Planet Money - What AI data centers are doing to your electric bill

Episode Date: December 20, 2025

As a country, we are spending more to get data centers up and running than we spent to build the entire interstate highway system. (Yes, that’s inflation-adjusted.) With tech companies spending hundreds of billions of dollars on AI, data centers have kind of become the thing in the US economy. But along with that growth have come a lot of questions. Like where is all the electricity to run these data centers supposed to come from? And how much are residential customers’ electric bills increasing as a result?On today’s episode, we go to Ohio to trace one electric bill back to its source, to see what exactly is causing the big price increases people are seeing. We take a tour of a data center hot spot, and get to the bottom of how prices are set from inside the power company.Related episodes: - Asking for a friend … which jobs are safe from AI?  - No AI data centers in my backyard!  - What $10 billion in data centers actually gets you  - Is AI overrated or underrated?  - Green energy gridlockPre-order the Planet Money book and get a free gift. / Subscribe to Planet Money+Listen free: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts.Facebook / Instagram / TikTok / Our weekly Newsletter.Today's show was hosted by Keith Romer and Jeff Guo. It was produced by Sam Yellowhorse Kesler. It was edited by Jess Jiang and fact checked by Sierra Juarez and Vito Emanuel. It was engineered by Cena Loffredo. Alex Goldmark is Planet Money's executive producer. Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey, Erica Barris here. We are almost at the end of 2025. And there is no way to sugarcoat it. It has been a tough year for NPR and for local stations. But with your support, NPR will keep reporting the news. And here at Planet Money, we'll keep doing what we do best, explaining the economy in the most entertaining and accessible ways we possibly can. If you're already an NPR plus supporter, thank you so much. If not, please join the community of public radio supporters right now at plus.npr.org. Signing up unlocks a bunch of perks like bonus episodes and more from across NPR's podcasts. Visit plus.mpr.org today. Thanks. This is Planet Money from NPR. Earlier this month, I visited Ken and Ken and Ken. Carol Apaki. Hello.

Good morning. How are you? They live in a little town outside Columbus, Ohio. Oh, I can't always predict how long they'll think to get somewhere. They're retired now. Carol worked in curriculum development. Ken was an engineer. And according to Carol, Ken still has an engineer's way of keeping track of things.

Everything, everything ends up in a spreadsheet. He had the grandkids. What was it when you had them do a charge? all of our grandkids. The daddy. Oh, yeah, their height, how much they grew from year to year

because he's been measuring we've got a big board. With everybody's measurements on there for 20 years. All 13 grandkids, their height by year, in a spreadsheet on their computer.

Oh, yeah. Can I see it? I think I can find it. See if you can find it. Oh, no, you don't. I do. Really? Not only was there a spreadsheet, there was a graph of the growth curve of each kid.

That is your grandson's Jalen's growth history. Growth history, and it looks like he's about 6-2 now? Yeah, yeah. On another spreadsheet on his computer, Ken had tracked the growth of a different number, their electric bill. And it was really this spreadsheet I'd come to see. And here's my spreadsheet. And so here we start back in July 2020.

Every month for the last five years, Ken has recorded how much electricity he and Carol used. And how much they had to pay their utility company, AEP, Ohio. Like a lot of people around the country, Ken and Carol's electricity prices, but they are paying per kilowatt hour. That has been going way up. And so my charge is around 11 cents. That's your 2020 charge, right? Yeah, in 2020.

And down here in 2025, it's 19. So it's nearly doubled? Yeah. In five years. Yeah. Do we know why? I don't know why. Because AEP, Ohio charge me that.

Ken doesn't know, but he does have a theory. This theory has to do with all the physical stuff that is being built to create our new AI future. The data centers we're aware of came about 2020. And then it's gone from there to data centers all around. 130 data centers in central Ohio here. I mean, that is amazing. And so you, in your mind, you are making the connection between these data centers showing up and this price increase in your electricity bill.

Well, they are telling us your rates are going to increase. I mean, that's what we're hearing in the news and all that this is, you know, they don't have enough power. Hello and welcome to Planet Money. I'm Keith Romer. And I'm Jeff Guo. With tech companies spending hundreds of billions of dollars on AI, data centers have kind of become the thing in the U.S. economy.

We are spending more to build data centers than we spent to build the entire interstate highway system. But along with that growth has come questions about where all the electricity to run those incredibly power-hungry data centers is supposed to come from. Today on the show, data centers and electricity. What all the AI investment might mean for all of our electricity bills? And what, if anything, we can do about it? So, investment in data centers has been this giant economic story.

We're talking hundreds of billions of dollars, expected to add up to trillions over the next five years. But, you know, Keith, sometimes this whole thing has felt super abstract, right? Like, it's just a line on a graph called data centers, and it's going up and up and up. Totally. And this is honestly part of the reason I wanted to go report this story in the first place, right? Like, I wanted to actually go look at some data centers. And Ken and Carol offered to take me on a little tour of their corner of central Ohio. All right, so tell me the plan. Okay.

We'll start here in Granville and then go over to Alexandria. And then an existing new data center. Jeff, I don't know if you know this about me. But once upon a time, I lived in Ohio for a year and a half. Best year of your life. Well, it is where I met my wife. And at first, the landscape, right? where we were, that landscape looked kind of like the rest of the state.

This, to me, is what it feels like driving across any part of Ohio. It's like flatland, farm trees, a little snow on the side. But then, six or seven miles from Ken and Carol's house, complete change. Okay, and you come out of the trees, and what do you find? Cranes and construction. Oh, wow. And a data center. Then, a little ways down from there, another data center.

This is a brand new building in the last six months. I think it's Google, or Google's back in there somewhere. And then another. This is a data center over here and a data center here. And another. I don't know whether this is meta or the next one's matter, or they're both meta. Jeff, it was just miles and miles of this. Just the smell of raw infrastructure.

Sure. It was all of these enormous, like, the most plain rectangular buildings you've ever seen. They were like gray or tan or black and they were football fields long. And like, how do you even describe them? We were in the car. We were trying to come up with the right adjective. We tried out boring.

Starkly on a prusa. We tried out ugly. They have an ominous feel to them. That's the way I would think of it. I don't know what they need to look like, but... Interesting, the windows, those just look like a vent. they can open up if it got too hot. Yeah, they're not windows really, aren't there?

No, there's no glass. I suppose the computers don't need to look outside. No. The places that didn't have data centers had data center construction. You know, dump trucks hauling dirt, workers putting up new data centers. It's just like a miles-long construction site, piled up pipes and storage containers and building supplies. Every time we come, we see some new vast wasteland. There it is.

Used to be a golden rod field. And Jeff, everywhere you looked, giant power lines, substations. Like, it was very clear that there's going to be all of this electricity coming in for these data centers from these lines. Right. But there's a lot you can't figure out just by looking at the data centers and their power lines. To really understand why Ken and Carroll's electricity prices went up as much as they did, you need to understand the market for electricity. which is just really weird. It has all these different complicated layers to it.

So we are going to try to peel back those layers and figure out who is to blame for Ken and Carroll's electricity prices going up so much. Yeah. So the first stop on our journey, maybe the most obvious place to look, is the company who sends Ken and Carroll their power bill each month. I will ask you kind of easy questions to start, which is just can you introduce yourself? Sure, Mark Ryder, president of AP Ohio. Mark's company, AEP Ohio, serves about. about a million and a half customers around the state. But they are only responsible for delivering electricity to their customers, kind of the last mile of power markets. A lot of their job

is taking care of all the power lines and sometimes building new power lines and substations and whatever else to connect new homes and businesses. It's a simple product. I think everybody understands the product. Incredibly complex to deliver that product. Mark says going back about a decade, he started hearing from data center developers who wanted to get connected to power. Then, in 2022, 2023, he started getting a lot of requests to connect a lot of data centers who wanted a lot of power. If we do a 800 home housing development, that'll be, you know, call it a megawatt. But the data centers are clusters of 50 megawatts to 3,000 megawatts. So just one of those bigger data center clusters he's talking about would use the same amount of electricity as the entire.

higher city of Fort Worth, Texas. Now, it's worth pausing for a second to explain AEP Ohio's business model. It works like this. The state gives AEP Ohio a monopoly over delivering electricity in its service area. But to keep their monopoly power in check, AEP Ohio is not allowed to set their own prices. Instead, the prices are set by the government, the state utility commission. If AEP Ohio ever wants to raise its rates, it first has to get permission. from the commission. The primary reason they're allowed to raise rates is because they've invested

in their infrastructure, upgrading their power lines or building new lines and substations when they need to. The grid supports everybody and everybody pays fair share. That's the crux of the model has been for a long time. And for years, this kind of social contract made sense. The infrastructure expanded little by little over time, and everybody paid for it collectively. But as more and more companies were asking to connect more and more data centers and get access to more and more power, Mark realized all this could kind of break the system and really raise prices for residential customers. There were a few ways this could happen.

For one, a data center company could ask to be connected, get AEP Ohio to build all this infrastructure, and then just never actually build that data center. The bat scenario is that they are insolvent or they never show up or they weren't real. Or the data center company could show up, connect to power, but just take forever to start using and paying for all the electricity they asked for. Or they could change their mind and close up shop after a year or two. If any of that happened, it would be the rest of AEP Ohio's customers who would end up getting stuck footing the bill. Data centers did have to help pay for the new infrastructure built specifically for them, but only to a point. They were required to pay for at least

60% of the energy they asked for, whether or not they used it. Mark worried, though, that that might not be enough. Let's say it's a billion dollars to build that infrastructure. 400 million, the remaining 40% will be paid by all other rate pairs. When you're talking billions of dollars and all this infrastructure, and if you play it out, and our view was this was just the beginning, we had to get the rules right. Mark, we should say, was under some real pressure here. Pretty much every Everybody's electricity bills were going up. And to the extent that people could put a face to the problem, it was Mark's face. Are people mad at you, like, personally?

I'm sure some are, yeah. I don't want to have another cocktail conversation about what I do. Like you say that I'm the president of AEP, Ohio, and somebody's... Yeah, I sometimes just want to be Mark. If AEP Ohio raised rates for residential customers to connect all these data centers, It would, to say the least, be pretty politically unpopular. And remember, if Mark wants to raise rates, he has to get permission from the Public Utility Commission, which is appointed by the governor who has to answer to voters.

So Mark had to find a way to thread this needle. In 2023, AEP Ohio made a big decision. They were going to stop letting any new data centers sign up for power. They essentially pressed pause on the whole process. And Mark and his team got to work trying to find a lasting, solution. What they came up with was a pretty innovative set of new rules, rules just for data centers. AEP Ohio would require data centers to start paying for the vast majority of the energy they requested within four years. And the data centers had to put up millions of

dollars in case they didn't end up sticking around. We had to flush out who's real and who's not. And you do that with collateral requirements. That's big money. Finally, they would make data centers pay for a larger share of the energy they asked for. Instead of requiring them to pay at least 60% of the power they had requested, AEP Ohio was going to ask for as much as 85%. So as long as the data centers show up and use what they say they're going to use, that should offset the costs associated with the infrastructure buildout. The new rules got approved by the State Utility Commission and went into place earlier this year.

It's one of the first data center specific utility rates in the country. Mark acknowledges that residential customers will still pay for some of the infrastructure costs from data centers, but it should be a lot less now. And using the data from Ken's spreadsheet of all his electric bills and talking to energy experts, we estimate that only about 10 or 20 percent of the price increases Ken and Carol saw were because of AEP Ohio. AEP Ohio, though, they are just the local distributor. Their job is only to bring electricity the last mile to people's homes. So if the problem isn't distribution, how are data centers making things more expensive? Well, the next place to look is one step further up the chain at what is called transmission. So not how electricity gets moved around on a local scale, but on a much bigger scale.

The grid of giant power lines that connects power plants from one state to customers hundreds of miles away. Cameron Ali is in charge of a big chunk of that grid of power lines. across 11 states. When Cameron closes his eyes, he says he can visualize the whole thing. In your mind, is it colors or is it black and white? Colors. Yes, absolutely. Every single voltage is a different color.

What are the colors? Well, 765 kv is green, because that's my favorite. 345 kv is red, and then 138 kv is black, and then we have lower voltages, purple and yellow. Cameron works for AEP, which is the parent company of AEP, Ohio, His job is to make sure that the multicolored grid that AEP owns stays up and running and to figure out what new red and green and black power lines need to be built to get all the electricity where it needs to go.

Cameron told us to think of the grid as like the highway system but for power. If you want to send more power to new data centers, you have to build new lanes and new on-ramps and new off-ramps. The only difference, which is a big difference, is that where you may be traveling 70 miles an hour on an interstate, electricity moves at the speed of light. It costs billions of dollars to expand that highway system to build out those long-distance transmission networks. Those costs get passed on to customers, just like costs get passed on for distribution at the local level. Transmission is very similar when it comes to rate recovery

or cost recovery. When AEP spends money to upgrade its infrastructure, it's generally allowed to recoup that money from the people it serves. The regulator that has to approve, any price increases, in this case, is the federal government. Which means that not only are Ken and Carroll paying for the new black and red and green power lines that serve data centers in Ohio, they're also paying for power lines for data centers being planned in, you know, West Virginia and Indiana. And Cameron says there is just so much demand for new power. Or peak demand before the advent of data centers and crypto customers was roughly 40,000

megawatts. So that's our peak demand. It took us 100 years to get to 40,000 megawatts. We have currently signed agreements to bring on another 28,000 megawatts by 2030 in a span of five years. It is really hard to tease out precisely how much of the increase in Ken and Carol's electricity charges comes from building out the transmission grid, let alone isolate what part of that build out was specifically due to data centers. But from what we can tell, from talking to experts and comparing their old bills to their new ones, transmission, it actually isn't that big of a culprit either. Transmission charges did go up over the last five years, but that change seems to account for less than 20% of their total increase. Add that to the 10 or 20%

estimate for the distribution part of the increase, and you still have over half the price jump unaccounted for. So what's to blame for that biggest part of their increased bill? That's after the break. Okay, so far we've talked about the way data centers might be increasing electricity prices for our retired couple, Ken and Carroll, in two ways. distribution, sort of the last mile of bringing power to them, and transmission, bringing electricity along high voltage lines from power plants to their area. Together, those two account for something like 30 or 40 percent of the increase in their electricity prices.

Which leaves more than half of the increase unaccounted for. The culprit here is generation. It's the power plants that make the electricity in the first place. But that story is way, way weirder than just, you know, power plants jacked up their prices. Okay, time for a classic podcast move. Jeff, to understand this piece of it, we actually have to go back in time a few decades.

Back then, in a lot of places, including in Ohio, utility companies were in charge of the entire process of getting electricity to customers. So generation, transmission, and distribution, all vertically integrated in one utility. And in a lot of the western and southern parts of the U.S., you still do have these vertically integrated, integrated omnibus power companies.

But for now, we are going to stay with Ohio. And in Ohio, about 25 years ago, they threw out that old system and they broke up these vertically integrated companies. So some companies would be in charge of distribution, other companies would be in charge of transmission, and still other companies would be in charge of power generation. The idea was deregulation. You'd get more competition, and hopefully that would make electricity prices come down. And it worked. a while. But today, with all the new demand for power from data centers, that system is starting to break down. To help explain this bit, we called up Kathy Cuncle. If we were starting a system

from scratch today, would we design the one that we have now? I cannot imagine someone designing this system on purpose. I mean, not seriously, it has just, it has sort of evolved. And, like, as problems have come up, it's been kind of taped together to keep working. But, yeah, I don't think this is really what anyone would just, like, sit down and dream up. Kathy is an energy consultant at the Institute for Energy Economics and Financial Analysis. And the first thing she pointed out to us was just how weird of a product electricity is. You know, power, it's not like shoes or wheat or something where it's easy to store extra inventory in some warehouse somewhere.

Sorry, batteries. You're just not that good yet. Right, right. For the most part, you have to be able to generate electricity in real time for the people who want it right now, which is very tricky. Power demand or our use of electricity is not constant throughout the day or throughout the year. In particular, it spikes typically at certain times. Like on a really hot day in the summer. If everybody turns on their air conditioners on August 17th, and there's not enough power to supply it, what happens? There will be rolling blackouts.

I actually happen to be in Puerto Rico right now where that's actually a relatively frequent occurrence, that there's not sufficient power plant capacity to supply the peak demand. And yeah, that's exactly what happens. the utility has to curtail the demand. Now, before deregulation, when it was one utility company's responsibility to handle everything for a particular area, distribution, transmission, and generation, it was that company's

responsibility to make sure there were no shortages, you know, no rolling blackouts. They had to forecast how much power they would need in the future and make sure there were enough power plants to meet that future demand. The idea behind deregulation was that markets, could do the planning. Markets, so efficient. But markets left completely unchecked could potentially introduce a new problem.

Yeah, think about what happens in a market when there is a shortage of something. Prices, they go way, way up. In theory, that should incentivize companies to start making more power, and eventually everything would be fine. But A, nobody wants to get an electric bill for $1,000 because they ran their AC

on a super hot day, and B, rolling blackouts are also obviously not a great outcome. There are a bunch of different ways to solve this problem, where Ken and Carol live in Ohio, their electricity is overseen on a regional level by an organization called PJM. It manages power for 20% of Americans. And PJM thought that they could fix the problem with this market by creating another market. This new market would make sure that enough new power plants were being built today

to supply the electricity that would be needed years from. now. They called it the capacity market, which was designed to incentivize new capacity to come online to make sure that PJM will be able to keep meeting that peak demand in the future. And so the idea is that I'm a power plant operator. And even if nobody is buying my energy, I'm still going to get this revenue stream just for being willing to supply power on those peak demand days, just to say, I'm ready to, if you need it. Yeah, exactly. So it's trying to look out in the future and say how much power we're going to need. If we don't have it right now, can we provide a price signal so that a generation developer thinks, oh, there's money here. Let me build my power plant in PJM. It's hard to stress enough how weird the capacity market is. So PGM will try to model how much power the region's going to need three years out into the future. And then it will hold an auction where it will determine how much power.

power plant should be paid for promising to be available in case they are needed on that one super hot day when everyone turns on their AC. Local power distributors basically have to pay power plant operators just for existing whether or not those power plants ever generate any actual power to sell. And as weird as this sounds, for years and years, the capacity market worked more or less. Even on the hottest days, there was pretty much always enough power to go around. But part of the reason this all worked was electricity use wasn't changing that much. Up until now-ish, like for the past couple of decades, the U.S. electricity sector as a whole has been operating in essentially a flat demand environment. Electricity demand just wasn't

growing that much. So it was relatively easy for power generators to keep up with any demand growth. But Kathy says the moment when a cajillion data center showed up and started wanting more and more and more power, things really broke down. It turned out the capacity market was not great at dealing with this kind of scenario. The capacity market is becoming a lot tighter. You know, the demand is there and the supply is maybe not. And so in the capacity market, the price to guarantee that there will be enough power plants making power three years from now, that price has gone way, way up.

PJM's prices for generation went up by a factor of 10. That's a lot. Yeah, that's a lot. The amount local utilities across PJM had to shell out went up by $12 billion in one year. Again, not to actually buy any electricity, just to guarantee that there would even be enough electricity to buy in the future. And that $12 billion extra dollars, it got spread out across the electric bills of all. all the customers in the PGM region, including Ken and Carroll in Ohio. But that is not even the worst part.

Okay, Kathy says the high prices in the capacity market may not even be getting companies to build that many new power plants for a whole bunch of reasons. Reason number one is a timing mismatch. The capacity market only guarantees a price for capacity for one year. And that price could go right back down for the next year. So if you're planning like a 20 to 30 year asset, I'm not convinced that, like, knowing a couple years' price signals is really that useful. Reason number two has to do with the different ways electricity can be generated. Probably the fastest way to bring new power online would be to build wind or solar.

But for the most part, renewable energy counts for way, way less in the capacity market. Yeah, remember, what an energy company is selling in the capacity market is its ability to supply power whenever demand is that peak. And solar panels, they cannot generate power at night. Wind turbines can't make much power on calm days. So what about natural gas plants? Obviously, they are not great for climate change, but historically, they were pretty easy to build quickly. But that brings us to the third reason why more power plants are not being built. Right now, there is actually a shortage of the gas turbines that gas power plants need to operate. Manufacturers can't make them fast enough to keep up with demand. So what used to be like a two, two and a half year wait time to get your

turbine has now turned into a five or six year wait time. The last problem comes from PJM system for connecting new power plants to the grid. Even if a company decides to build a new plant and they can get their hands on gas turbines, they still have to wait in a year's long line to get hooked up to the grid. So they might not be able to start sending out electricity anyway. In an email, A PJM spokesperson said, this narrative is old and it's no longer true, that PJM had done a good job clearing the backlog of power plants waiting to connect. But the experts I spoke to said it was still a problem. And that problem, along with all the other problems we talked about in the capacity market, they all add up to local utilities spending an extra $12 billion, $12 billion that was supposed to incentivize new power plants to start supplying electricity. But instead, almost all that money is going to power plants that are already up and running.

And most of them would have made electricity even without all that extra money. Most of the money from the capacity market just ends up going to existing power plants. And so this is kind of our answer. The reason Cannon Carroll's electricity prices went up was mostly not because data centers increased costs for the last mile distribution of electricity. And not because of what data centers did. to the costs for new long-distance transmission lines. No. By far, the biggest contributor to their electricity prices going up was generation.

And most of that price increase came from the way the capacity market isn't really working the way it is supposed to. Kathy says it's important to keep in mind why all of this is happening. A bunch of tech companies are in a big hurry to build data centers, which is creating a huge surge in demand for power. For some of those projects, companies are building their own on-site power plants, but the rest of that demand will have to be absorbed by the rest of the electricity system. I think it's almost inevitable the way that these structures are set up, that ordinary people are going to end up subsidizing the wealthiest industry in the world. Folks like Ken and Carroll, who live in PJM's region, they probably have it the worst. their electricity prices have gone up the most, in large part, because of all these new data centers. But different versions of this story are playing out all over the country.

The sheer scale of the demand for power from these data centers is putting a lot of pressure on the electricity system. And lots of people are seeing their bills increase as a result. Right now, the electricity world, it's in chaos. Everyone's got their own idea of the best way to fix things. You know, maybe we should make it easier for new power plants to connect to the grid. Or maybe we should stop connecting new data centers altogether until power supply catches up to demand. PJM just had a big meeting last month, where its board reviewed a dozen different proposals for how to fix its problems. And they rejected all of them.

They say a new plan is coming next month. On the federal level, the Department of Energy has been making noises about taking over control of data center connections for the entire country. So it's anyone's guess how any of this plays out. In the meantime, more data centers are being built that will need more power, which the Kens and Carols of the world will have to keep paying for. If you enjoy Planet Money, please help us by leaving a rating and a review on your podcast app. Thanks to username Informative Millennial, honestly not a bad nickname for you, Jeff, who wrote this on Apple Podcasts.

This podcast always teaches me something informative about economics, society, history, and culture in every episode. So nice. Reviews like that could really help new listeners pick us out from the giant pool of podcasts they could be listening to, so please consider, you know, leaving a review yourself. Today's show was produced by Sam Yellow Horse Kessler, was edited by Jess Jang,

and fact-checked by Sierra Juarez and Vito Emanuel. He was engineered by Sina LaFredo. Alex Goldmark is Planet Money's executive producer. Special thanks today to Mike Jacobs, Mike Hogan, Laura Aaron Shield, and Abe Silverman. I'm Keith Romer. I'm Jeff Glow. This is NPR. Thanks for listening.