One of the biggest reasons most Americans don’t want a data center built nearby is that they worry it will drive up their utility bills. But whether those bills rise, and by how much, depends on the local power grid and the terms of the deal.
In fact, the impacts have at times been counterintuitive, with new data centers in some cases actually driving down utility bills for other customers on the same grid.
Consider North Dakota. A 2025 study from Lawrence Berkeley National Laboratory and the Brattle Group found that increased electricity demand from large customers, including data centers, helped lower bills in the state between 2019 and 2024. That’s partly because North Dakota had a relatively abundant supply of electricity, including wind power, and didn’t necessarily need to build new infrastructure to accommodate the additional demand. Instead, utilities could spread their existing costs across more customers, bringing bills down. (That dynamic becomes less likely as the grid runs out of spare capacity, but more on that later.)
The study found that over that five-year period, there were several reasons that prices were rising other locations. Inflation was one obvious driver. But there were a range of other significant causes, from Russia’s war in Ukraine impacting the price of gas for power plants to the cost of utilities making the grid more resilient to wildfires in places like California.
To get a clearer picture of how data centers affect electricity costs, researchers at the University of Pennsylvania’s Wharton School and Harvard Business School took a different approach. In a new working paper , they compared electricity bills in places where data centers were built between 2020 and 2025 with bills in areas that didn’t see new construction. “We started looking at this earlier this year…there was a lot of public perception about what data centers are doing, but strong academic and critical evidence on what the real impacts are was missing,” says Vishrut Rana, a Wharton doctoral student and one of the study’s authors.
That research has found that new data centers had a relatively small impact on residential bills over the study period—on average, just 4% of the total observed increase. (Industrial energy prices jumped up higher.) The impact varied depending on location and the type of data center. Colocation data centers, where businesses rent space to house servers, had more impact on prices than hyperscale data centers for single tenants. That may be both because hyperscalers have tended to build in more rural areas where there was more room on the grid, and because hyperscalers have also been more likely to sign contracts where they cover the cost of adding new infrastructure—sometimes new wind and solar power that can replace more expensive gas generation.
The risks of a grid stretched to its limits
That doesn’t mean the effect on energy bills will be small going forward. Another new report from a nonprofit called ESIG , the Energy Systems Integration Group, looks at multiple factors that influence what could happen because of a hypothetical new data center. First, in theory, there still might be some places where there’s enough extra power infrastructure on the grid that a data center might lower costs. The report’s modeling suggests that scenario could lower rates by 0.88 cents per kilowatt hour in the example of a hypothetical utility in the Southeast. But because of the scale of demand for electricity, if those places exist, they probably won’t for long. And a grid might need that extra capacity for other new uses, too.
Several factors could push bills higher. A data center might overestimate how much electricity it needs, so new energy infrastructure gets built and other ratepayers get stuck helping cover the bill. A data center might be built late or shut down earlier than expected, again leaving other ratepayers covering the cost of new infrastructure. In some regions, utilities don’t own all of their own power plants and have to buy energy in auctions; as data centers sharply increase demand, wholesale prices go up, and that gets passed on to customers.
The type of power plants that are being built to support data centers can also affect costs for consumers. Energy Innovation , an organization focused on clean energy, has estimated that relying on fossil fuels for new energy generation would add $29.7 billion a year to customer bills by 2030; clean energy could save around $5 billion a year. If coal and gas prices spike, as they have in recent years, the cost could jump to $40.5 billion a year. In that case, clean energy could save as much as $13.5 billion.
In a worst-case scenario where multiple factors are simultaneously pushing electric rates higher, the ESIG report estimates that it could raise rates by 1.32 cents per kilowatt-hour. (It doesn’t translate that into monthly bills, but that might mean paying roughly $10 more a month.)
[Image: ESIG]
Who pays for all that power?
Other factors could mitigate rate increases. States and utilities are beginning to require contracts with minimum billing terms, so data centers wouldn’t end up paying less if they happen to use less energy. Other contracts include early termination fees. Data centers or their customers can also cover the cost of new power plants. If federal regulations change , it could also be easier to charge data centers for upgrades to transmission networks.
The terms of these contracts are evolving rapidly. “What’s happening is actually quite remarkable [in terms of] how quickly things are changing,” says Trieu Mai, senior director of programs and research at ESIG. More than a dozen states, from Tennessee to Minnesota, have passed laws designed to protect consumers from rising energy bills. Hundreds of data center bills were filed this year. In some states, attorneys general are also challenging data center contracts that they say don’t adequately protect consumers.
Utilities are also changing their approach, though the details differ everywhere. In North Carolina, where Duke Energy has said that data centers are responsible for more than 85% of load growth on the local grid, the utility initially planned to raise rates 18% next year (the cost also included upgrades like making infrastructure more resilient in storms). Under pressure from the governor, that was negotiated down to around 9.5%. Now, the utility has proposed a new tariff for large customers like data centers, though it won’t apply to contracts signed before July 2026, and critics say that it doesn’t go far enough—it doesn’t cover the cost of new transmission upgrades, for example, or what might happen if a data center leaves early.
These changes represent a major shift in how utilities typically operate, and they may not happen everywhere. “Utilities are spending billions of dollars on new infrastructure for data centers, and the basic utility business model is to spread the cost of new infrastructure to everyone,” says Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program.
Even when companies claim they’ll cover the cost of new grid infrastructure, it’s difficult to verify whether that’s actually happening. “It’s very hard because a lot of the details are confidential,” says Peskoe. “And then there’s not a lot of transparency about what’s actually being built for data centers, particularly when it comes to the high-capacity transmission network, interstate transmission system that connects everyone together. Utilities are not really doing a good job of disclosing what is being built for what data center. The federal regulator is ordering more transparency, but that’s still a process. So TBD on how that all plays out.”
The bottom line: Transparency is critical if residents want to understand what a proposed data center could mean for their utility bills. And at a time when data centers have become a defining issue in the midterm elections—and most Americans are convinced that data centers will significantly spike bills—there’s no simple answer to what impact a large data center might actually have. “The answer would be: it depends,” says Mai. “Of course, it’s an unsatisfying answer. That’s why you have to do the math to see what it depends on for your region.”
