OPINION:
The narrative is set: Electricity rates are rising, and artificial intelligence data centers are to blame. This simple claim is seemingly buttressed by the fact that data centers do indeed use a lot of energy.
Still, it is also not entirely true. Data centers have become a convenient scapegoat for politicians who are eager to distract from the real cause of rising utility rates: government policy.
That is not opinion. It is supported by data.
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A rigorous state-by-state analysis by the Institute for Energy Research found no meaningful correlation between data center presence and increases in electricity prices. In fact, states where electricity sales grew faster from 2015 to 2025 paid less for electricity.
High-growth states averaged a 20% price increase over that decade, while low-growth states showed a nearly 40% increase.
Although this analysis predates the most recent surge in data center scale, the basic principle remains: More consumption on the same infrastructure means fixed costs split among more users, lowering the cost per kilowatt-hour.
For example, in Northern Virginia — the world’s data center capital — large customers cover 9% of transmission costs, keeping residential rates below the national average.
Yet electricity rates were rising nationwide long before AI data centers entered the public imagination. The reason is simple: America has an aging grid that costs immense sums to repair, replace and expand.
A Lawrence Berkeley National Laboratory analysis of rate increases from 2019 to 2025, funded by the U.S. Department of Energy, confirmed that the primary driver of inflation-adjusted increases in electricity prices was investment in grid infrastructure. After that, the price of natural gas, natural disaster recovery and state energy and environmental policies contributed to the problem.
Despite the aging grid, politicians have spent decades making it impossible to build new infrastructure. The Northern Pass Project in New Hampshire would have brought cheap Canadian hydropower to New England. A state committee killed it. The New England Clean Energy Connect in Maine would have done the same. A ballot initiative killed it.
From 2022 to 2026, PJM Interconnection was forced to freeze new grid applications in the eastern U.S. Although it is true that in the PJM market data center growth has accelerated price increases, that is not because data centers are inherently problematic. Any new power needs would have eventually caused issues.
As Brent Nelson, managing director of markets and strategy at Ascend Analytics, put it, “Even without data centers, load growth from other causes would still eventually cause the same capacity market cost increases … because capacity prices reflect the price of getting new generation to market, not the cost of supply.”
The result is a market limitation crisis, not a data center crisis.
These grid problems are compounded by difficulties in electricity production. Before the Trump administration began deregulating zero-emissions nuclear energy generation, it often took 15 years or longer to get a new reactor approved and built.
Although America pioneered the solar industry, ironically, policymakers buried it under environmental regulations — while China simultaneously threw more than $50 billion in subsidies at it to steal the manufacturing lead.
Data centers entered a world with electricity prices already rising. That is the last thing they want because rising electricity costs increase production costs. So hyperscalers are bringing their own power, effectively becoming energy companies, building more and mostly clean energy generation to meet their own demand.
Microsoft signed a 20-year agreement to restart Three Mile Island, with Constellation spending $1.6 billion to bring the reactor back online. Google signed the first corporate small modular reactor fleet deal in U.S. history and a 1-gigawatt solar power purchase agreement. Meta contracted more than 10 gigawatts of clean energy in 2025, the most of any corporate buyer in the world.
Still, critics argue that hyperscalers will make unprecedented demands on our grids regardless of how much power they generate themselves — and that the research institute study showing that data center buildouts correlate with lower electricity rates predates the current unprecedented scale of construction.
Yet once again, the market is solving a problem that the government allowed to happen. Technology companies raced to sign on to the Trump administration’s Ratepayer Protection Pledge, committing to fund the generation and infrastructure their projects require. The pledge now covers 80% of all power delivered to U.S. homes and businesses.
As a result, ratepayers have less to worry about than critics presume. Localized hyperscaler generation reduces demand pressure that would cause price spikes. Meanwhile, ratepayers can benefit from transmitting electricity on tech-funded infrastructure buildouts for which their tax dollars did not pay.
Instead of overtaxing aging infrastructure, AI is helping foot the bill for new infrastructure — at least that which affects the data centers.
Politicians are all too eager to blame AI companies for electricity price hikes because doing so distracts from the real problem: them. Yet Silicon Valley is not causing the energy crisis. If anything, it is helping solve the problem created by Washington’s red tape.
• Drew Bond is co-founder and executive chair of C3 Solutions.
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