Hi Money Movers,
Today’s special edition of Money Moves is the first in a new series I’m calling What’s up with… It’s a way to explore timely money- and career-related topics in the news that we’re all kind of aware of but maybe haven’t had the time to dive into. It will not be weekly.
First up, I looked into something that’s been on my mind for the past few months: Why is everyone seeing huge spikes in their electricity bills?
This is a bit of an experiment and a new-to-me topic, so I welcome (respectful) feedback! Shoutout to Chris who made the cool animation.
Electricity prices are sky-rocketing in the U.S., climbing twice as fast as inflation nationwide over the past year and filling social media with confused posts about why a household’s monthly bill has increased by hundreds of dollars.
Many households budget down to the last dollar—there isn’t much wiggle room month to month—which makes the doubling of a utility bill so scary. And many people are reporting they are actually using less electricity than in the past, yet paying more for it. So what’s going on?
There’s no single answer. Utility companies have been making capital investments to upgrade aging infrastructure like power lines, and climate change-related repairs are becoming more common. Plus there has been higher demand due, in part, to more extreme temperatures on both ends of the spectrum and increased household electrification (AKA smart-everything). Natural gas, by far the biggest source of electricity generation, is also increasing in cost. There is also great variability by region.
But one of the biggest reasons American consumers are seeing higher electricity bills is because residential households are subsidizing data centers being built to power Big Tech’s AI exploits.
Data centers are giant facilities that house the IT infrastructure needed to train and deploy AI applications and services, and the U.S. has far more of them than any other country. But as seemingly every company scrambles to implement an AI strategy, Big Tech is racing to build more data centers to power its initiatives.
These centers use substantial amounts of electricity (and water). In 2023, U.S. data centers consumed 4.4% of the nation’s electricity; that could climb to 12% by 2028 if current trends continue, according to a 2024 Department of Energy-sponsored study. Tech companies are now using so much computing power, in fact, that commercial electricity usage will surpass household usage for the first time ever in 2026, according to the U.S. Energy Information Administration (EIA).
As just one example, Meta’s data center in Altoona, Iowa, consumed about 1.2 million megawatt-hours of electricity in 2023, which could power 100,000 homes for a year, Inside Climate News reports. And that’s not Meta’s only facility in the state.
To support the tech companies’ electricity demands, utilities are spending billions of dollars on new infrastructure, including power plants and transmission lines.
Consumers on the hook for Big Tech’s power surge
Okay, but what does all that have to do with us?
Electricity bills include a few different costs: there’s the rate you’re paying for the literal electricity (the cost per kilowatt-hour) you consume, of course, but also fuel, delivery, infrastructure, maintenance, and taxes/fees.
The infrastructure cost component is key: utilities pass them on to everyone; this has been their business model for decades, and it is predicated on fairness. If a power line goes down in your neighborhood, all residential ratepayers cover the repairs, rather than individual homeowners.
But what’s happening now is unprecedented, given the increased demand and the surge of infrastructure being built. Some of these large data centers can use as much electricity as whole cities (and are the size of whole cities), to the benefit of the wealthiest corporations on the planet.
“A large amount of new generation and transmission will need to be built that would not otherwise be built, creating fixed costs that utilities will need to recover. It will be difficult to supply enough energy to keep pace with growing data center demand, so energy prices are likely to increase for all customers,” reads a report on data center construction from Virginia’s Joint Legislative Audit and Review Commission.
“It will be difficult to supply enough energy to keep pace with growing data center demand, so energy prices are likely to increase for all customers.” - Virginia JLARC
And research from Harvard’s Environmental and Energy Law Program finds that utility companies are giving Big Tech preferential rates while hiking them for the average customer. So we could be paying even more than the companies are for their energy needs.
What’s worse: The Harvard report finds a utility will often create a special contract with Big Tech companies and then “shield its proposal from public view.”
Though utilities must have their rate hikes approved by a governmental agency—generally known as a Public Services Commission or Public Utility Commission—there's a lot of political pressure on public servants.
“Rejecting new data center contracts could lead potential Big Tech customers to construct their facilities in other states,” the Harvard report reads. “Indeed, Big Tech companies have repeatedly told utility regulators that unfavorable utility rates could lead them to invest elsewhere.”
It’s not likely to get better any time soon: Utility companies asked regulators to approve $29 billion in rate hikes in the first half of 2025, a 142% increase from the prior year period, to meet data center demand, according to a report from energy affordability advocacy group PowerLines. Electricity bills are expected to increase 8% nationwide on average through 2030, according to a report from N.C. State University and Carnegie Mellon University.
And according to Harvard’s Ari Peskoe, because so many of these data center projects are still pre- or under-construction, we haven’t even seen the bulk of the infrastructure costs in our bills yet.
In some states, utility companies are lobbying to be able to charge their residential customers more before they build the centers. This helps utilities save on interest payments, but it puts residents on the hook for costly projects that may never even come to fruition, or look very different from the original pitch.
Not to mention, but what happens if there is an AI bust, or American tech companies finally figure out how to use less energy? The chart below from Apollo’s chief economist Torsten Slok uses Bureau of Labor Statistics data to show AI usage might already be slowing among big companies. Customers could foot the bill for tons of infrastructure we might not use long term.
As for the average consumer, we mostly don’t have other options aside from paying. Many utilities operate as essentially state-approved monopolies; there aren’t competing electric companies compelling them to offer more attractive rates.
That said, it doesn’t have to be this way, as the Virginia commission noted in its report.
“Establishing a separate data center customer class, changing cost allocations, and adjusting utility rates more frequently could help insulate non-data center customers from statewide cost increases,” it reads.
The Big Beautiful Bill will exacerbate the problem
Remember how higher natural gas prices are driving electricity prices higher? One way to solve that is with more clean or renewable energy production, including solar and wind. (Nuclear is also an option, but it’s really expensive to build.)
But the Republicans’ Big Beautiful Bill (BBB) eliminates hundreds of billions of dollars in tax credits, grants, and loans created under the Biden-era Inflation Reduction Act, the largest federal investment in renewable energy in U.S. history.
Now many of the renewable energy investments and projects that were already underway have disappeared, taking potentially tens of thousands of jobs with them and untold energy capacity.
Some studies estimate repealing the credits could hike the average family’s energy bill by as much as $400 per year over the next 10 years. States like Iowa will be hit especially hard, because of the loss of major wind energy investments that will now be replaced with higher-priced generation methods.
It’s an odd strategy, given the Trump administration’s love of AI—and Big Tech’s love of renewable energy. Many tech companies have sustainability goals and want to build their data centers in places with plentiful renewable energy sources.
To go back to Iowa, the state has been attractive because of all of the wind energy capacity there. And not for nothing: Wind energy is cheaper. Iowa has the eighth-lowest average electricity prices, Inside Climate News reports, though that might not last long thanks to the BBB.
But electricity generation has come to rely on renewables, according to the U.S. Department of Energy. Natural gas has made up much of the difference as the country has moved away from coal, but renewables have become increasingly important, as the graph below shows.
The president has a negative fixation on wind energy: The White House recently instructed agencies ranging from the Department of Health and Human Services to the Defense Department to come up with plans to kill the offshore wind industry, the New York Times reports. Trump also shut down a $4 billion wind farm in Rhode Island that was 80% complete, and is reviewing other already federally-approved projects.
“Windmills, we’re just not going to allow them,” Trump said in a recent cabinet meeting, per the New York Times. “They’re ugly. They don’t work. They kill your birds. They’re bad for the environment.”
“Windmills, we’re just not going to allow them. They’re ugly. They don’t work. They kill your birds. They’re bad for the environment.” - President Donald Trump
The BBB also made it easier for the U.S. to export more natural gas overseas, which will further cause price increases at home, and Trump’s tariffs on steel and other materials could also raise the cost of building out new energy capacity.
At a time when we desperately need to invest in power supply, we’re actively destroying it. Basic economics explains what lower supply and surging demand will do to our bills. It’s not just that wind energy prices will spike, but gas- and coal-powered as well, as more and more is used.
This leaves Americans worse off, not only because we’re paying more every month for electricity, but because the BBB is eliminating good paying blue collar jobs in the trades, the exact opposite of what the president promised during his campaign.
So it’s sort of the perfect storm: Tech companies are going all in on AI data centers, encouraged by billions in federal investment and deregulation, and support from state and local governments. At the same time, the Trump admin is actively hostile to the renewable energy industry in the U.S., a more affordable and increasingly popular energy source.
But to power the data centers and keep costs reasonable for everyone else, we need to produce more electricity—so where is it going to come from?
Worth noting: The president promised during his campaign that his policies would “cut energy and electricity prices in half within 12 months” and “quickly double our electricity capacity.”
Sources:
Apollo: AI adoption rate trending down for large companies
Carnegie Mellon University: Data center growth could increase electricity bills 8% nationally and as much as 25% in some regional markets
Consumer Federation of America: How the bipartisan dirty data center boom is leaving taxpayers without power
Department of Energy: U.S. net generation of electricity relied on record use of renewables…in 2023
EIA: Short-term energy outlook
EIA: U.S. electricity prices continue steady increase
EIA: We expect rapid electricity demand growth in Texas and the mid-Atlantic
Harvard Law School: Extracting profits from the public: How utility ratepayers are paying for Big Tech’s power
IBM: What is an AI data center?
Inside Climate News: Clean energy brought data centers to Iowa. The Big Beautiful Bill could change that
Lawrence Berkeley National Laboratory: 2024 United States data center energy usage report
Meta: 2024 Sustainability Report
More Perfect Union: These trades workers voted for Trump. Now they feel betrayed.
New York Times: Donald Trump vs. the Wind Power Industry
New York Times: White House orders agencies to escalate fight against offshore wind
PowerLines: Utility bills are rising: Q2 2025 update
Resources for the Future: Projected impacts of repealing the section 45Y and 48E technology-neutral clean electricity tax credits
Virginia Joint Legislative Audit and Review Commission: Data centers in Virginia
That’s it for now. See you Thursday,
A
P.S. Thanks Christopher Skinner for the illustrations!
P.S.S. To share tips, pitch ideas, or provide reader feedback, please respond to this newsletter or email aliciaadamczyk781@gmail.com.