Rising Electricity Costs – Watts Up With That?

By Paul Steidler

Left unchecked, early November 2025 will go down as the Rubicon when datacenters became the scapegoats for higher electricity costs. The messaging campaign has been aggressively launched and is gaining traction.

The reality, however, is fundamentally different.

Electricity prices were already on an upward tear before President Trump took office and implemented policies to accelerate the growth of datacenters. In fact, the widespread expansion of datacenters over the next decade can catalyze the substantial reduction of electricity costs while also improving grid reliability, thereby lessening service outages.

According to the Federal Reserve, nationwide electricity prices rose 31.6% from January 2021 to January 2025, compared with underlying inflation of 21.4% in the Consumer Price Index (CPI). Thus, electricity prices rose 48% more than other goods and services.

From January to September 2025, the latest period for which figures are available, the Federal Reserve reports a 5.0% increase in electricity prices, also above the CPI. While high, it is hardly a new trend. That has not stopped some from looking to pin the blame on datacenters.

In an October 21 interview with The Wall Street Journal, Jonathan Kanter, the former Assistant Attorney General for Antitrust Enforcement in the U.S. Department of Justice during the Biden Administration, warned, “Energy power is going to be an extremely important area of focus for antitrust enforcers” because “datacenters consumer power at the expense of local communities and businesses.”

On Monday, November 10, five U.S. Senators wrote to U.S. Secretary of Commerce Howard Lutnick and White House Office of Science and Technology Policy Director Michael Kratsios. The Senators bluntly attacked datacenters for electricity costs saying, “American families face soaring electricity bills caused by the Trump Administration’s sweetheart deals with Big Tech companies.”

The charge does not hold muster, based on several factors.

First, datacenters take years to build. And while more than a thousand additional datacenters will be needed to help Americans thrive with AI, there simply has not been enough time in the Trump Administration to bring new ones online, or to cause changes in power markets and prices.

The primary issues affecting most electricity consumers in 2025 are as follows.

Much of your electric bill is not for electricity. A typical electric bill involves costs for fuel (e.g., the natural gas used), transmission (the process of delivering electricity from power plants to your home), and an assortment of government taxes and fees. The latter can be 25% of a typical bill and include sales taxes, subsidies for renewable energy, and other opaque purposes. Cutting these electricity taxes is an immediate and direct way for politicians to lower electric costs.

Much of the transmission grid is old – and it is expensive to replace it. According to the U.S. Department of Energy, more than 70% of the electric grid is more than 25 years old. For decades, improvements have been put off, and the costs have risen substantially today to improve the grid.

Much more power generation is needed. With more fuel or power produced, the supply will increase and prices will fall. However, many areas, especially in the Northeast, have shut down large coal and nuclear plants while energy demand grows. In many areas, this is a significant structural issue that must be addressed.

Datacenters, in addition to the vast number of jobs and economic activity they bring to a region, can also be both the catalyst and central force in improving the delivery of electricity. They also help communities harvest the vast benefits of AI better.

As large users of electricity that will operate 24/7 for years in a community, datacenters often look to enter into multi-year power purchase agreements with utilities. This provides a stable, long-term source of investment capital that can and should facilitate the new generation coming online and the improvement of the transmission grid. Public utility commissions will assess such agreements to make sure they benefit the public, and it is local leaders who are directly accountable.

Datacenters also have the option of developing their own power sources. Communities that push datacenters towards that risk losing out on massive investments that will improve their electric grid, and defray costs to households.

Just as communities can decide whether they want datacenters, so too can the companies investing in datacenters determine where they want to locate. Many cities and states are courting companies investing in datacenters. Those who demagogue datacenters for electricity costs should take that to heart, as they could push these engines of prosperity out of their state to neighboring ones. 

This article was originally published by RealClearEnergy and made available via RealClearWire.