Who’s Driving Up Your Electric Bill? Why Data Centers Aren’t the Main Culprit

Who’s Really Raising Electricity Prices?

Americans are rightly frustrated by rising living costs. Politicians of all stripes seek to channel that frustration, and it’s important to separate political talking points from the underlying causes. Critics who blame the growth of data centers for higher utility bills overlook research and regional policy drivers that better explain recent price trends.

Data Centers: A Convenient — But Incomplete — Target

Yes, artificial intelligence and large-scale computing increase electricity demand. But multiple studies suggest that the story is more complicated. Researchers at Lawrence Berkeley National Laboratory note that in many states, load growth associated with new data centers coincided with stable or even lower retail electricity prices because utilities could spread the cost of grid upgrades across larger customer bases. As they write:

"Over the past five years, states with the highest load growth generally saw retail electricity prices decline in real terms."

Virginia — which hosts more data centers than anywhere else — is often cited as a counterexample: the state’s concentration of computing infrastructure has not produced a comparable spike in retail electricity prices tied directly to data-center growth.

Policy Choices That Do Drive Rates

A better explanation for high electricity prices in some places centers on policy decisions. Aggressive electrification campaigns (encouraging electric vehicles, heat pumps and electric appliances), ambitious renewable mandates, and constraints on fossil-fuel infrastructure can increase demand and raise costs when reliable, low-cost backup or transition capacity is limited.

California is commonly cited: critics point to electrification efforts and renewable requirements as contributors to higher residential rates, which the article reports as roughly 77% above the national average. In New York, long-standing limits on new natural-gas pipelines have been blamed for leaving consumers with higher fuel and delivery costs; the state’s retail rates are reported to be about 48% above the national average. Observers note that Governor Kathy Hochul reversed a pipeline ban amid pressure to address rising costs.

Regional Examples And International Comparisons

Regional price trajectories bolster the policy-explanation view. The piece reports that between 2010 and 2020, California’s residential electricity price rose about 39% (from 14.75¢/kWh to 20.45¢/kWh), while the U.S. average rose roughly 14% over the same period. It also notes a reported 44% jump in New York retail electricity rates between 2020 and 2025 (from 17.6¢/kWh to 25.3¢/kWh).

Observers draw parallels to Europe’s experience under ambitious green-transition policies. Germany’s Energiewende is frequently cited as an example: reported retail rates of about 42¢/kWh in Germany and high industrial rates in the U.K. are used to illustrate how rapid decarbonization without sufficient reliable backup supply can raise costs and hurt competitiveness.

Energy Supply And Policy Trade-Offs

Proponents of an "all-of-the-above" energy strategy argue that maintaining abundant, affordable domestic fossil-fuel production alongside cleaner sources will help meet growing demand from AI and other industries and keep U.S. industry competitive. The article notes recent U.S. oil production near record levels (reported at 13.8 million barrels per day) and observes that oil prices were down about 13% year-over-year at the time of writing. Natural gas production is also high, though global LNG demand has affected prices.

Ultimately, the piece contends, data-center growth is a factor in rising electricity demand but not the primary driver of higher retail prices in many regions. Policy choices on electrification, renewable mandates, and fossil-fuel infrastructure often play a larger role.

About the Author: Liz Peek is a former partner at Wertheim and Company.