Data Centers Raise Electric Bills by Just 4%, Study Finds

Data centers accounted for just 4% of the observed increase in residential electricity bills in the US regions where they were built between 2020 and 2025, according to a new working paper from researchers at the University of Pennsylvania's Wharton School and Harvard Business School. Industrial energy prices rose more sharply. The finding cuts against widespread public perception that AI infrastructure is spiking household bills.

"We started looking at this earlier this year…there was a lot of public perception about what data centers are doing, but strong academic and critical evidence on what the real impacts are was missing," says Vishrut Rana, a Wharton doctoral student and one of the study's authors.

The researchers compared bills in areas that saw new data center construction with bills in areas that didn't. The impact varied by location and data center type. Colocation facilities, where businesses rent server space, pushed prices up more than single-tenant hyperscale data centers. The authors point to two likely reasons: hyperscalers built in rural areas with more grid headroom, and they more often signed contracts covering the cost of new infrastructure—sometimes new wind and solar that displaced more expensive gas generation.

Can data centers actually lower your bill?

Sometimes, yes. A 2025 study from Lawrence Berkeley National Laboratory and the Brattle Group found that demand from large customers, including data centers, helped lower electricity bills in North Dakota between 2019 and 2024. The state had abundant supply, including wind power, and didn't need new infrastructure. Utilities spread existing costs across more customers, and bills fell.

That same Berkeley-Brattle study identified what actually drove prices up elsewhere over the five-year period: inflation, Russia's war in Ukraine pushing up gas prices for power plants, and the cost of hardening grids against wildfires in states like California.

How high could rates go?

A new report from ESIG, the Energy Systems Integration Group, models what a hypothetical new data center could do to rates. In theory, a grid with spare capacity could still see rates fall—by 0.88 cents per kilowatt-hour in the report's example of a Southeast utility. But given the scale of electricity demand, such places probably won't stay that way for long.

Several factors could push bills higher instead:

• A data center overestimates its electricity needs, so excess infrastructure gets built and other ratepayers help cover it
• A facility opens late or shuts down early, stranding infrastructure costs
• Utilities in regions that buy power through auctions see wholesale prices rise as demand climbs

Energy Innovation, a clean-energy focused organization, estimates that relying on fossil fuels for new generation would add $29.7 billion a year to customer bills by 2030. If coal and gas prices spike, as they have in recent years, that rises to $40.5 billion. Clean energy could save roughly $5 billion a year in the base case, and as much as $13.5 billion in the spike scenario.

In ESIG's worst-case modeling, where multiple factors hit rates simultaneously, a data center could raise rates by 1.32 cents per kilowatt-hour—roughly $10 more a month for a typical household.

Who pays for all that power?

Contract terms are shifting fast to answer that question. "What's happening is actually quite remarkable [in terms of] how quickly things are changing," says Trieu Mai, senior director of programs and research at ESIG. More than a dozen states, from Tennessee to Minnesota, have passed consumer-protection laws on energy bills. Hundreds of data center bills were filed this year. In some states, attorneys general are challenging contracts they say fail to protect consumers.

North Carolina shows how messy the renegotiation gets. Duke Energy says data centers account for more than 85% of load growth on its local grid. The utility initially planned an 18% rate increase next year, partly for storm resiliency upgrades, then negotiated down to about 9.5% under pressure from the governor. Its proposed new tariff for large customers won't apply to contracts signed before July 2026, and critics say it doesn't cover transmission upgrade costs or early departures.

New contract structures could soften the blow elsewhere: minimum billing terms, early termination fees, and data centers directly covering new power plant costs. Changes to federal regulations could also make it easier to charge data centers for transmission upgrades.

Why transparency is the sticking point

Even when companies claim they'll cover infrastructure costs, verification is difficult. "It's very hard because a lot of the details are confidential," says Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program. "Utilities are not really doing a good job of disclosing what is being built for what data center. The federal regulator is ordering more transparency, but that's still a process. So TBD on how that all plays out."

Peskoe notes the structural pressure: "Utilities are spending billions of dollars on new infrastructure for data centers, and the basic utility business model is to spread the cost of new infrastructure to everyone."

With data centers now a defining midterm election issue, and most Americans convinced they'll significantly spike bills, the honest answer remains conditional. "The answer would be: it depends," says Mai. "Of course, it's an unsatisfying answer. That's why you have to do the math to see what it depends on for your region."

— Amara Osei