Data centers in the largest U.S. regional power grid are adding billions of dollars to ratepayers’ electricity bills and raising the risk of persistent inflation in the economy and potential power shortages, new analyses show.
Shock waves of new and projected electricity demand from the rise of artificial intelligence are rippling across U.S. power grids. A report by Monitoring Analytics, the independent market monitor for Eastern grid operator PJM Interconnection, estimated that current and planned peak power added nearly 12,000 megawatts to the expected peak power demand next summer.
These substantial increases “were almost entirely due to existing and projected large data center load additions to the PJM grid,” said Joseph Bowring, president of Monitoring Analytics.
Power demand from tech companies operating some of the largest clusters of data centers in the world drove up PJM’s July capacity auction by $7.2 billion, an 82 percent increase. More than $16 billion in payments to power companies to guarantee future electricity supply in the 13-state region is passed on to utility customers.
Northern Virginia’s “Data Center Alley” — the world’s largest cluster of data centers — is located inside of PJM’s territory. And PJM’s outgoing CEO, Manu Asthana, has emphasized the need for the United States to “win the race” for global AI dominance. That commentary echoes the views of the White House and powerful Silicon Valley companies.
PJM’s 2025 long-term load forecast shows a peak load growth of 32,000 MW from 2024 to 2030. Nearly all of that is from data centers — if the power is available.
More customer charges stem from the need to add power line and substation capacity to the PJM network to move the higher energy flows, according to an analysis by the Union of Concerned Scientists.
UCS calculated that last year $4.3 billion in transmission expansion costs were passed on to consumers in seven PJM states, based on the limited information transmission system owners reported to PJM about the planned new projects.
“From 2022 through 2024, utility companies initiated over 150 local transmission projects in Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia. These projects were needed only to connect data centers,” said the report.
Virginia and Ohio had by far largest number of projects.
The UCS analysis concluded that the cost pass-through is part of PJM’s approved practices. “Regulatory cost reviews are practically nonexistent for these transmission-level facilities and utility incentives reward this practice,” it said. PJM is the “messenger” not the director of the process, which is largely controlled by transmission owners, said Mike Jacobs, senior manager for energy with the UCS Climate and Energy Program.
In a third critique, the Natural Resources Defense Council projected this week that PJM consumers could see an increase of utility bills of up to $163 billion through 2033 because the steady growth in data center power demand will keep supply strained and prices high. “By 2028, an average family in the region will be paying around $70 a month extra on their electricity bills because of forecasted data center growth,” the NRDC report said.
NRDC’s analysis focuses on the payments to generators that result from PJM’s annual capacity auction. When expected demand runs ahead of available supply, suppliers charge more, creating a signal to investors that more power supplies will be needed but pushing utility charges higher in the process, PJM experts note.
“Thanks to short-term price caps [on capacity payments] negotiated between PJM and Pennsylvania’s Gov. Josh Shapiro, [capacity] costs in 2027–2028 will remain at about $16 billion,” NRDC said.
Then, when the negotiated price caps come off, the top capacity price will rise much higher. According to NRDC, that would push the annual capacity bill up $27 to $30 billion per year from summer 2028 through summer 2032, totaling $163 billion.
“As a final twist of the knife, PJM residents will be on the hook for skyrocketing prices, even if these data centers don’t get built,” NRDC said.
The solution is to require data center developers to install their own generation and storage at new facilities, said the NRDC report. Bowring, PJM’s market monitor, also backs a “bring-your-own-generation” requirement.
PJM’s leadership is wrestling with that issue now, as its staff and industry members debate a so-called Critical Issue Fast Path process to address the impact of data centers and other large loads on its system.
ClearView Energy Partners noted in analysis this week that PJM has moved away from an initial mandatory requirement affecting new data center projects. Those that did not have their own power supplies could face the loss of grid power if PJM’s network was headed to emergency conditions.
But citing “clear, overall stakeholder concern” with the mandatory requirement, PJM on Sept. 26 shifted to a voluntary system that remains a work in progress, ClearView Partners summarized.
PJM is also considering directing utilities in its system to ask data center developers whether new projects proposed for the PJM region duplicated the developers’ proposals in other grid regions, to get better understanding of “double counting” by developers that were shopping around for the best opportunities.
ClearView quoted PJM Executive Vice President Stu Bresler, speaking at the Sept. 26 meeting, as saying that “to be perfectly blunt,” the disclosure request to utilities is “not something whether we know we can actually actively enforce.”
Bresler called the approach “thou shalt ask,” ClearView Partners said.
The final version is scheduled to be completed and submitted to PJM members on Nov. 19, and then go to the Federal Energy Regulatory Commission before year’s end, PJM said.
PJM has reminded critics that it has no veto over new customers that want to connect to the grid. But it does oversee a complex, costly gauntlet of analysis and approvals that developers have had to go through to get permission to connect to the PJM grid.
With its queue of interconnection requests bulging to the breaking point, PJM shut the process down in order to work through the applications. While it has now given interconnection approval to more than 46,000 MW of proposed projects, many are held up by permitting, financing and other issues, PJM said.
