As electricity prices continue to rise across the United States—New Jersey alone saw a 19% increase last year—many Americans have pointed fingers at energy-intensive data centers. The massive facilities that power the digital economy have become a convenient target for politicians, who warn their growing presence could send power bills soaring for everyone.
But new research suggests that narrative may be misleading. A recent study from Lawrence Berkeley National Laboratory and the consulting firm Brattle Group, published in The Electricity Journal, found that rising electricity rates are being driven not by data centers, but by the skyrocketing costs of infrastructure upgrades and disaster resilience.
According to the study, several states experiencing higher power demand—partly due to data centers—actually saw stable or even falling prices. North Dakota and Virginia are two examples: both reported demand spikes alongside inflation-adjusted price declines. Meanwhile, California, where electricity demand has dropped, recorded one of the nation’s largest price increases.
The key reason, researchers say, is that most electricity system costs are fixed, covering poles, wires, and upgrades needed to withstand extreme weather. When overall demand rises, those fixed costs are spread across more users, which can sometimes lead to lower per-customer rates. However, the impact varies by region, depending on whether utilities need to construct new power plants or can accommodate demand using existing infrastructure.
While the cost of generating electricity from sources such as wind, solar, and natural gas has fallen roughly 35% over the past two decades, transmission and distribution costs have surged—more than doubling as the price of wires and transformers climbs faster than inflation. States pursuing aggressive clean-energy goals have seen modest rate increases as a result.
Extreme weather events have also taken a toll. Utilities nationwide have spent billions repairing storm damage and strengthening the grid. In California, the study found that about 40% of the state’s electricity price increase over the past five years is tied to wildfire-related costs.
Looking ahead, researchers acknowledge that data centers could strain the system if their rapid expansion outpaces utilities’ planning and infrastructure development. For now, though, they conclude that data centers are being unfairly blamed for higher electricity bills—while the true drivers lie in the cost of modernizing America’s power grid and protecting it from disaster.