What AI data centers are doing to your electric bill

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1:10This is Planet Money from NPR. Earlier this month, I visited Ken and Carol Apaki. Hello. Good morning. How are you? They live in a little town outside Columbus, Ohio. Oh, hey. Oh, I can't always predict how long it'll take to get somewhere. They're retired now. Come on in. 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 chart? All of our grandkids. The height? Oh, yeah, their height, how much they grew from year to year.

1:55Because he's been measuring. We've got a big board. We've got a 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. Yep. On another spreadsheet on his computer, Ken had tracked the growth of a different number, their electric bill.

2:39And it was really this spreadsheet I had come to see.

2:45Here's my spreadsheet. And so here we start back in July of 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, what 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 charged me that.

3:37Ken doesn't know, but he does have a theory. His 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, that this is, you know, they don't have enough power.

4:23Hello 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.

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6:37But, 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. 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.

7:17Best 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 flat land, 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.

8:00And 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 meta, or they're both meta. Jeff, it was just miles and miles of this. Just the smell of raw infrastructure. Sure. 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 unobtrusive. Starkly unobtrusive. We tried out ugly.

8:42They 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 vents. They can open up if it got too hot. Yeah, they're not windows really, are they? 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, They piled up pipes and storage containers and building supplies. Every time we come, we see some new vast wasteland.

9:22There it is. Used to be a goldenrod 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 Carol'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 Carol's electricity prices going up so much.

10:06Yeah. So the first stop on our journey, maybe the most obvious place to look, is the company who sends Ken and Carol their power bill each month. I will ask you kind of easy questions to start, which is just, can you introduce yourself? Sure. Mark Reiner, president of AEP Ohio. Mark's company, AEP Ohio, serves 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.

10:40It'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 an 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 city of Fort Worth, Texas.

11:24Now, 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.

12:03The 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.

12:46The bad 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 percent of the energy they asked for, whether or not they used it.

13:23Mark 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 payers. 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 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.

14:02I 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.

14:42They 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%.

15:29So 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 build-out. 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.

16:10AEP 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.

16:49In 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.

17:29If 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.

18:09The regulator that has to approve any price increases, in this case, is the federal government. Which means that not only are Ken and Carol 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. Our 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.

18:57It 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.

19:35So what's to blame for that biggest part of their increased bill? That's after the break.

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21:07Start your risk-free trial at greenlight.com slash NPR. This message comes from Bloomberg. Join Jason Leopold and Matt Toppik as they access government records and reveal them to listeners every Tuesday. Don't miss an episode of Disclosure, available on your favorite podcast app. Okay, so far we've talked about the way data centers might be increasing electricity prices for our retired couple Ken and Carol 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.

21:51Which 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.

22:29And in a lot of the western and southern parts of the U.S., you still do have these vertically 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 for a while.

23:06But 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 Kunkel. 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.

23:32like 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 i 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.

24:19Power 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. 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.

25:13They 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.

25:51And 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.