Data centers could spur a utility spending spree, report finds. Here’s the impact.

U.S. utility companies are planning to invest $1.4 trillion over the next five years to update the nation’s ailing power grid as the data center boom intensifies the need for electricity.

That’s according to a new report released Tuesday by the nonpartisan nonprofit consumer education organization PowerLines, which analyzed capital spending plans from 51 investor-owned utilities. A majority of those companies, which serve 250 million U.S. customers, cited data centers as a top driver of capital expenditures in their earnings reports.

Developers are rushing to build power-hungry data centers across the country as tech companies look to expand capacity for artificial intelligence computing. The boom has sparked local opposition from communities that fear rising electricity demand will result in higher utility bills. 

U.S. data centers consumed more than 4% of the country’s total electricity in 2023, according to the MIT Energy Initiative. That could rise to 9% by 2030, the research group projects.

Impact on consumers

Strengthening the grid against severe weather and replacing aging infrastructure were among the reasons utilities cited for future investments, according to the PowerLines report. The $1.4 trillion that the utilities plan to spend over the next five years is an increase of more than 20% from their 2025 projections. 

Capital expenditure plans require approval from state utility regulators. The projected rise in spending could also translate into bigger bills for consumers, as utilities often pass costs onto households in the form of rate hikes, according to PowerLines. That means Americans could see their electricity bills go up at a time when they are already feeling squeezed by rising energy costs. 

A separate report from PowerLines earlier this year found that 56 million Americans will face higher utility bills due to a series of rate hikes regulators approved in 2025. Average residential electricity prices are projected to increase 5.1% this year, according to data from the U.S. Energy Information Administration.

If that trend continues, the nonprofit predicts residential customers could end up footing the bill for nearly half of planned utility capital spending from the 51 investor-owned utilities, or around $0.7 trillion.

While the threat looms large, rate increases are not inevitable, according to PowerLines. The nonprofit said it will be up to state regulators to conduct effective oversight of utilities’ spending plans to ensure the cost burden doesn’t fall too heavily on customers. Data centers can also play a role.

“New electricity consumers such as data centers can actually apply downward pressure on rates by providing utilities more sources of revenue while spreading fixed costs over a larger customer base,” the report says.