How AI infrastructure is driving a sharp rise in electricity bills

Geoff Bennett:

Tech leaders from some of the country's biggest companies met with President Trump at the White House last night, promising hundreds of billions of dollars to accelerate artificial intelligence and the infrastructure to power it.

They also offered unusually lavish praise for the president at a moment when many in the industry are pressing for a hands-off regulatory approach. It's all unfolding as electricity bills climb nationwide, rising faster than inflation in many places and in some regions far more sharply. The explosive growth of A.I. and the massive data centers behind it are driving demand and straining the grid.

To explain how this hits consumers and what can be done about it, I spoke earlier with Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.

So, electricity prices are surging nationwide. To what extent is the rapid expansion of A.I. and those data centers driving up those costs?

Ari Peskoe, Electricity Law Initiative Director, Harvard Law School:

So, the rise of these industrial-scale computing facilities that are needed for A.I. and other Internet applications is certainly one of the factors driving up prices.

And I think there's a chance that A.I. is going to drive our bills even higher in the future. And there's a couple of reasons for that. One is that these facilities are using so much energy that utilities are building billions of dollars of infrastructure to support them and spreading those costs to all of us.

And the second reason is that there are energy markets where utilities buy their power. And because demand from these A.I. energy centers is booming, it's driving up prices, and we're all paying those higher prices.

Geoff Bennett:

And some regions are getting hit harder than others. The nationwide average increase is around 6 percent, compared to as high as 14 percent in places like New Jersey and New York. What explains those disparities?

Ari Peskoe:

Well, a lot of our electricity bill increases are due to decisions being made by your local utility. Three out of four Americans receive electricity service from a for-profit company that makes money by investing in infrastructure, such as power lines and other related assets.

And so a lot of utilities have been replacing power lines on their aging systems and investing in new infrastructure. And that's been driving up bills. But different utilities are making different investment decisions, and that explains some of the disparity around the country.

Geoff Bennett:

I'm sure there are people who will hear you say that and they will ask the question, shouldn't the tech companies that are profiting from these data centers and the A.I. advances, shouldn't they be the ones to fit the bill? Why are everyday Americans being forced to pay these higher costs?

Ari Peskoe:

That's exactly the right question to be asking.

But the business model of the utility industry for now more than 100 years has been to invest in their systems and then spread those costs for everyone. That's always thought to be the fair approach to supporting our electricity system.

And when you think about it, in a lot of ways, that is fair. So, for example, if there's a storm in your neighborhood and a tree falls on a power line and the lights go out in your neighborhood, the utility comes to fix that, but it doesn't bill you and everyone in your neighborhood for that. Rather, it spreads the cost of those repairs to everybody.

And that you know is seen to be fair, because certainly you did nothing wrong when that tree falls down. And so that idea of spreading costs through everyone, when the utility needs to expand the system, it doesn't just charge the new residences or new businesses that are joining the system, but, again, it spreads those costs to everyone.

We're in a bit of a new situation here when you have individual facilities, these data centers, that are using as much electricity as large cities, and they happen to be supporting the wealthiest corporations in the world. I think we need to revisit some of these fundamental assumptions behind how we share the costs of our power system.

Geoff Bennett:

So much of this data center build-out is relatively new. Should we be bracing for even higher prices in the years ahead or are we already seeing the peak?

Ari Peskoe:

I think it's certainly possible that the costs of this data center expansion are going to increase for everyone.

And that's because this — data centers have been part of the backbone of our Internet for some time now, but the size of these facilities has just so vastly expanded since the introduction of ChatGPT just a few years ago really kicked off this wave of, again, these city-sized data centers that we have never seen before. And many of them are still in development.

So the costs of all the infrastructure and energy associated with them really haven't hit our bills just yet.

Geoff Bennett:

And, of course, the Trump administration is pushing coal, natural gas, nuclear power to meet the A.I.-driven demand, while kind of moving away from renewable energy, like wind and solar. Do you see that approach as addressing the core challenge posed by the rising energy needs?

Ari Peskoe:

No, I mean, it doesn't make any sense to take supply options off the table. And that's really what this administration is doing, particularly with wind energy.

We really need every option we can to boost the amount of electricity if we're going to power these new computing facilities. And, as I said, demand is rising, and that's causing prices to go up in many markets around the country. When demand goes up, you want to increase supply as well. And under basic economics, that's going to even out some of the prices.

But it doesn't make any sense what they're doing.

Geoff Bennett:

So, higher bills are here to stay?

Ari Peskoe:

That's certainly the trend that we're seeing right now.

And all the trend lines are unfortunately pointing in the wrong direction for consumers. So it would be nice to see, again, let's put more supply options on the table that'll help alleviate some of the stress we're seeing.

And, in addition, we have to be able to get more juice out of our current system. We have to have the utility industry operate it more efficiently, so rather than just building more and more and more, we're actually able to use what we have in a more efficient, cost-effective manner.

Geoff Bennett:

Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School, great to speak with you. Thank you.

Ari Peskoe:

Thanks so much.