Are energy-hungry data centers causing electric bills to go up?

Among the many rising prices pressuring consumers this holiday season, electricity prices are up 6.9% year over year, much higher than overall inflation. And costs are expected to go up even more in the future with increased demand from data centers and other big projects.

This week, three Democratic Senators said they were opening up an investigation into big tech firms and how their power demands are impacting people’s electric bills.

What we do know is that all the new data centers coming online use a lot of electricity. We also know that local utilities are building or upgrading their infrastructure, which is expensive.

“Utilities are building billions of dollars of infrastructure and then spreading those costs to everyone,” said Ari Peskoe, the director of the Electricity Law Initiative at Harvard. “Electricity prices are now a national issue. There are several reasons why prices are going up across the country, and I think data centers are certainly one reason. They’re a nice political target.”

Peskoe and others have done research arguing big tech firms aren’t paying their fair share of the costs of upgrading the electric grid, driving up bills for everyone else.  

But when it comes to the direct impact of data centers, “we know that infrastructure is placing upward pressure on power pricing, but it's really hard to say exactly how much that's weighted towards that,” said Geoff Hebertson, lead renewables analyst at Rystad Energy.

Rystad predicts data centers are very likely to contribute to higher prices in the future. Like by 2030. But right now, when it comes to the costs of utility upgrades, “is the transmission upgrade due to wildfire risk that we're seeing in California, or is a transmission price increase related to a data center that's being installed in Virginia or Texas, that is very unclear right now,” Hebertson said.

According to some of the tech firms, the infrastructure that comes along with a data center can sometimes even lower customer prices.

Kush Patel is a senior partner at Energy Environmental Economics, which recently did a study for Amazon on how some of its data centers were affecting residential prices.

“Our perspective is that you know those impacts are real, but how they actually impact individual customers is quite varied and nuanced, and it's not really a clean story,” he said.

What kind of upgrades are necessary? Who is paying for them? Is the facility getting subsidized power or not?

“How it impacts a customer in Virginia is gonna be a lot different than in Jersey or California,” Patel said.

How much a data center coming to your town will affect your electricity bill often depends on whatever deal the tech firm struck with the local utility. Those contracts tend to be confidential, but the Senators want to know what’s in them, and they are calling for a response from tech firms by January 12.