Is AI really making electricity bills higher? Here’s what the experts say
Lindsey Martin’s electricity bill reached $314 in July, the highest bill she had received this year until that point, she said on TikTok. In the video’s more than 4,000 comments, many users reported similar power-bill spikes.
Martin’s bill jumped even higher in August to $372, a notable leap from around $150 two to three years ago.
“I thought that was so high, I could not believe my bill was $150,” Martin, a Kentucky-based registered nurse, told CNN over the phone. “And now I wish my bill was $150.”
Martin isn’t alone. Residential electricity costs are on the rise, according to from the U.S. Energy Information Administration (EIA). The average price of electricity in America has increased 13% since 2022, with the cost of retail electricity expected to grow faster than the rate of inflation, the report says. Some regions, like the Pacific, Middle Atlantic and New England, could see even higher increases than the national average.
The increases have largely been driven by the costs of updating and maintaining the power grid and other necessary infrastructure, particularly in the face of increasingly common severe weather events, according to experts on energy and computing who spoke with CNN.
But a new technological wave is also driving up electricity bills: The AI boom is boosting electricity demand and power resources as tech giants pour billions into what many believe is the biggest computing shift in decades. OpenAI and Broadcom announced a partnership just this week to design and develop 10 gigawatts of custom AI chips and systems, more than enough to power a major city.
That trend is only expected to continue. Data centers are projected to consume approximately 6.7% to 12% of U.S. electricity in 2028, up from 4.4% in 2023, according to a December 2024 report from the . A found that areas near data centers saw an increase in electricity costs of as much as 267% compared to five years ago.
The power industry just isn’t equipped to keep up, said Bob Johnson, an analyst with market research firm Gartner who follows the semiconductor industry.
'Explosion in demand' for AI
Investment in data centers has moved fast as tech behemoths stake the future of their businesses on AI. Meta said it spent $17 billion in capital expenditures, which typically refers to money spent on data centers and infrastructure, for the quarter that ended in June, while Microsoft said it spent $24.2 billion. Data center construction spending reached in June, according to a Bank of America Institute report.
Existing data centers likely need to be updated to ensure they have enough capacity to handle new power-hungry AI services and products.
That growth is contributing to more electricity demand than the United States has seen in two decades, leading to a need for more investment in electricity generation and transmission, said Rich Powell, CEO of the Clean Energy Buyers Association, a trade group that represents electricity buyers.
Other factors behind the increased demand include a shift to electric-based heating systems in homes and new manufacturing plants, according to the Bank of America report.
There weren’t enough data center construction and upgrades in the past to affect consumer prices, said Ram Rajagopal, senior fellow for Stanford University’s Precourt Institute for Energy. But now the AI industry is seeing an “explosion in demand.”
AI tools are also growing increasingly sophisticated, evolving beyond text-based queries to handle complex tasks like generating realistic video clips in a matter of seconds and coding websites from scratch. This means they also require more resources than ever.
“AI is really computationally intensive,” said Shaolei Ren, an associate professor of electrical and computer engineering at the University of California, Riverside.
What goes into your electricity bill
Rates vary by location, but retail electricity prices generally include the “cost of generating, transmitting and delivering” electricity and can sometimes factor in investment in upgrading infrastructure, according to the EIA.
Large buyers of electricity typically pay lower rates because the distribution infrastructure is less complex; power needs to be piped to one location rather than hundreds or thousands of homes, said Johnson. Pricing models haven’t been updated to take into account the surge in data center growth, he said, although that can vary by location.
Oregon, for example, requiring data centers to “pay for the actual strain they place on Oregon’s electrical grid” so that the costs don’t get passed on to the consumer.
“In other words, the homeowners shouldn’t have to pay for data centers, but that’s not built into the pricing structure,” he said.
