Data Center Boom Driving Up US Electricity Costs

The rapid expansion of data centers across the United States is projected to increase electricity consumption by 16% by 2029, according to a Schneider Electric report. This growth is primarily driven by artificial intelligence development, data storage needs, and other technology services. As utilities build new infrastructure to meet this demand, consumers are beginning to see higher electricity rates, with New Jersey residents recently warned of potential 20% increases starting June 1.

The number of data centers in the U.S. nearly doubled between 2021 and 2024, with the largest concentrations in Virginia, California, and Texas. These facilities, which house thousands of computer servers and networking equipment, require significant power not only for operation but also for cooling systems. According to the Department of Energy's Lawrence Berkeley National Laboratory, approximately 4.4% of U.S. electricity went to power data centers in 2023, with AI-related demand representing a growing portion of that consumption.

Utilities are factoring the increased demand from data centers into their pricing models. Dominion Energy, one of Virginia's largest utilities, proposed a price hike of $8.51 per month for 2026 and suggested creating a "new rate class for high energy users, including data centers." Electricity prices have risen 4.5% in the last year according to Labor Department data, with further increases anticipated this summer. Energy analysts have noted that certain policy changes could further impact consumer costs.

Beyond price increases, experts warn that the heightened energy demand could compromise grid reliability. The North American Electric Reliability Corporation reported that facilities serving AI and cryptocurrency companies are being developed faster than the power plants and transmission lines needed to support them, potentially resulting in "lower system stability." PJM, a grid operator serving 13 states and Washington, D.C., cited data center demand as a factor that could lead to capacity shortages in its 2025 forecast.

The article references potential impacts of a Republican-backed budget package that would repeal tax credits created under the Inflation Reduction Act. According to analysts from Rhodium Group, this legislation could increase a family's annual energy expenditures by nearly $400 if passed and signed into law by President Trump. This represents one of several factors, alongside data center expansion, contributing to rising electricity costs for American consumers.