Big tech’s AI data centers are driving up electricity bills for everyone
- The San Juan Daily Star
- 2 days ago
- 6 min read
By Ivan Penn and Karen Weise
Just a few years ago, tech companies were minor players in energy, making investments in solar and wind farms to rein in their growing carbon footprints and placate customers concerned about climate change. But now they are changing the face of the U.S. power industry and blurring the line between energy consumer and energy producer. They have morphed into some of energy’s most dominant players.
They have set up subsidiaries that invest in power generation and sell electricity. Much of the energy they produce is bought by utilities and then delivered to homes and businesses, including the tech companies themselves. Their operations and investments dwarf those of many traditional utilities.
But the tech industry’s all-out artificial intelligence push is fueling soaring demand for electricity to run data centers that dot the landscape in Virginia, Ohio and other states. Large, rectangular buildings packed with servers consumed more than 4% of the nation’s electricity in 2023, and government analysts estimate that will increase to as much as 12% in just three years.
The AI boom threatens to drive up power bills for residents and small businesses. Nationally, the average electricity rate for residents has risen more than 30% since 2020. Much of that increase has been driven by utilities catching up on deferred maintenance and hardening grids for extreme weather. But in the coming years, AI could turbocharge those increases.
It is difficult to predict what that will mean for consumers’ power bills. But recent reports expect data centers will require expensive upgrades to the electric grid, a cost that will be shared with residents and smaller businesses through higher rates unless state regulators and lawmakers force tech companies to cover those expenses.
A June analysis, from Carnegie Mellon University and North Carolina State University, found that electricity bills are on track to rise an average of 8% nationwide by 2030 and as much as 25% in places like Virginia because of data centers.
In some places, it is happening already. Starting in June, the electricity bill for a typical household in Ohio increased at least $15 a month because of data centers, according to data from a major local utility and an independent monitor.
Tech companies insist they are not trying to fob energy costs onto residents and small businesses, saying they are willing to pay for the power they use and for much of the equipment needed to make it available. But getting the companies to make consumers whole will not be easy because determining how much large users like data centers should pay is not straightforward.
The business of keeping America’s lights on is mostly about two things: supplying reliable electricity and figuring out what to charge to deliver it. In recent years, big tech companies have inserted themselves into debates over both. They lobby lawmakers and regulators, and they are pitching their own pricing schemes to challenge those of utilities.
The utilities pay for grid projects over decades, typically by raising prices for everyone connected to the grid. But suddenly, technology companies want to build so many data centers that utilities are being asked to spend a lot more money a lot faster. Lawmakers, regulators and consumer groups fear that households and smaller companies could be stuck footing these mounting bills.
“Unless people lean on the public utilities commissions, the ratepayers will take it on the chin,” said Mark Cooper, an economic analyst at the Institute for Energy and the Environment at the Vermont Law and Graduate School.
In the debate over who will foot the bill, the industry’s eyes have been fixed on Ohio.
On a snowy day in December, a first-of-its-kind showdown played out in a small hearing room in Columbus. Lawyers for Amazon, Google, Microsoft and other technology companies faced off against representatives of an electric utility.
The tech companies had plans for dozens of new data centers — so much that the local utility, American Electric Power, projected it would need six times the electricity central Ohio produced.
The utility had spent months meeting with the state’s consumer representative, tech companies, related industries and the staff of the regulator, the Public Utilities Commission of Ohio, to hammer out a deal.
But in October, before the negotiations were done, the tech companies gave the utility a few days’ notice that they were submitting their own proposal. Industry experts said they had never seen that kind of front-running before. Under the companies’ plan, they would pay less upfront than the utility had wanted.
Days later, the Ohio utility, the consumer representative and the regulator’s staff countered with a plan that would create a class of customer for data centers and would require them to pay more. This category would be in addition to the four main types of electricity customers — homes, businesses, factories and public rail systems — that pay different rates in Ohio and other states.
American Electric Power, which has 5.6 million customers in 11 states, warned the judge that if the state did not adopt its proposal, residents and smaller businesses would bear much of the costs for tech companies’ power demands.
Despite tech companies’ professed desire not to burden others, they often push regulators to impose some of the upgrade costs on everybody. They contend that data centers bring jobs to the area and that grid upgrades will ultimately help local businesses and residents.
The utility in Ohio has already committed to supplying electricity for 30 data centers in the region by 2030. But the tech industry is making additional requests to power 90 more data centers.
“We’re used to a couple megawatts added to our system,” Marc Reitter, the chief operating officer at the utility, said. “Massive amounts of power is extremely new territory.”
The utility’s proposal for a new category of customer will require data centers to make years of payments for the energy they need — something other customers are not required to do. It wanted data centers and cryptocurrency miners to pay at least 85% of the electricity they request, even if they did not use it.
But Amazon, Google, Meta, Microsoft and other tech companies said they should pay less than what the utility wanted. The settlement the companies filed had committed to 75% of the electricity they requested, depending on the length of the contract. That would leave other utility customers to shoulder more of the cost of new grid equipment.
In addition, the tech industry wanted all large customers, including factories, to be treated the same. And it proposed a higher threshold for determining if data centers should be considered large users than in the utility-led proposal.
Kevin Miller, who was until recently a vice president at Amazon, said the Ohio utility’s plan could result in tech companies overpaying because data centers ramp up operations in phases. And data centers could be required to pay for power even if the utility failed to deliver all the energy it had committed to supplying, he said.
Last month, after spending months weighing the proposals, the commission ruled 5-0 against the tech companies. Last Friday, the tech companies asked the commission to reconsider the case, calling the ruling “unlawful and unreasonable.”
The Ohio ruling hinged on a big concern for utilities and lawmakers: that the tech companies may be asking for a lot more power than they will ultimately use. The worry is that executives could overestimate demand for AI or underestimate the energy efficiency of future computer chips. Residents and smaller businesses would then be stuck covering much of the cost because utilities largely recoup the cost of improvements over time as customers use power rather than through upfront payments.
These are not idle fears. Tech companies have announced plans for data centers that are never built or delayed for years.
The utility’s executives said their proposal sought to protect all customers if tech companies abandoned or delayed projects. They pointed to a case in Virginia where regular customers had to cover initial costs of grid upgrades for a data center that started operating years later than planned.
In that case, a developer of data centers, Unicorn Interests, told Dominion Energy, a large utility, in 2010 that it would build a data center next to the regional airport in Manassas, near Washington, that would need electricity by July 2013.