New Report Finds No Evidence Data Centers are Driving Higher Residential Electricity Costs

A comprehensive review of more than 10 recent studies points to a broader set of economic and policy factors driving rates

ASHBURN, Va., May 18, 2026 /PRNewswire/ -- A new independent report by energy consulting firm Energy + Environmental Economics (E3) finds no historical evidence that data centers are driving increases in residential electricity costs under existing rate structures. The study examined more than 10 recent quantitative studies conducted to date on the topics of load growth, electricity demand, and retail electricity rates.

E3's analysis shows rising energy costs are driven by five primary economic and policy factors beyond simply load growth, including:

1. Inflation: Recent inflation has significantly increased the cost of labor, materials, and financing – directly increasing the amount of revenue utilities need to collect to recover their investments.
2. Grid Modernization: Utilities have increased investment to replace aging infrastructure and modernize the grid.
3. Natural Gas Volatility: Natural gas prices have become more volatile, and regions reliant on gas are particularly exposed to this dynamic.
4. Wildfire Mitigation and Resilience Investments: Wildfire-related spending and grid hardening – the process of strengthening electrical infrastructure such as substations, electric wires, and poles – now represent a significant and growing share of utility spending to respond to extreme weather events.
5. Market Design and Supply Dynamics: In wholesale markets such as PJM (serving 13 states and DC), capacity price volatility has also been driven by market design and supply-side factors, including power plant retirements, reduced accreditation of fossil resources, higher reliability targets, planning/forecasting gaps, regulatory lag, and interconnection backlogs.

"While electric rate setting and design are highly technical and complex topics, E3's new study provides clear, fact-based insights into the real drivers of residential electricity costs. By grounding the conversation in data, this study will help policymakers and stakeholders better understand the factors that contribute to rising rates and help them ensure consumers are protected," said Josh Levi, President & CEO of the Data Center Coalition, which commissioned the report. "The data center industry is committed to paying its own way for the power it uses, and the Data Center Coalition will continue to highlight the credible research that consistently shows data centers are not the primary driver of rate increases."

Key findings include:

• Multiple studies show data centers can generate more revenue for utilities than it costs to serve them, helping to offset or lower costs for other customers.
• There is no consistent relationship between load growth and rising electricity rates at the state level.
  • States with significant data center-driven demand growth, such as Texas and Virginia, have seen relatively modest rate increases. Meanwhile, states like California and New York have experienced higher prices despite declining load.
• In the PJM market (13 states and Washington, D.C.), data center load growth accounted for approximately half of the recent increase in capacity prices, with the remainder attributable to market design changes, supply constraints, and power plant retirements.

"The key point our analysis makes is that residential electricity costs are driven by a range of economic, policy, and market factors, and those factors play out differently across regions," said Kush Patel, Senior Partner at E3. "While there's a lot of national rhetoric on this, the real opportunity to manage costs and maintain affordability is at the state and regional level, where stakeholders can address what's actually driving costs in their own system and build a framework for responsible load growth that fits their system."

E3's analysis provides recommendations to stakeholders crafting frameworks for responsible load growth, including leveraging tailored large load tariffs and aligning cost allocation with the pace of load growth, enabling innovative supply and load integration models, strengthening planning and forecasting, and closing research gaps with targeted analysis.

The report also examined markets across the U.S. that illustrate a range of approaches to addressing load growth and the surge in power demand, including the PJM market, ERCOT in Texas, Georgia, Arizona, and Missouri.

Read the full report here.

The Data Center Coalition (DCC) is the membership association for the U.S. data center industry. DCC's members include leading data center owners and operators, as well as companies that lease large amounts of data center capacity. For more information, please visit datacentercoalition.org.

Press Contact

Claire Bencks, Senior Manager, Communications
Data Center Coalition
[email protected]
804-503-4809

SOURCE Data Center Coalition