Data centers will add billions to energy costs in 13 states

PJM, the nation’s largest electric utility, released the results of an electricity auction Tuesday that will add $6.3 billion to the bills of millions of homes and businesses over the next three years, an increase driven by the energy demands of data centers.

During the annual auction, utility companies supplied the prices they were willing to accept to supply electricity to PJM during peak demand. These prices are then factored into the electricity rates that are ultimately charged to grid customers in the 13 eastern states and the District of Columbia.

In a declarationPJM said data centers increase demand for electricity across the region.

“The results of these auctions show that the demand for electricity continues to grow faster than the supply of electricity,” said David Mills, PJM’s president and CEO. announcement of auction results. “We are working with government and industry leaders on many fronts to restore this balance by deploying new generation as quickly as possible and managing the growth of new network loads.”

Over the past several years, individuals and politicians alike have become frustrated with PJM’s operations as electricity prices have continued to rise. At the same time, anger over data centers spread across the country. New York on Tuesday announced the first statewide moratorium on construction of the giant facilities, a one-year pause to assess their environmental impact and energy use.

PJM’s grid supplies electricity to 67 million people from Virginia Beach to Chicago. The Power Systems Network includes the world’s largest data center cluster in Northern Virginia.

“Demand growth is not going away,” said Patrick Cicero, a former state-appointed consumer advocate in Pennsylvania who is now counsel for the Pennsylvania Utility Law Project, which helps low-income consumers. “The bottom line is that high prices will stay in place.”

In its role as the regional grid operator, PJM effectively sets a significant portion of retail electricity rates, but governors and their appointed regulators have little say over that. PJM is regulated by the Federal Energy Regulatory Commission, not state legislators.

PJM’s annual auctions help determine the cost of electricity for two years after the auction. According to Monitoring Analytics, an independent monitor of the PJM market, auctions have driven a total of $29 billion in data center costs for all utility customers in the PJM region since 2024. The market monitor also presented an estimate of additional costs of $6.3 billion from the last auction, which took place on June 30.

The high costs so angered Gov. Josh Shapiro, a Pennsylvania Democrat, that he sued PJM in December 2024. Mr. Shapiro and PJM reached an agreement that capped the price set by the auction, saving consumers billions of dollars.

The PJM grid often has only a thin buffer of excess power during extreme weather, such as the recent heat dome that sent temperatures across the East.

Mr. Shapiro and other governors have complained that PJM has been too slow to connect more plants, solar and wind farms, batteries and other resources that would help lower prices and ease the load on the grid.

The PJM network serves all or part of New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, North Carolina, Tennessee, Kentucky, Ohio, Indiana, Illinois and Michigan, as well as the District of Columbia.