The cost of keeping the lights on is becoming a painful financial burden for many Americans as electricity costs are rising faster than inflation.
While factors like grid upgrades and increasingly severe weather have contributed to the rise, experts point to an unprecedented technological shift as a powerful new driver: the artificial intelligence boom, CNN reports.
But pricing models often don't account for the strain data centers place on local grids, meaning the costs of building new capacity are frequently passed on to homeowners like Lindsey Martin, whose electricity bill hit $315 in July — the highest bill she'd gotten up to that point this year, the Kentucky resident said on TikTok.
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In August, her bill spiked to $372, a significant increase from about $150 two or three years ago.
Martin's steep power bills reflect a national trend. Residential electricity costs are climbing across the U.S., according to the U.S. Energy Information Administration.
The data shows the average price of electricity in America has jumped 13% since 2022, and the cost of retail electricity is expected to continue growing faster than inflation.
This has prompted legislative action in some areas, with states like Oregon passing bills to require data centers to pay for the strain they put on the electrical grid, aiming to prevent consumers from absorbing the tech industry's soaring energy needs.
"In other words, the homeowners shouldn't have to pay for data centers, but that's not built into the pricing structure," Gartner market research analyst Bob Johnson told CNN.
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Tech giants are investing billions in massive data center infrastructure to power complex AI services, creating an explosion in demand for electricity that the current power industry is struggling to handle, Johnson said.
Companies like Meta and Microsoft are spending tens of billions of dollars on capital expenditures for data centers, pushing construction spending to a record high of $40 billion in June, Reuters reports, citing a Bank of America Institute report.
Data centers are projected to consume as much as 12% of U.S. electricity by 2028, up from 4.4% in 2023, according to the U.S. Department of Energy.
The concentration of computing power is having a direct impact on consumer rates. A Bloomberg analysis found that areas near data centers have seen electricity costs increase by as much as 267% compared to five years ago.
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The problem stems from the power-hungry nature of modern AI. Generating complex video clips or coding from websites from square one requires far more computational power than simple text-based queries, making AI tools "really computationally intensive," Shaolei Ren, an associate professor of electrical and computer engineering at the University of California, Riverside, told CNN.
Making matters worse, power grids and pricing models were not designed to handle the surge.
Large power users, like data centers, typically get lower rates because it's simpler to pipe power to one massive location than thousands of homes, Johnson said to CNN.
"The power industry just isn't equipped to keep up," he said.
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