Data Centers Really Do Raise Energy Prices

By Nick Blanton, Director of Technology & Finance, and Andre Eanes, Technical Consultant 

Electric bills are rising across the country, and customers are feeling the pain. Most media coverage has correctly fingered the culprit as energy-hungry AI data centers, which are proliferating at a rapid rate, spiking new demand for power. Since the supply of new energy can’t keep up with even faster rising demand, costs have risen for all electricity customers. 

For example, “AI data centers are sending power bills soaring,” reported Bloomberg News in September. “Wholesale electricity costs as much as 267% more than it did five years ago in areas near data centers. That’s being passed on to customers.” 

Yet, surprisingly, a single article from a major media outlet came out recently claiming the opposite: that data centers may actually be bringing down the cost of power for everybody else, despite what everybody thinks.  

“There’s a reason electricity prices have been rising. And it’s not data centers,” by Shannon Osaka was published in October in the Washington Post.  

Coincidentally, this venerable American cultural institution was purchased in 2013 by Jeff Bezos, whose Amazon Web Services is “is the largest cloud service provider and data center company worldwide,” according to Data Centre magazine. 

Nearly alone among hundreds of articles published in the last couple years that blame rising electricity costs on spiking power demand from data centers, the Post article cites recent research that correlates limited decreases in power costs with growth of data centers in a few localities between 2019 and 2024.

Just to take one example, “Virginia, one of the country’s data center hubs, had a 14 percent increase in demand and a price drop of 1 cent per kilowatt-hour,” the article says.  

But this claim is misleading. While discounted rates for big commercial power users (including data centers) may have remained relatively stable or even decreased in some cases, rates for most Virginia homes, schools, and businesses have increased, in some cases dramatically, over the last couple of years. 

A Problem with the Data 

Though the click-bait headline and the opening of the Post article make the research findings sound simple, the report put out by Lawrence Berkeley National Laboratory cited by the Post is complex, and suggests only tentative findings that would need further research for confirmation.  

In addition, our company’s technical team has examined some of the data behind the Berkeley Lab report and found a troubling issue: the research averaged together all the different rates for power paid by varied groups of customers to claim that rates had declined overall, but failed to note that discounts to a few big commercial power users had skewed the data, thus hiding the fact that most ratepayers experienced increases.  

And of course, the biggest commercial power users these days, who receive the biggest discounts on electric rates, are data centers themselves. 

In Virginia, data centers now consume nearly one-third of all electricity in the state – up from just 7% in 2019 according to a 2024 report commissioned by the Virginia General Assembly. Yet, these facilities pay roughly 5.5 cents per kilowatt-hour, compared to between 9 and 14 cents for homes, schools, hospitals, and small businesses. (Our analysis of this and references for key figures can be found in this spreadsheet.) 

Using U.S. Energy Information Agency data, if data centers’ electricity usage were removed from the equation, a very different picture emerges. 

Between 2019 and 2024, the average retail electricity price for all other Virginia customers rose about 25% – roughly one percent above inflation. Residential customers have seen steady increases, while commercial users – especially schools and hospitals – have faced cost jumps of over 16%. Meanwhile, data centers’ rates have remained flat or even declined relative to inflation. 

They Can’t Say It Isn’t So

It would be convenient for data center operators if the message spreads that they are not really the cause of rapidly rising energy costs. But it’s not true. 

In the future, if data centers start to bring their own energy to the grid, for example, by installing solar panels with batteries, that might change. 

But for now, whether energy costs are rising because of increased demand for power or need for more grid infrastructure or both, the culprit is clear: energy-hungry AI data centers. 

Jeff Bezos’s Washington Post seems to be the only major media outlet confused about how data centers like those owned by Bezos’s own Amazon Web Services raise energy costs for everyone else. Conflict of interest? 

For a more accurate picture, along with the Bloomberg piece we list above, Newsweek published a clear overview in August, Eye-Popping Electric Bills Come Due as Price of AI Revolution while in September, Harvard Law Today shared that “The public is paying for the energy infrastructure used to power Big Tech, argues Harvard Law expert.”