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US power providers are seeking to impose big price increases on consumers following booming data centre demand, sparking debate over who should pay for the electricity burden of artificial intelligence.
Utilities have sought regulatory approval for $29bn in rate increases in the first half of 2025, a 142 per cent increase over the same period a year ago, according to a new report by PowerLines, an energy affordability advocacy group.
These increases highlight the question of whether surging electricity costs will be shared among all consumers, or charged directly to the large industrial users driving the new demand. Power consumption is expected to more than double in the next decade because of energy-intensive AI, according to BloombergNEF.
“What we’re . . . seeing is a deer-in-headlights dynamic,” said PowerLines executive director Charles Hua. “A lot of states don’t have a playbook for how they can meet rising [data centre] demand while balancing affordability and utility bills.”
US customers are served by a sprawling network of different utility companies, with many of the biggest planning prices increases.
National Grid, with customers in New York and Massachusetts, received approval in April to raise rates by $708mn, or up to $50 a month for each customer.
Meanwhile, PG&E, which serves 5.5mn business and residential customers in northern and central California, requested a $3.1bn rate increase in April, while Oncor, which serves 13mn customers in Texas, proposed an $834mn increase in June.
The Northern Indiana Public Service Company was allowed to increase monthly rates by $23 a customer, for a total of $257mn.
Utilities say the increases are in part needed to repair infrastructure damage, which has become more common because of climate change.
Massive capital investments are also needed to shore up the US’s ageing electricity grid and meet rapid demand growth.
But consumer advocates object to the price rises, and question whether households should bear the cost to ensure the US maintains its lead in AI technology.
One tool a growing number of utilities and regulators are turning to in order to keep bills down are so-called large-load tariffs, which charge big energy users for their excess load on the system.
AEP Ohio, a utility, in October filed a request with the Public Utilities Commission of Ohio, to charge data centres for 85 per cent of their projected energy use each month even if they use less, and pay an exit fee if their project folds.
Critics of these arrangements say it is not clear whether the costs are being allocated fairly. Some agreements between utilities and data centres take place behind closed doors.
Ari Peskoe, director at Harvard Law School’s electricity law initiative, said “these closed door proceedings are problematic as the regulator doesn’t get the benefit of multiple parties weighing in, and we don’t know” the terms of the deals.
“Meanwhile the utility is spending billions of dollars on infrastructure,” he added.
A recent Mississippi state law bars utility regulators from reviewing contracts between a utility and a data centre. Kansas regulators are allowed to approve contracts favourable to data centres on the grounds they will spur economic growth or local employment.
Another option is clean energy transition tariffs, which involves data centres committing to buying clean energy through utilities, which funds new renewable projects.
The Public Utilities Commission of Nevada in May approved an agreement for Google to buy power from Fervo Energy’s geothermal plant.
Rich Powell, chief executive of the Clean Energy Buyers Association — whose members include Google, Meta, Microsoft and Amazon — said the tariffs “insulate rate payers from higher costs while giving buyers long-term supply certainty”, though some cost sharing is necessary.
Utilities say they only invest in infrastructure when they have certainty that data centre projects will come to fruition, and that large customers such as data centres will help make their fixed costs more manageable.
PG&E said it “wants what our customers want — safe, reliable, clean and affordable energy service. We are delivering on our commitment to stabilise energy bills.”
