AI Data Centre Electricity Demand Increasing US Utility Bills, Putting Households in Debt

Electricity prices tracked inflation from 2013 to 2023 but are likely to outpace inflation at least until 2026, according to the Energy Information Administration forecast earlier this year.

The EIA's latest data showed that retail electricity prices in September increased 7.4% to around $0.18 (£0.13) per kilowatt hour.

Energy experts attribute the rising electricity prices to surging demand from an increasing number of AI data centres, which is driving up utility bills for US households.

Demand from AI data centres is outpacing new supply, and these power-hungry warehouses of servers and IT equipment are expected to consume between 6.7% and 12% of the total US electricity supply by 2028, up from 4.4% in 2023, according to a late 2024 estimate from the US Department of Energy.

John Quigley, senior fellow at the University of Pennsylvania's Kleinman Center for Energy Policy, stated that the 'data centre frenzy' is the main reason for higher electricity prices for US households. 'It's going to get worse,' he warned.

US Households Financially Strained, Debts Inch Higher

Analysis by Lawrence Berkeley National Laboratory suggests that rising electricity prices are likely to strain already tight household budgets, undermine economic competitiveness, and even impact the electrification of energy systems.

This trend could also hinder investments in renewable energy projects, as higher electricity costs make it more challenging to transition to cleaner energy sources.

Furthermore, a Century Foundation report indicates that higher energy bills are pushing US households into debt. The think tank noted that the average overdue balance on utility bills rose 32% to $789 (£591) in 2022, up from $597 (£447). Utilities include electricity, gas, and water bills.

Additionally, consumers served by the largest electric grid in the US could face costs of $16.6 billion (£12.4 billion) to secure future power supplies to meet data centre demand from 2025 to 2027, according to a recent watchdog report.

A cold winter could exacerbate the situation. The National Energy Assistance Directors Association estimates that households using electricity for heating could see their winter bills rise by 10%, reaching $1,205 (£902) this season from $1,093 (£819) last winter.

'Consumers may again feel the pressure on their utility bills in the coming months, particularly if the winter is a cold one,' states an October report from the Bank of America Institute.

AI Data Centre Power Demand Forecast

The International Energy Agency predicts that global electricity demand from AI data centres will quadruple by 2030.

To support this growth, companies will need new infrastructure such as transmission lines, substations, and power plants. As a result, capital expenditure is expected to rise significantly, with some costs passed on to residential consumers, according to Quigley. In essence, households are partially subsidising the expansion of AI data centres.

Between 2019 and 2024, Lawrence Berkeley National Laboratory found that average retail electricity prices increased by 23% before inflation. Other factors, including the push towards residential electrification and electric vehicles, are also contributing to rising demand.

New Jersey governor-elect Mikie Sherrill and Virginia governor-elect Abigail Spanberger have pledged to reduce electricity bills for residents. During her campaign, Spanberger stated she wants to 'make sure data centres don't drive up energy costs for everyone else in Virginia.'

Even former US President Donald Trump claimed he would cut electricity prices in half within his first 18 months in office.