Power costs soar in PJM region as data center demand spikes
PJM covers the largest amount of data center demand in the world, and the region is becoming a test case for how AI's energy needs will hit homes and businesses, particularly as new electricity supplies are slow to be added.
The latest energy auction held in July by the PJM Interconnection to cover electricity needs on peak demand days soared to $329 a megawatt day, a roughly 1,000% jump from two years ago.
Those prices funnel down to power bills in PJM's territory, which stretches from the Mid-Atlantic region westward, covering all or part of 13 states and the District of Columbia.
Analysts at ICF, a global consulting and technology services firm, said customer power bills in PJM could increase residential retail rates between 30% and 60% by 2030, largely due to rising costs caused by the capacity auctions, which determine the price paid to power plant owners to run overtime during extremely high power use.
"This outcome underscores PJM's critical need for capacity, driven largely by surging demand from data centers, which is expected to outpace new generation additions," ICF said.
In the short term, PJM expects the recent auction to have a year-over-year impact of 1.5% to 5% on utility bills starting June 2026.
That would account for the capacity portion of bills alone, whereas utility spending on power lines and other build-outs and services to meet growing loads will also hit customer bills.
With the rest of demand sources in PJM largely flat, data centers are pretty much driving all of those rising costs, said John Quigley, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania.
"They are ground zero in terms of why we're seeing rising electricity costs," Quigley said.
Data centers make up more than 90% of the new power demand PJM estimates it will see by the end of the decade, the grid operator has said in filings.
'While economic growth is welcome in the PJM footprint, we recognize the impact that data centers are having on the system," PJM said in a statement. "We're going to seek to address some of these challenges around reliability and cost with data center owners, consumers and all of our stakeholders, including our states, in the near future."
On the supply side, rising power bills on PJM turf are caused by multiple factors, and capacity auctions are one component.
The prices from those auctions in recent years take effect about a year out, so price impacts from the latest one in July will take effect next summer.
Power bills are also affected by spending by utilities to build power lines and upgrade systems to deliver electricity to homes and businesses.
As data centers drive power demand higher and spur the need to build new generation capacity, consumer advocates said they fear residential customers are subsidizing the AI ambitions of wealthy corporations.
Some of the biggest utilities in PJM, including AEP (AEP.O), opens new tab and Dominion(D.N), opens new tab
, this year announced significant increases to capital expenditure plans to meet new data center demand.
That spending is paid for mostly by the public.
As a way to soften the financial blow to customers, some utilities, including ones in New Jersey and Maryland, began to offer rebates.
Those measures, however, are mostly temporary, and long-term fixes remain unclear if the pace of new power demand outstrips supply.
'We have residential customers providing massive subsidies to some of the wealthiest corporations in the world to support their data centers,' said David Lapp, the head of Maryland's Office of People's Counsel, a state agency that advocates for residential utility consumers. 'It's just a massive transfer of wealth from small customers to data centers.'
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