The Indicator from Planet Money

Episode•February 3, 2026•9 min

All these data centers are gonna fry my electric bill … right?

Data centers are getting a lot of heat right now. There’s neighborhood pushback against them for water usage and environmental concerns, and some politicians on both sides of the aisle aren’t fans for the same reasons. There’s also fear that they could drive up the cost of electricity bills. But that last bit isn’t set in stone. Data center electric bill upcharge is not a guarantee. In fact, it is even possible for data centers to cause power bills to go down. Today on the show: the future of your power bill.Related episodes: No AI data centers in my backyard! (https://www.npr.org/2025/10/22/nx-s1-5581445/no-ai-data-centers-in-my-backyard) What AI data centers are doing to your electric bill (https://www.npr.org/2025/12/19/nx-s1-5649814/ai-data-center-electricity-bill)For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org (http://plus.npr.org/). Fact-checking by Sierra Juarez (https://www.npr.org/people/1268825622/sierra-juarez). Music by Drop Electric (https://dropelectric.bandcamp.com/). Find us: TikTok (https://www.tiktok.com/@planetmoney), Instagram (https://www.instagram.com/planetmoney/), Facebook (https://www.facebook.com/planetmoney), Newsletter (https://www.npr.org/newsletter/money). To manage podcast ad preferences, review the links below: See pcm.adswizz.com (https://pcm.adswizz.com) for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. Learn more about sponsor message choices: podcastchoices.com/adchoices (https://podcastchoices.com/adchoices) NPR Privacy Policy (https://www.npr.org/about-npr/179878450/privacy-policy)

Apple Podcasts Overcast

Transcript

0:01

Npr.

0:12

Data centers are getting a lot of heat right now. There are protests against them, cities voting to keep them out. You even have both Bernie Sanders and Ron DeSantis speaking out against data centers. Two men I'm pretty sure wouldn't even agree that, you know, water is wet.

0:30

You know, data centers, they are essentially warehouses packed with computers that make cloud computing and AI possible. And there are a lot of different reasons people have for opposing them, like concerns about AI and worries about the tons of water they use. And then there's the fear that data centers will lead to higher electric bills.

0:48

Electricity prices are up about 7% year over year, way higher than overall inflation. And that's driven in part by this flurry of power hungry data centers. And the concern is that all the new centers coming online will only drive electric rates even higher.

1:05

But that is not inevitable. This data center electric bill upcharge is not a guarantee. In fact, it is even possible for data centers to cause power bills to go down.

1:17

This is the indicator from Planet Money. I'm Wayland Wong.

1:19

And I'm Stephen Bassaha. Today on the show, we look at three possible futures for your power bill. Futures where power companies over prepare for AI under prepare. And in the Goldilocks scenario, where everything goes right and your electric bill could actually get cheaper.

1:36

This message comes from Instacart. Everyone prefers things a certain way, like groceries. If you want groceries just how you like them, you gotta try Instacart. They have a new preference picker that lets you pick how ripe or unripe you want your bananas. Shoppers can see your preferences up front, helping guide their choices. Because when it comes to groceries, the details matter. Instacart get groceries. Just how you like

2:04

to lay out. Our three futures is Greg Upton. He's the executive director for Louisiana State University's center for Energy Studies.

2:12

There's no reason that inflation adjusted electricity prices have to increase over time.

2:18

It sounds like you are not a electric price data center doomsayer.

2:23

I'm definitely not a doomsayer.

2:26

The groups responsible for determining which future we end up with are power companies and their regulators.

2:33

The regulator could be called the Public Service Commission, the Public Utility Commission. The name can change based upon the state.

2:38

Whatever you call them, those regulators and utilities need to get together and make a bet. The bet being on just how much electricity data centers will actually need. And there is a huge range of predictions here.

2:51

One estimate is that data centers will take up an incredible 16% of all energy used in the US by 2030. I mean, huge Amounts. Some other estimates, though, are way more conservative. Like one is less than 7%.

3:05

Greg says essentially the utilities present regulators with a story about how much demand they think there will be from the new data center and how much power the utility wants to bring online to match, like by building new natural gas plants, renewable energy sources, and nuclear power plants.

3:22

And then the regulator, if they have a successful story, is going to prove the utility in order to build that additional generation.

3:30

And then we'll have to wait to see if they bet right. And that will likely play out in one of three scenarios. Scenario one, they got it wrong. Data centers don't need that much electricity. You know, maybe AI flops or data centers just get much more energy efficient. Whatever the reason, the utilities have all overbuilt and have excess power.

3:49

Greg says utilities tend to end up overbuilding. Their version of being cautious.

3:54

Probably doesn't hurt that they, you know, make money by building more plants. And there are still benefits in this construction zealous future.

4:02

Well, on one hand, the whole grid's actually going to run more efficiently. You've got this new generator. That new generator is probably going to be more efficient than a lot of your legacy older generators.

4:15

But there's also a big downside.

4:17

On the other hand, you built this capital, and that capital is going to have to be paid for by ratepayers.

4:23

You might think all that extra supply of power would lower costs, but it's hard to store electricity. Batteries just aren't that good yet. So we're stuck with paying for that unused power or power plants just sitting there idle.

4:36

And so if you build over bill generation, you might have fuel savings in the short run, but the amount of the capital that you're spending is not worth that.

4:45

Regulators can hedge against this by requiring data centers to pay for a certain amount of power, even if they don't use it all. That's what Ohio regulators did. Data centers there will have to pay at least 85% of electricity they said they would need.

4:59

Greg says this overbuild scenario would likely cause residents power bills in the community to go up.

5:05

That's scenario one. The other scenario is that electricity demand grows very rapidly, way faster than you projected.

5:15

So this is the case where the utilities underbuilt. They're not generating enough power to meet the new demand.

5:21

Utilities could then start building new plants, but that takes time. So while they try to catch up, Greg says they'd be bringing online older power plants, plants that are less efficient and cost more to run. And that drives up the price of electricity.

5:36

And so in the instance that you don't build out the new generation, in that instance, you can also have higher costs.

5:45

Then there's scenario three. Building not too much, not too little, but getting it just right.

5:52

And so it's this Goldilocks zone.

5:54

This is that magical scenario where electric bills could be lower or at least, you know, rise slower than inflation.

6:01

And.

6:02

And it comes down to economies of scale.

6:05

Essentially. Economies of scale means that companies often get more efficient as their business grows. The same concept applies to power generation.

6:13

Economies of scale definitely, definitely can play in. In order to supply that in the

6:17

most efficient way, newer, larger plants can be more cost efficient. And if the data centers pay their share, then this is that Goldilocks case where the electric bills get cheaper.

6:28

Okay, but you know, that pay their share bit. Greg says that's another balancing act.

6:33

You can get a good deal, or you could get a bad deal, right?

6:36

Utilities and regulators often set a separate rate for large customers like data centers. If the centers end up paying too little, then the rest of the utilities customers will be stuck paying more for those new power plants.

6:49

And so, again, it comes to getting it right. It comes to the regulators getting it right, it comes to the utilities getting it right and kind of meeting that Goldilocks that we talked about to build out the appropriate amount of capital while at the same time protecting ratepayers in order to have access to affordable and reliable energy.

7:07

So how likely is it that utilities will make good deals for residents? That's what I asked Ari Pesko. He's the director of the Electricity Law Initiative at Harvard.

7:17

So, unfortunately, the incentives here for the utility and the data center are not great from the public's perspective.

7:23

He says the reason for that is because utilities are competing right now to attract data centers, because the utility industry

7:29

makes money by building infrastructure. That's where their profits come from. And there is now no better reason to build infrastructure than data centers.

7:38

And a great way to beat out another state or utility for that data center business. Offer a sweetheart deal where the utility isn't paying all that much and residents are essentially subsidizing the costs with higher electric bills.

7:49

He says the one mitigating factor here is all the public backlash to data centers that could put pressure on utilities as they set these rates. But Ari doesn't expect that to go too far. After all, these utilities are typically monopolies.

8:03

There's. There's a reason that for 150 years in this country, we have regulated monopoly providers.

8:11

Well, okay, but, yeah, but you're right, we have those regulations. Don't. Wouldn't that kind of. We have Public Service Commissions and other groups don't. We are. Does that not solve this issue?

8:20

So utility regulation is hard in part because the utility controls all the relevant information.

8:27

Yeah, the utilities have way more information about their own operations, not to mention way more resources than cash strapped regulators for things like lawyers and analysts.

8:38

So it sounds like to you this sounds like less of a Goldilocks zone to try and hit that could benefit consumers and sounds more like to go biblical on you for a second, putting a camel through the eye of a needle.

8:52

You know, maybe the hole's a little bit bigger. Maybe we could choose a smaller animal. But look, I think we have some safeguards, some protections. They don't always work.

9:05

So, yes, it's possible for electric rates to drop if everything lines up right, but that doesn't sound like a beta Ari is planning on making. If you liked this episode, send it to a friend who might like it too. Word of mouth is how we grow, so spreading the word is supporting our journalism.

All these data centers are gonna fry my electric bill … right?

0:00

0:00

Related Episodes

Are we in an economic 'doom loop'?

Are we in an economic 'doom loop'?

Feb 9, 20269 min

Eswar PrasadDoom LoopGlobalization

Can a good story change economic reality?

Can a good story change economic reality?

Jan 14, 20268 min

Narrative EconomicsRobert ShillerDaron Acemoglu

Bitcoin miners are betting on AI over crypto

Bitcoin miners are betting on AI over crypto

Dec 10, 20259 min

Bitcoin MiningAI Data CentersBitfarms

No AI data centers in my backyard!

No AI data centers in my backyard!

Oct 22, 20259 min

Data CentersAIPavilion Township