Rate base — The total net value of assets on which a utility is permitted to earn a rate of return. Net income is the numerator EPI uses to calculate each utility’s profit margin in this report. Net income — A company’s profit after all operating costs, interest payments, and taxes have been deducted from revenues.
Originally planned for 2,250 acres, the site recently expanded to 3,650 acres, according to reporting by Fortune—the size of 2,765 football fields, and twice as big as the state’s international airport. Meta alone has dozens of these mega facilities in various stages of development, including its Hyperion campus in rural Louisiana. The facilities also compete for critical resources like water and land, and they can lower air quality and increase traffic, often while benefiting from changes to zoning laws and huge tax breaks. The contribution of AI data centers to higher bills is just one of the ways the development boom is affecting consumers. Steinbach, who has lived in his Manassas, Va., home for nearly 40 years, worries his rates will keep climbing as the outsized electricity demand from AI data centers grows. Even before the data center boom, one in four households reported having difficulty paying their energy bills or maintaining safe indoor temperatures because of energy costs.
This requirement can be reduced up to 70 percent for customers with sufficient credit standing or liquidity. Another common ratepayer protection emerging in large load tariffs is minimum monthly billing demand. Regulators, utilities, and https://www.testking.us/sovereign-strategic-shifts-in-the-trans-european-natural-gas-network/ policymakers will have to continue to evaluate whether that risk is balanced against the benefits of rates that attract customers.
AGA’s 49th Annual Legal Forum
In fact, he said, “the protections provided by NDAs may result in an increase in the amount and detail of information” shared with local officials about planned water and power usage. When a company wants to build a data center in a community, its residents are frequently kept unaware about what’s coming until the project is a done deal. As AI data center construction outpaces the facilities’ ability to connect to the grid in many areas, some are opting to rely entirely on their own generators.
- That’s one of the main ways new data centers can drive up home electricity bills, says Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative and co-author of a March 2025 paper exploring how the public is funding Big Tech’s power-intensive facilities.
- In both the Northeast and California, rate increases were not caused by data centers.
- Residential prices jumped 7.1 percent in 2025—more than double the inflation rate—and topped 20 percent in some states, according to federal data.
- Return on equity (ROE) — The authorized percentage return that a utility’s equity investors earn on their invested capital, as set by regulators in rate proceedings.
- As Northern Virginia and other regions compete to host increasingly energy-demanding data centers, affordability impacts on residents are mounting.
Electricity Bills Are Rising
The facilities’ direct water consumption may skyrocket to 3.7 billion gallons annually. Data centers around Phoenix use about 385 million gallons of water per year for cooling—and that doesn’t count the water used to generate the electricity they need to operate. To prevent the machines from overheating, the facilities have historically relied on constantly circulating water to cool their equipment.
- Among these utilities, the median profit margin was almost 15 percent, while the average was approximately 14.6 percent.
- This lack of public awareness allows fossil fuel companies and corporate lobbyists to exert considerable influence over commission decisions—often to the detriment of consumers and the environment.
- The six most power-hungry facilities use 781 MW of electricity.
- The electric utility business model in most of the country rests on a government-granted monopoly.
- Net income is the numerator EPI uses to calculate each utility’s profit margin in this report.
– Trends in the nationwide average are heavily influenced by large rate increases in specific areas, including in the Northeast and California, and in those jurisdictions, data centers were not the cause of such rate increases. In a report prepared for the Edison Electric Institute (EEI), we analyzed the recent trends in retail electric rates. Polling indicates that most customers are concerned about their bills and feel “powerless” in the face of rate increases. The financial health of consumers looks solid, though rising auto payments may be a risk if the economy deteriorates. Though small business revenues are rising, potential tariffs and access to credit could elevate certain cost pressures.
Small Business Checkpoint: Curbing costs and raising revenues
Large data centers’ rows upon rows of stacked servers and other hardware operate around the clock to power intensive computing tasks like generative AI and cryptocurrency mining—and they run hot. That’s one of the main ways new data centers can drive up home electricity bills, says Ari Peskoe, director of Harvard Law School’s Electricity Law Initiative and co-author https://alsurtravel.com/page/169 of a March 2025 paper exploring how the public is funding Big Tech’s power-intensive facilities. To keep up with the growing demand for power, electric utilities are spending billions to build new transmission lines and power plants. That same Bloomberg analysis found that areas with high concentrations of data centers saw electricity prices jump 267 percent over the past five years.
Tech firms emphasize the importance of these facilities to train and maintain next-generation AI models, and they point to multiple benefits for communities, such as additional jobs, tax revenue, and more. To calculate the approximate percentage of a utility’s customer bill that flows to investors, we divided net income by total operating revenues per year. Return on equity (ROE) — The authorized percentage return that a utility’s equity investors earn on their invested capital, as set by regulators in rate proceedings. Profit margin or bill profit share — Net income expressed as a percentage of total revenue for a given year. These patterns suggest that a substantial share of what customers pay for electricity is consistently flowing to investors as profit, a finding that is especially significant as consumers face persistently high energy costs and financial stress. Given the varied designs of electricity rates and major regional differences in the size of data center markets, national data such as these may conceal even more pronounced utility-level trends.
The promise of arrearage management plans (AMPs)
Newly elected Virginia Gov. Abigail Spanberger has also been rumored to be adding a chief energy officer to her cabinet to address these challenges and others facing residents. Based on their 2024 modeling, Dominion Energy Virginia—the primary energy utility servicing customers across the state—expects data center metered load to reach 13,353 megawatts (MW) in 2038, which is a 3.5 times increase from the current load. The impacts of disconnections often fall on lower-income households and other disadvantaged customers, prompting the need for a more proactive policy response across different communities. Despite the massive new generation buildout being undertaken, there is still a projected shortfall of 49 gigawatts (GW)—roughly 5% of total generation in the U.S.—through 2028. Policymakers and public utility commissions need to better measure and address the impacts of data centers on residents.
And because many data centers are built close to homes and schools, these emissions can put nearby residents and children at particular risk. In late January, with the threat of bitter cold temperatures and impending winter storms in many parts of the U.S., the Department of Energy gave a preemptive green light to data centers and other “major facilities” to run their generators as needed. Because the equipment inside data centers operates day and night, operators often install fossil-fuel generators that can provide power in the event of a shortage or an outage.
Five common large load tariff terms designed to protect ratepayers
Rates that enrich investors beyond the cost of capital are not “just and reasonable” under the standard affirmed by the Supreme Court in FPC v. Hope Natural Gas Co. (1944). FERC Form 1 — An annual financial report that utilities meeting certain size thresholds must file with the Federal Energy Regulatory Commission (FERC). Cost of equity (COE) — The return that equity investors require to provide capital to a utility, reflecting the risk of the investment. Cost of capital (COC) — The average cost a utility pays to raise money from lenders and investors to build and run its system.
- More regions could start to look like Virginia, already home to nearly 600 facilities with more than 100 more proposed or under construction.
- Even though many of these projects will never be built, the requests are still leading to a ramp-up in energy infrastructure investments, including generation facilities, transmission lines, and transformers.
- While a utility’s cost of debt is straightforward to determine — it’s the interest rate lenders charge — its cost of equity is not directly observable.
- Those risks have already been the point of significant pushback against xAI here in Memphis and Southaven — primarily, due to the use of turbines by xAI at its Memphis and Southaven facilities.
Confronting and addressing rising energy bills linked to data centers
Running a successful business means staying ahead of market trends—and understanding how shifting energy regulations can impact your bottom line. The definition of colocation is unclear, and the influence of taking large power plants, like nuclear facilities, off-grid for billing purposes could profoundly influence capacity markets, which will, in turn, affect all ratepayers. Challenging the utility analysis is costly and time-consuming. The base-case analyses were performed with PV penetration levels ranging from 2.5% to 10% of total retail sales (compared to current penetration levels of 1-2% in a number of the larger state solar markets and to the U.S. average of 0.2%). These impacts were first assessed under a set of base-case assumptions related to each utility’s regulatory and operating environment, in order to establish a reference point against which sensitivities and potential mitigation strategies could be measured. For each utility, we model the impacts of customer-sited PV over a 20-year period, estimating changes to utility costs, revenues, average rates, and utility shareholder earnings and return-on-equity (ROE).