US Utilities Seek Rate Hikes as AI-Driven Data Center Demand Surges

US utilities plot big rise in electricity rates as data centre demand booms

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."

Energy costs are rising. This state says tech companies must pay more.

The cooling tower of the Davis-Besse Nuclear Power Station in Oak Harbor, Ohio. State regulators have grappled with growing electricity demand from data centers built by major tech companies. (Amy Sancetta/AP) Energy regulators in Ohio said on Wednesday that electricity-hungry data centers must pay more up front for their power demands, overruling the objections of the tech companies that rely on them to develop artificial intelligence. The decision could set a precedent in other places grappling with soaring data center power demands, as summer temperatures climb and AI's appetite for energy has raised concerns about increasing home electricity bills. Surging power demand from data centers is on track to force utilities to make expensive grid upgrades in Ohio and other states. Major tech companies including Meta, Google, Microsoft and Amazon have data centers in Ohio. The tech giants supported a competing proposal that would have been more lenient on them but risked passing the increased costs on to consumers. The tech companies did not immediately respond to a request for comment. Amazon founder Jeff Bezos owns The Washington Post. The Data Center Coalition, an industry group representing the tech firms, said in an email statement that it was "very disappointed" in the commission's decision. It called the regulator's order "a deviation from the long-established, sound ratemaking principles that have carried both Ohio and the nation through periods of electricity demand growth and flat demand." The Ohio showdown over data centers' impact on energy infrastructure started last year, when power company American Electric Power proposed increasing a monthly charge on data centers in the state from 60 percent of their projected consumption to 90 percent -- regardless of their actual usage. The power company said the increased charge was needed to help cover the cost of expensive transmission line upgrades required to serve data center energy needs. AEP said demand from dozens of pending data center customers was set to more than triple its previous peak load. Consumer advocates argued for tariffs that would ensure tech firms paid a greater share of the grid upgrades needed to serve data centers, helping to keep household electric bills in check. On Wednesday, the Public Utilities Commission of Ohio sided with AEP and consumer groups' revised proposal to charge data centers 85 percent of projected usage. In its written decision, the commission said that higher level "balances the encouragement of incoming data center investment from global companies that will significantly alter Ohio's grid for years to come, with protecting non-data center customers from service disruption." The Data Center Coalition said in a filing that the proposal unfairly targeted data centers and risked "unduly stifling data center development" in Ohio. "We continue to maintain that no one customer type or industry should be singled out for disparate rate treatment by the utility," said the coalition's director of energy policy, Lucas Fykes, in an email statement. The industry is "committed to paying its full cost of service," he added. Amazon derided the power company's proposal as a "discriminatory and punitive approach" in an April filing with the commission. Consumer advocates in Ohio celebrated the commission's decision Wednesday. "We are grateful that the PUCO acted today to protect residential consumers from bearing excessive costs caused by data centers. It's a step in the right direction for Ohio consumers," said Maureen Willis, Agency Director of the Office of the Ohio Consumers' Counsel. Rapid growth in data center developments has sparked concern among regulators and experts since last year that the facilities' huge power demands could cause rate hikes, forcing everyday ratepayers and small businesses to cover the grid construction costs driven by tech companies. Carrie Killingsworth, a resident of Hilliard, Ohio, supported the decision made by Ohio regulators, writing in a public comment filed in January that "citizens should never be asked to financially subsidize the largest companies in the world."