Data centers can put upward pressure on electricity costs and require grid upgrades, but a new facility does not automatically cause a fixed increase in household bills or a blackout. The local effect depends on the facility’s electricity use and location, available generation and network capacity, and—critically—how regulators and utilities assign the costs and risks of new infrastructure.
How much electricity do data centers use?
U.S. data-center electricity use is substantial, but national totals cannot predict the effect on a particular utility or community. The figures below describe different measures and time periods; the 2028 projection is a scenario range from an earlier report, not a current local forecast.
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| Measure | Figure | Scope and source |
|---|---|---|
| Electricity used | 176 TWh in 2023 | U.S. data centers; estimate in the Lawrence Berkeley National Laboratory’s 2024 United States Data Center Energy Usage Report, announced by the U.S. Department of Energy (DOE) on Dec. 20, 2024. |
| Share of U.S. electricity | 4.4% in 2023 | National share, not a local utility’s share; Lawrence Berkeley National Laboratory’s 2024 report. |
| Projected electricity use | 325–580 TWh in 2028 | Scenario range in the 2024 report. DOE’s 2025 update revises the analysis using later equipment-shipment data and assumptions about AI equipment, so this range should not be treated as the latest forecast. |
| Electricity demand across organized markets | Up 2.8% in 2024 | Aggregate change across organized markets, not an estimate of data-center demand alone; Federal Energy Regulatory Commission (FERC), State of the Markets Report for 2024, released Mar. 20, 2025. |
| Active generation interconnection-queue capacity | 2,289 GW at the end of 2024, down from 2,368 GW in 2023 | FERC’s organized-market reporting. Queued capacity is not the same as generation that is committed, built, or available to serve a data center. |
The DOE’s 2025 update is the more current analysis of future data-center use; its forecasts are scenarios, not predictions for an individual utility. DOE’s Electricity Demand Growth Resource Hub repeats the older 2024 report’s 2028 range, so that figure should not be presented as a new 2025 forecast.
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How can a data center affect electricity rates?
A large facility can change utility costs through its energy use, contribution to peak demand and capacity needs, and need for new infrastructure. Those costs reach customer bills only through the applicable rates, contracts, and regulatory decisions. A facility’s size alone does not establish what residential customers will pay.
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Energy and capacity
Electricity consumed hour by hour contributes to the energy a utility or market must supply. The facility’s peak demand can also affect how much generation capacity must be available, including at times when the broader system is under stress. The result depends on the load’s hourly shape, its ability to ramp down or curtail use, and the system’s existing resources and headroom.
Transmission and local distribution
Serving a new load may require transmission work, a substation, or upgrades to local feeders and other distribution equipment. Some investments may be dedicated to one customer; others may serve multiple customers or the wider system. Who owns an upgrade and how its costs are allocated can affect whether the expense falls on the data center, other customer classes, or both.
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Rates have several drivers
Retail bills reflect more than data-center demand, including utility investment, energy and capacity costs, and approved cost recovery. FERC reported that organized-market electricity demand rose 2.8% in 2024 even as wholesale prices declined overall and retail prices continued to rise. That contrast shows why market and retail price movements have multiple drivers; it does not establish that data centers caused the national retail-price increase.
What determines whether the local grid has enough capacity?
Grid capacity is location-specific. A project needs an interconnection point that can serve its expected load, with adequate generation and transmission supply as well as local distribution capacity. A region may have ample annual electricity generation while the particular substation, transmission path, or peak-hour supply needed by a proposed campus remains constrained.
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Utilities and grid operators assess the project’s size and timing alongside other expected demand, existing congestion, and the schedule for generation and network upgrades. If necessary upgrades or supply are not ready, service may be delayed or investment may be required. National electricity-use totals—and the volume of projects in interconnection queues—do not reveal whether a specific site can be served on a particular timeline.
Who pays for new infrastructure, and who carries the risk?
The key question is not simply whether a company says it will pay for upgrades. The relevant question is which costs and risks are assigned to that customer under filed and approved tariffs, rate decisions, or contracts. DOE’s January 2025 brief, Electricity Rate Designs for Large Loads: Evolving Practices and Opportunities, identifies fair cost allocation and the risk of underused or stranded utility investments as central issues.
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- Dedicated upgrades: Determine whether the customer pays for equipment built specifically to connect or serve its facility.
- Shared system work: Check how costs for upgrades that also benefit other customers or the wider grid are allocated.
- Forecast and exit risk: Review minimum bills, security, construction contributions, contract commitments, and exit terms. These may affect who bears costs if a project is delayed, uses less electricity than forecast, or does not proceed.
- Reliability and supply risk: Ask who is responsible if the load grows faster than available supply or planned infrastructure.
A proposed tariff or company commitment is not necessarily an approved, enforceable protection. The controlling details are in the applicable filed and approved terms, not in a general promise to cover some costs.
Do on-site generation or co-location remove the grid impact?
No—not by themselves. A data center may be located alongside a power plant or use on-site generation, but its relationship with the grid still matters. The facility may import electricity, export surplus power, or rely on the grid for backup; the arrangement and governing tariff determine how those services and costs are treated.
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In February 2025, FERC opened a proceeding focused on co-location arrangements in PJM, asking whether tariff rules provide clarity while ensuring reliability and fair costs for consumers. In June 2026, FERC announced show-cause orders to all six jurisdictional regional grid operators concerning rules for connecting data centers and other large loads. These actions concern federal wholesale and transmission rules; they are not evidence that every region has completed reforms or that one federal rule protects all local retail customers.
Which regulator decides what appears on a household bill?
FERC oversees relevant interstate transmission and wholesale-market matters, including regional grid-operator tariffs. State commissions generally regulate retail electricity rates and address retail cost shifting. A federal grid proceeding therefore does not, on its own, determine how a state-regulated utility’s costs are recovered from local households. For a specific community, the utility’s state commission filings and decisions are essential evidence.
How to assess a proposed data center in your area
Use public utility and regulator records to distinguish a real, approved cost or capacity constraint from a forecast or proposal. Compare projects only when their loads, location, regulatory status, and rate components are comparable.
- Identify the expected load. Find the project’s expected hourly and peak demand, construction schedule, and any stated ability to curtail or shift consumption.
- Check the local capacity record. Look for the utility’s interconnection and service studies, regional operator capacity and transmission studies, and the utility’s integrated resource plan. Note whether required upgrades are proposed, approved, under construction, or in service.
- Trace the costs. Review the relevant state commission rate case, large-load tariff, and any public special contract. Separate costs assigned to the customer from shared upgrades and broader market costs.
- Look for protections against forecast error. Check minimum-demand or minimum-bill provisions, security, construction contributions, exit terms, and what happens if the project is delayed, scaled back, or abandoned.
- Assess flexibility and backup arrangements. Determine whether demand response, interruptibility, storage, or on-site generation is part of the approved arrangement—and how imports, exports, and backup service are handled.
- Pin down the rate component and jurisdiction. Identify whether the claim concerns energy, capacity, transmission, distribution, or fixed charges, and whether it is an approved retail decision, a federal tariff issue, or a proposal still under review.
These records can establish what a particular utility or regulator has proposed or approved. A national data-center statistic cannot substitute for them, and a cost estimate alone does not show which customers will ultimately pay it.
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