Seven in 10 Americans oppose an AI data center in their community, whereas only 53 percent would object to a nuclear power plant, according to Gallup’s March survey. Somehow, we would rather live beside a reactor than a building full of servers.
Perhaps Hollywood trained us too well to fear Skynet, when in fact the real trouble is in the wires.
To be sure, there have been instances where data centers were simply built in inappropriate places, too close to unwilling neighbors. But most of the fear rests on a belief that data centers are the reason your electrical bill keeps climbing. But the best evidence through 2024 says they explain only a small slice of it. The panic is steering us away from the technology and away from the fixes that would protect your wallet. Ignorance has a price here, and it is showing up on your monthly statement.
Candidates in both parties ran against data centers. Texas Democrat James Talarico said, “Data centers are jacking up utility bills across the state of Texas.” His Republican opponent, Attorney General Ken Paxton, answered with a four-point plan of his own. New York also froze permits for new large data centers for up to a year.
Talarico has a fair point about the bills. Residential prices in his state’s market rose by roughly 30 percent from 2021 to 2025, and Gov. Greg Abbott told regulators to make data centers pay for the infrastructure they need. But blaming one kind of building for all of them is the mistake.
I have been a California ratepayer since 1990. My own bill has climbed every year, despite the solar panels I installed on my roof. I don’t live near a data center. So rather than just get angry at my power bills and rail against data centers, I decided to read the studies first and try to understand, at this early date in the AI era, what has happened so far.
A Wharton and Harvard Business School working paper attributes just 4 percent of residential rate increases from 2020 to 2025 to new data centers. MIT researchers put the residential effect at just 2.1 percent for 2010 through 2024.
An EPRI working paper found that, through 2024, a doubling of a state’s data center capacity was actually associated with a 3.5 percent drop in residential electricity prices. That makes sense — when there are more users to cover the same fixed grid costs, everyone’s share is less. But the arithmetic cuts both ways — EPRI’s researcher cautioned that prices could rise if utilities build for demand that never shows up.
So what is causing bills to go up? Adjusted for inflation, the national average price in 2024 matched 2019. So the pain is concentrated in specific places for specific reasons.
Berkeley Lab’s review of 2019 through 2024 points to unglamorous culprits. Inflation-adjusted distribution spending rose 35 percent. California’s big three utilities were authorized to recover $27 billion in wildfire costs, which grew from 1.7 percent of their revenue requirement in 2019 to 17 percent by mid-2024. California’s residential prices rose nearly 40 percent over that stretch, amid only modest data center growth. Pay no attention to the man behind the curtain who ignored common-sense timber and brush management.
PJM Interconnection, the nation’s largest regional transmission organization, estimates that data center load added $23.1 billion in costs across the last three capacity auctions. Of the $6.5 billion tied to data centers in December’s auction, about $6.2 billion traced to facilities not yet built. Customers are paying for buildings that exist only in a utility forecast. That’s a risk allocation failure, and I’ve seen enough of those in private credit to recognize one.
The fix is old-fashioned contract discipline. Ohio regulators now require large new data centers to pay for at least 85 percent of subscribed capacity for up to 12 years, with collateral behind the promise. The old tariff’s minimum billing floor was 65 percent. Virginia’s new large-customer class, starting January 1, 2027, demands 14-year commitments and minimum payments on 85 percent of transmission and distribution demand and 60 percent of generation. Wisconsin regulators required the largest data centers to fund 100 percent of the generation resources built to serve them.
In private credit, we call that “take-or-pay.” The customer who asks for the plant carries the risk of the plant. Washington’s Ratepayer Protection Pledge, signed March 4 by seven tech companies, points the same way, but it is voluntary. A pledge becomes protection only when a utility commission writes it into a tariff.
The other half of this equation is supply. PJM Interconnection’s market monitor counts a 6,520 megawatt gap in the 2027-2028 auction and wants a separate capacity auction for data center load, open only to new generation. We can also permit generation and transmission faster.
Nuclear belongs in the mix, on a 2030s clock: Google’s deal with Kairos Power targets 500 megawatts by 2035, and the Energy Department is cost-sharing up to $800 million for reactors under construction for the Tennessee Valley Authority and Holtec Government Services, with completion expected in the early 2030s.
Blanket moratoria, meanwhile, may forfeit the cost-spreading effect researchers found through 2024. They do nothing about the supply gap.
Diogenes Laertius recorded Socrates as holding that there is only one evil — that is, ignorance. And Aung San Suu Kyi put it this way: “It is not power that corrupts but fear.” So don’t just get mad about data centers. Ask your commission whether there is a large-load tariff, what is being built in your area, and who is carrying the risk. Fear the stranded cost, but welcome the technology.
Jay Rogers is President of Alpha Strategies and a financial professional with more than 30 years of experience in private equity, private credit, hedge funds, and wealth management.
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