#26 Why Data Centers Are Raising Your Electric Bill
Your power bill went up last year. It is going up again this year. Most of that increase has not even reached your account yet, because the utilities already asked for it and the regulators already said yes.
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Seven in ten Americans do not want a data center built anywhere near them. In the first three months of this year, ordinary people blocked or delayed seventy five of them worth about one hundred and thirty billion dollars.
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And Congress noticed. A House committee voted fifty two to nothing on a bill to protect you from the cost. Then you read the bill and find out that what it actually requires is a meeting. Every one of these lands in the same place. Somebody decided you were going to pay, and nobody put a name on it.
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Between April of last year and April of this year, residential electricity prices in this country rose seven point three percent. That is a federal number. Not a think tank number, not an advocacy group number. Over that same stretch, general inflation did not come close to it.
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Here is the number that matters more, and almost nobody has seen it. In twenty twenty five, utilities across the country asked state regulators for a record thirty one billion dollars in rate increases. That is more than double what they asked for the year before. And the year before was already near a record.
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Most of those requests were approved. Nearly half of them were still sitting in front of regulators when this year started. So the money has been granted, and a large share of it has not shown up on your bill yet.
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Charles Hua runs a nonprofit called PowerLines that tracks this. His line on it was plain. These increases have not actually hit people's wallets yet.
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Which means when your bill jumps again this fall, it will not be new. It will be a decision that was already made, months ago, in a room you did not know existed.
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Let me explain how that room works, because most people have never had a reason to learn it, and you cannot follow the rest of this without it.
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Your electric utility is a monopoly. You do not shop for a different one. There is no competitor down the road offering a better deal on the same wires.
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That was a deliberate choice, and it goes back about a hundred years. Running two sets of power lines down the same street is wasteful, so the government granted each utility an exclusive territory. In exchange, the utility gave up the right to set its own prices, and took on a legal duty to serve everyone in that territory.
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That trade is the whole foundation of your electric bill. You cannot leave. They cannot gouge you. A state board sits in the middle and decides what is fair.
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Most states call that board the Public Utility Commission or the Public Service Commission. When the utility wants more money, it files what is called a rate case. The commission holds hearings, reviews the numbers, and rules.
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Now here is the part that changes how you hear everything else in this episode.
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The commission does not just approve a price. It approves a rate of return. That is the profit the utility is allowed to earn, expressed as a percentage, on the capital it has invested in physical equipment. Power plants. Substations. Transmission lines. Poles.
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Think about what that means. The utility does not get rich by selling you more electricity. It gets rich by building things and then earning a guaranteed percentage on what it spent.
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Every dollar of steel and concrete it puts in the ground earns a return for the next thirty or forty years. Not a hope of a return. An approved one, set by a board, collected from you.
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So when someone tells you the utility wants to build a new plant because demand is up, that may be true. It is also true that building is the only way it makes money, and nobody in that arrangement has an incentive to build less.
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That is not a scandal. That is how the system was designed. But it means the only thing standing between you and unlimited construction is a state commission saying no.
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Go pull out your last bill and look at it. There are two big pieces on there. One is the supply charge, sometimes called generation. That is the electricity itself. The other is the delivery charge, sometimes called distribution or transmission. That is the wires, the poles, the substations and the transformers that carry it to your house.
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The supply side moves with fuel prices. The delivery side is the capital. The delivery side is where the rate of return lives.
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So when your bill goes up, it matters a great deal which half went up. If it is supply, that is fuel and market prices doing what fuel and market prices do. If it is delivery, somebody built something, and you are paying a return on it for the next several decades.
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Which brings up the obvious question. Who argues your side at that hearing.
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Most states have an office set up to do exactly that. The names vary. Office of Consumer Advocate. Public Counsel. Ratepayer Advocate. Their job is to represent residential customers in rate cases.
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Ask ten people you know if they can name theirs. You will get ten blank looks.
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Meanwhile the utility shows up with a legal team, outside consultants, and expert witnesses it hired. Large industrial customers show up too, because a factory that runs on electricity employs people to watch this full time. The household is the least represented party in a proceeding that exists entirely to set the household's bill.
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Now here is a piece specific to where I live, and to a lot of you listening. If you get your power from the Tennessee Valley Authority, none of that applies to you. TVA is a federal corporation. It sets its own rates. Its board answers to Washington, not to a state commission, and there is no state rate case for you to show up to.
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So depending on where you sit, you either have a hearing you have never attended, or you have no hearing at all.
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And this is not a small pot of money. Electricity prices in this country are up roughly forty percent since two thousand one. Piped gas went up eleven percent last year alone.
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And I am not going to sit here and tell you every dollar of this is data centers or bad energy policy, because it is not. The people who track rate increases point at three other drivers that have nothing to do with either one. Aging infrastructure that is finally coming due. Extreme weather and the storm hardening that follows it. And natural gas price spikes that pass straight through to the supply side of your bill.
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That forty percent climb since two thousand one started long before anybody was training an artificial intelligence model. A good piece of this is a country that stopped maintaining its grid and got paid late.
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Here is the one thing you can actually do about any of it, and it takes about ten minutes. Search for your state's public utility commission. Nearly all of them post their dockets online, which means you can see every pending rate case, who filed it, how much they are asking for, and when the hearing is.
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Then search for your state's consumer advocate or public counsel, and find out who is supposed to be arguing your side.
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You may not change a single thing. But you will know the number before it lands on your bill, and right now almost nobody does.
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Wall Street has been watching this more closely than most voters have. An analyst at Jefferies described the shift this way. The industry story for this year is moving from growth at any cost to growth with a customer permission slip.
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Read that again. The people who own the utility stocks have worked out that the public has run out of patience. Their concern is not your bill. Their concern is that regulators are about to start saying no, and a regulator saying no costs them money.
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That is what happens when pressure finally builds in a system like this one. Not a reckoning. A repositioning.
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So where is the money going.
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The answer everybody gives is data centers. Let me tell you what one actually is before we argue about it, because the term gets thrown around like everybody already knows.
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A data center is a building full of computers. That is it. Rows and rows of servers, running around the clock, with enormous cooling systems to keep them from cooking themselves. Every email you store, every photo in the cloud, every streaming show, every website you have ever loaded, lives in one.
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They have existed for decades and nobody complained, because storing your email does not take much power. Training and running artificial intelligence is a completely different animal. It is a heavy, continuous, twenty four hour load that never dips. One large facility can pull as much electricity as a small city.
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Here are the numbers. Data centers used roughly four point four percent of all the electricity consumed in the United States in twenty twenty three. Projections put that as high as twelve percent by twenty twenty eight. That estimate comes from the Heritage Foundation, which is not a group that goes looking for reasons to attack industry.
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In May, the North American Electric Reliability Corporation issued something called a Level Three Essential Actions notice. That is rare. It directed data centers to start reporting their usage so grid operators could see what was coming at them.
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Then there is PJM. If you have never heard of PJM, it runs the electric grid for all or part of fourteen states across the mid-Atlantic and the Midwest. Sixty five million people. PJM has an independent market monitor whose job is to watch the market for problems.
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That monitor concluded that expected power demand from data centers was a primary reason for twenty three billion dollars in customer price increases that will run until at least the end of twenty twenty eight.
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Twenty three billion dollars. That is not an estimate from an environmental group. That is the grid operator's own watchdog, in writing.
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So the public reaction has not been irrational. In March, Gallup found seven in ten Americans oppose data center construction in their own community. A watchdog group called Data Center Watch counted at least seventy five projects blocked or delayed by community pushback in the first three months of this year, worth roughly one hundred and thirty billion dollars.
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Monterey Park, California voted in June to ban them permanently inside the city limits. Not a pause. A ban, by referendum.
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In New York, Governor Kathy Hochul signed a one year statewide moratorium on new large scale data centers. That is the first one in the country.
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In Oregon, the Public Utility Commission unanimously approved a twenty nine point seven percent rate increase aimed at Portland General Electric's largest consumers, which includes data centers, crypto operations and heavy industry. That one decision affects nearly a million ratepayers.
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And the states are moving in every direction at once. Virginia keeps its subsidies but is bringing in a statewide energy consumption tax so data centers carry more of the load. Florida passed legislation meant to stop data centers from raising residents' electricity costs, with local moratoriums on top of it. Texas started auditing data center projects and telling developers to fund their own infrastructure. Georgia's Public Service Commission wrote rules requiring data centers to cover not just the power they burn but the upstream generation, transmission and distribution costs they create.
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North Carolina's governor, Josh Stein, wants the tax loophole eliminated that lets data center companies skip sales and use tax on the energy they buy.
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Now I want to be honest with you about the other side of this.
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The Institute for Energy Research went and looked at all fifty states. They compared how many data centers a state has against what electricity costs in that state. They found no statistically significant correlation. None.
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The ten states with the most data centers, which includes Virginia, Texas, California, Illinois and Ohio, averaged fourteen point four six cents per kilowatt hour. Every other state averaged fourteen point three nine cents. Those are the same number.
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Think about what that means. If data centers were driving the price, Texas and Virginia would lead the country in electricity costs. They do not. California does.
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So what explains the difference between a cheap state and an expensive one. IER points at state energy policy. Renewable mandates, subsidies aimed at the sources politicians prefer, and shutting down working power plants before the end of their useful life.
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Heritage got to the same place from a different direction. For years, policy subsidized wind and solar while putting regulatory pressure on coal and natural gas. Those subsidies pushed wholesale prices down during high output hours, which wrecked the economics of nuclear plants and helped close some of them early.
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Now the grid needs steady around the clock power more than it has in a generation, and there is less of it than there was.
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Both of those things are true at the same time, and that is where most of the coverage falls apart.
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Inside PJM, the data center demand is documented, specific, and priced. Twenty three billion dollars, in writing, from the market monitor. That is real and it is regional.
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Nationally, the gap between what you pay in one state and what your cousin pays in another is mostly about what that state did with its power plants. That is real too.
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Which means if you live in a state that closed its baseload plants early, blaming a server farm lets your own legislature walk away clean. And if you live inside PJM, telling you the data centers have nothing to do with it is not true either.
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The politics of this have gotten strange, and that is worth thinking about.
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Vivek Ramaswamy, running for governor in Ohio as a Republican, has called for a moratorium on data centers. So has Francesca Hong, a Democrat running for governor in Wisconsin. An Oklahoma Republican state senator has proposed pausing new data centers in that state until late twenty twenty nine so somebody can study what they do to rates.
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In Arizona, Democratic Governor Katie Hobbs wants a penny a gallon water fee on data centers and wants the sales tax exemption gone. Water is its own fight, because the cooling systems on these buildings drink an enormous amount of it, and in the desert that is not an abstraction.
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President Trump posted that data centers must pay their own way. His own Energy Secretary, Chris Wright, has said publicly that data centers do not inflate electricity bills.
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The White House put out something called the Ratepayer Protection Pledge. Under it, companies agree to build, bring or buy all the power their data centers need and pay the full cost of it. They also agree to pay for the delivery infrastructure upgrades their facilities require, so those costs do not land on ordinary households.
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Most of the large operators signed it. Microsoft went further in January with its own plan, promising to cover its electricity costs, cut water use, and stop asking for tax breaks.
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Read the word pledge one more time, though. It is voluntary. Nobody signs a pledge that has a penalty attached.
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When the president and his own energy secretary are describing two different realities, and the Republican and the Democrat running for governor in two different states are proposing the same moratorium, you are not looking at a partisan fight. You are looking at a bill nobody wants to be caught holding.
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Here is the part almost nobody has heard of, and it has been sitting in state law for decades.
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It is called Construction Work in Progress. In the industry they shorten it to CWIP.
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Remember what I told you in the first segment. A utility earns an approved rate of return on the capital it has invested in equipment. That pool of equipment is called the rate base. If it is in the rate base, you are paying a return on it.
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The old rule was simple. A power plant only goes into the rate base once it is built and running. You bought power, you pay for the thing that made the power. If the project never gets finished, that is the company's problem, and the investors take the loss. That is how risk is supposed to work.
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CWIP changes that. It lets state regulators put a plant that is still under construction into the rate base. In plain English, you start paying for a power plant while it is being built. Before it produces a single watt. Before anybody knows whether it will ever run.
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And the utility collects its guaranteed return on that money the entire time.
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Now walk through the incentives. If the project runs two years late, the utility keeps collecting through those two extra years. If it runs a billion dollars over budget, the overrun goes into the rate base too, and you pay a return on that as well. Delay does not cost the company anything. Delay pays the company.
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This is not theory. Let me tell you what it looks like when it goes all the way wrong.
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In two thousand seven, the South Carolina legislature passed a law called the Base Load Review Act. It passed overwhelmingly, at the urging of a utility holding company called SCANA. The utility's own attorneys helped write it.
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The law let South Carolina Electric and Gas start charging customers for two new nuclear reactors before the reactors were finished. And it was written so the company could keep charging for the steel, the concrete and the labor even if the project was scrapped.
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Read that last part again. The law was written in advance to protect the company from failure. The people who wrote it were the company.
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Construction started in two thousand nine at the V.C. Summer station in Fairfield County. Two reactors. The original estimate was around nine point eight billion dollars.
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It went badly from early on. Delays. Overruns. Rates in South Carolina went up nine separate times while it was being built. At the peak, about eighteen percent of a customer's monthly electric bill was going to those two reactors. Call it twenty seven dollars a month, every month, for something that did not exist yet.
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Here is the detail I want you to hold onto. In the year before it all fell apart, SCANA's three highest paid executives all got raises. The chief executive made six point one million dollars, and his five percent raise was described in the company's own securities filing as based on his oversight and support of the new nuclear construction.
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He was paid a bonus for overseeing the construction. Two months later they walked away from it.
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On July thirty first, two thousand seventeen, they abandoned the project. About nine billion dollars had been spent. One reactor was roughly sixty percent complete, the other about forty percent. Neither one has ever produced a watt of electricity, and they are still sitting there.
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Executives were indicted. Some were convicted. Thousands of people lost their jobs. SCANA was swallowed by Dominion Energy in a fourteen point six billion dollar takeover.
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And the customers kept paying. In two thousand eighteen, state regulators ruled that South Carolina Electric and Gas customers would pay another two point three billion dollars for the two reactors that will never run. Santee Cooper, the state owned utility that was the other partner, carried about three point six billion dollars of debt of its own.
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As of a couple of years ago, Dominion's roughly eight hundred thousand South Carolina customers still had about fifteen more years left to pay. It works out to five point six percent of the monthly bill. A little over eight dollars a month for the average house.
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And here is the last piece of it. That charge is not itemized. It does not show up on the bill as a line. You are paying eight dollars a month for two reactors that were abandoned before some of you finished high school, and the bill does not say so.
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South Carolina was not alone. Duke Energy in Florida used that state's cost recovery statute to start two nuclear reactors in Levy County, spent over a billion dollars, abandoned the project in two thousand thirteen, and the ratepayers covered it.
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So when I tell you that the rule letting a utility bill you for an unfinished plant is worth knowing about, that is what I am talking about. It is not an accounting footnote. In two states it produced billions of dollars in charges for concrete sitting in a field.
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The Manhattan Institute went back and traced the whole pattern, from the nuclear plants of the nineteen seventies to recent offshore wind expansions. Same three results every time. Higher bills. Longer timelines. And risk moved off the investors and onto the ratepayers.
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The fixes they laid out are not complicated. Cap the budget that early cost recovery applies to. Tie the utility's return to actually hitting the schedule. Claw the money back when a project blows past its estimate. Or go back to the old rule, where a company recovers its costs after the plant is running and not before.
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None of that is radical. It is how nearly every other business in this country already operates. You deliver the thing, then you get paid for the thing.
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Now the second piece, and this one is about who gets a break and who does not.
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Virginia exempts data centers from sales and use tax. That exemption cost the state more than one billion dollars in twenty twenty four, and was projected to cost close to double that in twenty twenty five. Indiana's is almost as large. Most states offer some version of it.
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Who is collecting it. Google. Amazon. Companies sitting on more cash than most state governments will handle in a decade.
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The Cato Institute looked at that and did not hedge. Their position is that given the demand for artificial intelligence and everything else running on the internet, these buildings get built with or without the subsidies. The handouts are not economic development. They are companies playing states against each other to see who blinks first, at the taxpayer's expense. Cato's recommendation ran two words. Kill them all.
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When Cato says a corporate subsidy should be eliminated entirely, that is not an anti-business position. That is a market position. The company does not need the money, and the taxpayer should not be handing it over.
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So there are the two halves. A rule that lets a monopoly bill you for a plant that does not exist, and a tax break that lets a trillion dollar company skip the sales tax on the electricity it buys.
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Now let me tell you what Congress did about it.
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The bill is called the Ratepayer Protection Act. It came out of the House Energy and Commerce Committee on a vote of fifty two to nothing. Unanimous. Every Republican and every Democrat on the committee.
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That kind of vote does not happen in this country anymore. When it does, everybody involved wants to be photographed casting it. So the question is what the bill actually says.
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Here is what it says. It requires state regulators to hold a hearing on a standard that would make large data centers pay for the new power plants and power lines their own electricity use requires.
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It requires them to hold a hearing. It does not require them to adopt anything.
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It also writes into federal law that voluntary White House pledge, the one the tech companies already signed on their own. Senator Jon Husted of Ohio introduced the Senate version last month.
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So the answer to the cost of electricity is a federal law directing state boards to schedule a meeting about a promise the companies already made for free.
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That is why it passed fifty two to nothing. Nothing in it costs anybody anything.
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And it is not the only place this is happening. Lawmakers in more than thirty states have introduced over three hundred bills this year touching data centers. Moratoriums, tax incentives, rate structures, water use. Three hundred bills.
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One state has actually enacted a moratorium. New York.
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Three hundred bills. One law. That ratio is the whole shape of an election year.
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And the tools that would change something are already known and already written down. End the subsidies, which is what the Cato Institute wants. Fix the construction rule so a utility cannot bill you for a plant it has not finished, which the Manhattan Institute laid out with four specific options. Look hard at whether your own state closed working plants it should have kept, which is what the Institute for Energy Research found is driving the gap between the cheap states and the expensive ones.
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Every one of those is available right now. Not one of them is in the bill that passed fifty two to nothing.
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So that is where this sits. Your bill went up seven point three percent in a year, and the largest part of the increase has not landed yet, because the regulators already approved it and the utilities are still rolling it out. The data centers are a documented driver in some regions and a convenient excuse in others, and which one it is depends on what your own state did with its power plants. And the two mechanisms that quietly decide what you pay, a construction rule that already cost South Carolina nine billion dollars for nothing, and a sales tax break written for companies that do not need it, are not being touched by anybody, because touching them means somebody has to look a utility or a tech company in the eye and say no.
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AND THAT'S IT.
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That is everyone knows. The hard truth, the stuff nobody else will say, and the thing that keeps you going.
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I am Brian Bullock of starborn studios. Find me on X at Everyoneknows1. If this hits you share it with someone who needs to hear it. Subscribe. leave a review. Come find us at brianbullockwriter.com
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Because everyone knows. Your silence is your consent