Leadership1 publisher3 min readPublished
Utilities are pricing data-center demand into electricity rates
New Jersey's utilities board warned power bills could rise up to 20% from June 1, with data centers a key driver. Utilities elsewhere are building the same demand into their pricing, so energy belongs among the costs an operator should expect to climb.
The Board Room · Leadership desk
What happened
- Schneider Electric projects electricity demand will rise 16% by 2029, mainly because of the spread of data centers.
- Electricity prices rose 4.5% over the past year, according to Labor Department data.
- The North American Electric Reliability Corp warned that AI and crypto facilities are being built faster than the plants and transmission lines needed to serve them.
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Why it matters
- cost If Wolfe is right that grid-reliant data centers leave the bill with ratepayers, customers outside the data-center business are paying for capacity built to serve it.
- constraint Because gas prices, inflation and electrification also lift rates, a slowdown in data-center building would not on its own bring bills back down.
- exposure Operators on grids where new load outruns new plants and lines carry reliability risk alongside price risk, given NERC's warning of lower system stability.
Most data centers draw their power from the public grid, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association [4]. The number of US data centers nearly doubled between 2021 and 2024, according to Environment America [7]. They used about 4.4% of US electricity in 2023, a Lawrence Berkeley National Laboratory study found [11]. Torsten Slok, chief economist at Apollo Global Management, estimates they will need another 18 gigawatts of capacity by 2030 [9]. New York City uses about 6 gigawatts [10], so Slok's figure is roughly three times the city's demand [1].
A partial counterweight comes from Dave Turk, a former deputy secretary of the US Department of Energy. "The trend has been bigger data centers," he told CBS MoneyWatch. "They tend to be more energy efficient." [8] Better efficiency per site still adds load when the number of sites nearly doubles [7]. The same report names natural gas prices, inflation and the electrification of buildings and vehicles as other drivers of higher prices [12]. Even so, utilities are factoring data-center demand into their pricing models [13].
Attribution matters most for who pays. Dominion Energy's proposed rate class for high energy users, including data centers [14], would sort customers by how much they draw. For an operator, the trade-off depends on size. Such a class could shield smaller customers from costs that large loads cause, and it would put those costs on any firm heavy enough to qualify, data center or not. The report does not say where Dominion would set the threshold.
Wolfe's complaint is about process as much as price. "As utilities race to meet skyrocketing demand from AI and cloud computing, they're building new infrastructure and raising rates, often without transparency or public input," he told CBS MoneyWatch in an email [5]. "That means higher electricity bills for everyday households, while tech companies benefit from sweetheart deals behind closed doors." [6] His association represents states on energy issues [4].
The figures run on two time horizons. New Jersey's increase, with data centers a key driver [2], starts June 1 [1], and Dominion's proposal is for 2026 [14]. The Schneider Electric projection runs to 2029 and Slok's estimate to 2030 [3][9]. Rhodium Group analysts add a policy variable. They estimate the Republican-backed budget package, by repealing Inflation Reduction Act tax credits, could add nearly $400 a year to a family's energy spending [16].
For a budget set this quarter, the record gives a range. New Jersey's ceiling of 20% is about 4.4 times the past year's national increase [2]. Data centers are most concentrated in Virginia, California and Texas [18]. I'd plan next year's energy line at no less than the trailing national rise, and higher for sites in those three states.
What to watch
- Whether New Jersey's June 1 increase lands near its 20% ceiling once the new bills arrive.
- Whether Dominion's proposed rate class for high energy users is adopted, and at what consumption threshold.
- Whether the Republican-backed budget package passes with the tax-credit repeal Rhodium priced at nearly $400 a year per family.