Data Centers Didn't Jack Up Your Bill—Utility Greed Did | Opinion
Newsweek · C · trust 35/100
0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Your electricity bill went up again. And if you've been following the news, you probably think you know why: data centers. AI. The insatiable appetite of tech giants hoovering up power while the rest of us foot the bill.
It's a satisfying story. But it's the wrong diagnosis, and Americans have billions at stake if regulators fail to get it right.
Demand from data centers, manufacturing and electrification is surging . Utilities are spending billions trying to keep pace. Residential electricity prices have climbed 7.3 percent since April 2025, while some states are seeing double-digit rate hikes. Customers are angry. Politicians are reaching for the freeze button.
But before we scapegoat the data center on the edge of town, we need to analyze the existing model: Utilities are granted a monopoly over their service territory in exchange for an obligation to serve every customer reliably. Regulators allow them to earn a guaranteed rate of return on the capital they invest—substations, transmission lines and power plants. The more they build, the more they earn. It’s a system that rewards spending.
When demand rises, the incentive is to build more. Not optimize. Not innovate. Build. Never mind that the average American grid operates at roughly half its capacity for most of the year. Or that the peak demand event driving a billion-dollar infrastructure investment might last only a few dozen hours annually. The math still works for the utility.
You may ask, if the grid is half-empty most of the year, why don't bills fall? Because costs are driven by peak demand. The grid must be sized for those moments, and someone must pay for it. But what if Americans used that latent capacity more efficiently, rather than letting utilities build past it?
Now, faced with surging demand, some utility companies within PJM—the country's largest regional grid, serving 65 million people across 13 states and the District of Columbia—are pushing to regain control over new power generation, allowing them to collect guaranteed returns on plants built to serve rising load. This would only lead to higher electricity rates for consumers.
Georgia Power’s Vogtle nuclear plant, which took 15 years to build and cost $35.8 billion—more than twice its projected timeline and budget—is the clearest example of this. The Georgia Public Service Commission approved passing most of those overruns directly onto customers, meaning investors were protected while Georgians absorbed the mistake.
Utilities have historically overestimated load growth, and the speculative nature of data center demand has amplified the error. After Ohio regulators required more rigorous proof that projected data center load was real, AEP Ohio's demand forecast dropped by 80 percent. Allowing utilities to collect guaranteed returns on generation built to serve a demand that may never materialize saddles American families with unnecessary costs for decades.
Concerns over the way PJM operates are fair: The capacity auction produces price spikes and there have been yearslong interconnection backlogs, but the response to imperfect markets is to fix the markets—not to abandon competition.
There is also the option to use the tools that are already working.
Energy storage, particularly batteries, can unlock latent grid capacity, shifting supply and demand in ways that reduce the need for new generation. The market is already signaling this. When PJM recently reopened its interconnection queue, it received requests for over 800 new projects representing more than 200 GW of capacity. More than 40 percent were storage projects; solar-storage hybrids alone accounted for 75 GW of submissions.
Large flexible loads, like data centers, can play the same role. Their shiftable workloads can reduce consumption during grid stress events, acting as demand-side capacity resources, turning the supposed villain of the story into part of the solution.
Competitive markets, for all their imperfections, remain a meaningful check on the build-at-any-cost impulse. Interconnection reforms have reduced processing timelines. Performance-based ratemaking—which ties utility earnings to outcomes rather than capital expenditure—aligns incentives without abandoning oversight. The proposed Reliability Backstop Procurement allows utilities to commit to new capacity if competitive markets cannot deliver it, aligning capacity commitments with the long lead times new generation requires.
Americans deserve a serious response to the growing demand surge, but expanding monopoly control just when competitive alternatives are working would be a costly mistake.
Data centers didn't break the American grid. A regulatory model that rewards building over optimizing did. The path forward runs through better incentives, smarter use of existing assets, and a disciplined market. Elected officials in the PJM region and beyond should be demanding two things: That utilities provide clear evidence of their demand projections, and that the risk of getting that call wrong falls on investors—not the American people.
Jigar Shah is founding advisory chair of Deploy Action and a TIME100 honoree. He led the U.S. Department of Energy’s Loan Programs Office from 2021 to 2025.
The views expressed in this article are the writer's own.
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