World-Changing AI Is Raising US Electricity Bills

A report on the Consumer Price Index published in early August of this year found that the cost of electricity in the United States is rising at more than double the rate of general inflation. American households have seen their electricity bills rise 30% since 2021. This is contributing heavily to rising cost-of-living concerns across the country. At the center of these price hikes is the AI revolution, and the sector’s projected expansion means the increased costs are unlikely to level off any time soon.

The AI data centers sector, hungry for power, which accounts for much of the increased energy demand, is projected to undergo double-digit annual growth through the end of the decade. This far outpaces what the existing electrical grid and its operators are prepared to manage. Consumers are finding themselves footing the bill for the excess strain on the system. A study published by Carnegie Mellon University and North Carolina State University predicted an increase in household energy costs of 8 percent nationally by 2030, with up to 25 percent increases in select regional markets. This will be accompanied by a significant increase in greenhouse gas emissions from power generation during that period.

The success of the U.S. in the race to AI dominance hangs in the balance, and the public and private sectors will have to assume responsibility, take reasonable risks, do things differently, and innovate to meet the ever-increasing demand without simply pricing energy beyond the consumer’s capacity to sustain the costs of upgrades and expansion.

Unprecedented Electricity Demand Creates Unique Challenges

Nowhere is this trend more evident than in the area of the U.S. electrical grid. PJM Interconnection is the largest U.S. independent regional transmission organization, covering Illinois to the East Coast Mid-Atlantic region. The annual capacity auction held by PJM, meant to ensure that producers are prepared to handle even the highest levels of demand throughout the year, has seen costs rise by over 1000% in the last two years. According to Monitoring Analytics, an independent watchdog of PJM, roughly three-quarters of the increase, totaling over $9 billion, can be attributed to current and projected future demand from data centers.

The divide between everyday consumers and large corporations extends even beyond bill prices in the energy sector, as decisions about who to prioritize for power distribution and how to improve infrastructure must also be made. States across the country are faced with choosing between supporting a rapidly growing industry that will undoubtedly reshape the future and protecting their residents from ballooning expenses.

Big tech is looking to capitalize on the AI boom as soon as possible. Amazon Web Services even attempted to negotiate a deal with a Pennsylvania power plant that would link one of its data centers directly to the facility and take about 40% of production capacity before anything is distributed to residents.

Public Responses to Electricity Concerns Have Varied

Responses have varied across the country, with politicians and the public are beginning to wake up to the limits of the American grid ecosystem in its current state. As should be expected, the finger pointing has already begun.

In December 2024, Pennsylvania Governor Josh Shapiro filed a complaint with the Federal Energy Regulatory Commission against PJM. The lawsuit lays the blame for impending price increases on PJM’s capacity auctions, asserting that “Three unexpected developments—(1) significant load growth; (2) the country’s most snarled interconnection queue; and (3) a compressed capacity auction schedule—collided with PJM’s inapt design decisions to produce record high prices that are ineffective at delivering new power generation—the intended purpose of those high prices.”

Just this month, New Jersey Governor Phil Murphy signed a law requiring the NJ Board of Public Utilities to investigate PJM’s auction process and “…hold PJM responsible for hardworking New Jerseyans’ skyrocketing electricity bills and a lack of new energy generation.” It appears that both governors have decided to shoot the messenger, while the insufficient generation capacity stares everyone in the face.

Consumer protection measures are being implemented in several states. For example in Ohio, a proposal by energy producer American Electric Power was approved that forces large-scale data center customers to pay for a minimum of 85% of requested capacity even if they use less to support the costs involved in building out the infrastructure to bring power to their facilities.

In Georgia, base electrical rates have been frozen until 2028; and producer Georgia Power has been given more leeway to address the risks and costs of “large load users” like data centers. These developments in Ohio and Georgia are particularly noteworthy as they represent some of the highest growth markets for data centers nationwide. After previously offering tax incentives to draw data center operators to their respective states, lawmakers are now examining how to address the potential burden hosting these centers can impose on state residents.

Can the Private Sector Address Public Concerns?

In the private sector, including IT, financial burdens and the simplicity of access have also convinced many large tech corporations to produce their own power in-house. Data centers and AI companies are also investing in energy-saving technology and processes, as well as working with transmission and infrastructure managers to optimize the grid. For example, Google recently signed an agreement with Kairos Power and the Tennessee Valley Authority regional transmission organization under which the TVA will purchase energy from an advanced nuclear reactor to be built by Kairos. Google and Kairos will take on the financial risks of construction, while the TVA will provide the revenue stream for the plant through the power purchase agreement. The Kairos Hermes 2 fluoride salt cooled high temperature reactor (KP-FHR) using pebbled TRISO fuel, the first of its kind to be built, is designed to generate enough electricity to power about 36,000 homes. The reactor will help supply two Google data centers as well as households in the service area.

This multifaceted approach is a start, but there is much work to be done, and, in the meantime, the American consumer will bear the brunt of the cost. Legislation, regulatory measures, and private interests will all need to work in concert to meet demand while maintaining electricity that the American people can live with. AI is not going anywhere, and neither is its need for massive amounts of power. Given ingenuity, cooperation, common sense, and goodwill, U.S. electricity market is capable of handling it.