How the AI boom is causing your electricity bill to skyrocket

Energy costs are rising this summer, and the reason is not increased personal consumption but the intensive electricity used by artificial intelligence (AI) data centers.

The proliferation of AI data centers—the energy-intensive buildings that allow users to ask AI bots like Grok whether something is true—consume a vast amount of power.

PJM Interconnection supplies electricity to 13 states and Washington, D.C., and is considered a bellwether for the rest of the US.

PJM’s territory includes Data Center Alley in Northern Virginia, home to the world’s largest concentration of data centers, as well as areas like Columbus, Ohio, where data centers are rapidly expanding.

Its customers are seeing an increase of up to 20% in their energy bills this summer. The explosion in AI data centers is the primary reason.

So why are households paying for Big Tech’s energy needs? PJM holds an annual capacity auction. During this auction, utilities in the states it serves pay to ensure they have enough power on peak usage days.

Last year, capacity prices in the auction increased by 833%, and the impact is being felt now.

Last week, PJM Interconnection concluded its annual capacity auction, with wholesale electricity capacity prices reaching a record high, a 22% increase over 2024.

As a result, monthly electricity bills in the PJM region, which covers 67 million customers, could increase by up to 5% next year.

An independent monitor attributes three-quarters of these increases, which are ultimately passed on to customers, to the demand from existing and soon-to-be-operational data centers.

In addition to the supply-demand imbalance and inflation, factors contributing to sharp increases in energy bills include:

The heat wave seen in parts of the US this month, which the nonprofit Climate Central determined was a result of “human-caused climate change.”

Costly upgrades to modernize and strengthen the grid against climate disasters. These expenses are often offset by companies through higher electricity tariffs.

The approval time required to connect more power generators to the grid, which would lower costs—known as the “interconnection queue”—can take up to five years.

Relief may not be coming soon. President Trump has promised to cut energy costs in half within the first 12 months of his administration, but a think tank report predicts that prices will rise due to the “Big Beautiful Law.”

According to the Bank of America Institute, US electricity demand, which showed almost no growth for a decade, is expected to increase by an annual rate of 2.5% through 2035, largely due to the impact of data centers.

In Maryland, David Lapp, the People’s Counsel who advocates for local residents on state utility matters, is calling on state and federal regulators to intervene on behalf of residential customers and small businesses.

Lapp stated, “A massive wealth transfer is occurring from residential customers to large corporations, data centers, major utility companies and their parent companies, and those who profit from building additional energy infrastructure. Utility regulations are failing to protect residential customers, leading to rising energy prices.”