers warning of a 17% increase in their bills, though it didn’t call out data centers.
“Utilities do not earn a profit on the electric supply; these costs are passed through directly to customers,” the company said.
The problem could get worse as the data center build out accelerates — at least for now. Power used by data centers in advanced stages of planning in Pennsylvania, for example, jumped more than 40% to 20.5 gigawatts in the third quarter, up from 14.4 gigawatts previously, according to the utility PPL. That’s equivalent to the power consumption of about 17 million U.S. homes.
“I want to be clear that these load additions are real, they are coming fast and furious,” PPL CEO Vincent Sorgi said on its latest earnings call. “The bottom line is that we need to start building new generation as soon as possible.”
It is unlikely that residential utility bills will come down this decade as demand is expected to remain high and supplies tight, said Rob Gramlich, president of Grid Strategies, a power sector consulting firm.
Political blame game
The Democratic senators accused the Trump administration of making the affordability problem worse with its attacks on renewable energy. Trump has tried to halt the expansion of wind power, particularly offshore wind projects, and his signature piece of domestic legislation, the One Big Beautiful Bill, phases out tax credits for renewable energy.
Renewables are the most readily available source of generation to meet new demand, with solar, battery storage and wind making up more than 90% of the projects that are waiting to connect to the grid, according to August data from the consulting firm Enverus. Sherrill and Spanberger campaigned on expanding renewable energy in New Jersey and Virginia not to lower carbon emissions, but to help bring down energy costs.
The White House blames the Biden administration and its renewable energy policies for driving up electricity prices. Trump “declared an energy emergency to reverse four years of Biden’s disastrous policies, accelerate large-scale grid infrastructure projects, and expedite the expansion of coal, natural gas and nuclear power generation,” White House spokeswoman Taylor Rogers said in a statement.
The AI industry should pay for the new generation and transmission that is needed to support their data centers, Silverman said. “If we do that, then we are really going a long way to insulate mom and pop consumers from the higher costs,” he said.
The Data Center Coalition, a lobbying group, said in a statement that “the industry is committed to paying its full cost of service for the energy it uses.”
