Low-income residents, renters, Black households, and Hispanic households spend up to 20% of their income on energy, compared to 3% for higher-income households. Higher energy bills disproportionately affect disadvantaged communities, which often face significant energy burdens. These higher generation costs are passed on to consumers through higher monthly energy bills. But because so many utilities are exploring new plants at once, the average time to construct a new plant has increased from four and a half years to at least six, and wait times for gas-fired turbines can reach up to seven years. But these delays can be costly because most facilities were built in the 1970s and 1980s and have reached the end of their typical 40-year lifespan.
That’s like adding a country with the energy needs of Spain in just three years. A January 2026 report by Bloom Energy, an on-site energy company, predicts that U.S. data centers’ total combined energy demand—how much electricity they may use when up and running—will nearly double between 2025 and 2028, jumping from 80 to 150 gigawatts (GW). Hundreds more hyperscale facilities may soon be built across the U.S. 3,069 data centers already operate in the https://clojure-android.info/the-art-of-mastering-20/ U.S., with an additional 1,489 planned or under construction.
These tools include mechanisms such as upfront “payments in aid of construction” for new transmission lines or generation, and “exit fees” for https://seoadder.info/the-key-elements-of-great-14/ data centers that cause a utility to incur costs for new generation and transmission and then leave the utility’s service area relatively quickly, causing the utility’s remaining customers to foot the bill. Shockingly, low-income households spend three times as much of their income on energy costs compared to the average family. When they do so, data center energy costs can creep into other consumers’ bills. Under the tariff, the utility must try to reassign the capacity for any reduction requests beyond 20 percent and requires exit fees from the customer.
- Companies that build and operate data centers say that generating power on-site can reduce strain on the grid during peak times, and potentially keep consumer electricity bills in check.
- The facilities’ direct water consumption may skyrocket to 3.7 billion gallons annually.
- The cumulative profit extracted from customers across a utility’s entire infrastructure portfolio, year after year, is what makes the profit share of the electric bill so consequential.
- Nationwide utility bills have increased by an average of 8% as residents pick up offset costs due to increased energy demands.
- Energy efficiency programs such as weatherization and appliance replacement lower bills for the lifetime of the efficiency action by reducing energy use.
Local Impacts Can Be Overwhelming
This is in addition to the rate increases granted by state energy commissions over the previous couple of years. Electric rate increases were expected to affect 40 million customers nationwide last year. Utilities requested more than $29 billion in rate increases in the first half of 2025, double the amount requested in the first half of 2024. To cover the investments needed to accommodate the surge in interconnection requests, many utilities are passing on the costs to their consumers through higher monthly utility bills.
We also examined 2025 filings for 79 utilities that had reported annual results in time to be included in this analysis. By examining how much of utilities’ revenue ultimately becomes profit, the analysis offers a clearer picture of the role investor returns play in the economics of electricity service. Despite its central role in the utility business model, the share of electricity revenue that utilities retain as profit is rarely analyzed across the industry in a systematic way. Investor-owned utilities typically operate as regulated monopolies within defined service territories, where customers cannot choose another provider and state regulators approve the rates utilities charge. At the same time, extreme weather events and changing energy markets have created new pressures on utilities to rebuild or harden infrastructure. In response, regulators and elected officials across the country are facing mounting pressure to explain why power bills are climbing and what can be done to bring them down.
A key concept for understanding this report is that the profit in a customer’s bill is not the same number as the utility’s allowed ROE. That is money ratepayers are paying not for electricity, not for infrastructure, but https://www.antenna-re.info/a-quick-history-of-7/ for profits that exceed what investors need to be fairly compensated for providing capital. Because a utility’s stock market value scales directly with the gap between its authorized ROE and its actual cost of equity, utilities have an incentive to push for ROEs as high as possible. 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.
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After describing how rate-setting processes can shift utility costs among ratepayers, the paper explains how rate structures, as well as secret contracts between utilities and data centers, could be transferring Big Tech’s energy costs to the public. Martin and Peskoe explain that government-regulated utility rates socialize a utility’s costs of providing electricity service to the public. To provide energy to these new facilities, electric utilities are expanding their systems with new power plants and transmission lines. ROE is a component of the overall rate of return, applies only to the equity portion of the capital structure, and is set with reference to what investors could earn on comparable-risk investments elsewhere. Regional transmission organization (RTO) / Independent system operator (ISO) — An independent entity that manages high-voltage transmission infrastructure and operates competitive wholesale electricity markets across multiple states. Rate of return (ROR) — The overall percentage return a utility is permitted to earn on its rate base, calculated as the weighted average of its cost of debt and its authorized return on equity.
Confronting and addressing rising energy bills linked to data centers
The six most power-hungry facilities use 781 MW of electricity. The epicenter is Northern Virginia, where “Data Center Alley” has the world’s largest concentration of the facilities. In 2024, data centers accounted for almost 40 percent of all electricity used in the state. More regions could start to look like Virginia, already home to nearly 600 facilities with more than 100 more proposed or under construction. By 2028, data centers could use 12 percent of all the electricity consumed in the U.S., according to the Lawrence Berkeley National Laboratory, and that percentage will grow. That’s three times as much electricity as the entire city of New Orleans, according to the Institute on Taxation and Economic Policy.
EPI collected financial data for 110 investor-owned electric utilities providing service in the United States for the years 2021 through 2024, and for 79 utilities that reported 2025 results to the SEC in time for inclusion in this analysis. In competitive wholesale markets like PJM, there are local regulated utilities that own only transmission and distribution; generation is often owned by independent power producers whose earnings are not captured by this analysis. For example, utilities in the PJM regional market serving the Mid Atlantic averaged about 11.8 percent, while utilities in New York and New England reported similar or lower levels. Utilities in the Southeast that operate outside of organized wholesale electricity markets reported the highest average profit shares. Among these utilities, the median profit margin was almost 15 percent, while the average was approximately 14.6 percent.
A microgrid is an off-grid power source that can operate independently from a main electric grid (or be used to help support). Memphis Light, Gas and Water (MLGW) President and CEO Doug McGowen highlighted the importance of a growing national conversation regarding affordability and grid reliability. (The Trump administration has made a significant push to curb fossil fuel emissions and has reactivated coal power plants to meet the growing artificial intelligence energy demands.)
