Data centers driving up regional electric costs, study finds

The one exception was parts of the PJM region where capacity price increases were driven partly by data center demand, according to the study.

PJM is a massive regional transmission organization that manages the electric grid and wholesale electricity market across Ohio and several other states.

PJM’s benchmark capacity price increased by 833% between the 2024-2025 and 2025-2026 delivery years. Even after regulatory intervention that lowered price caps, PJM’s prices increased by an additional 22% for the 2026-2027 delivery year, which will affect future rates, according to the study.

A key factor in this increase was the surge in data center demand expected in the PJM region, which increased PJM’s projected capacity needs.

PJM state governors, including Ohio Gov. Mike DeWine, the U.S. secretary of energy and secretary of the interior signed a statement of principles in January to extend caps on the capacity prices that retail customers will pay, support the development of new generation capacity for data centers and ensure data centers pay for that capacity.

If implemented as proposed, the extended price cap would save more than 67 million consumers within the PJM region about $27 billion over the next two years.

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The statement of principles aligns in many respects with PJM’s goals of managing the “surge of large loads while balancing affordability and growing risk to grid reliability,” according to PJM External Communications Senior Manager Jeff Shields.

Capacity market auctions at PJM “procure power supplies needed for grid reliability in future years” and those wholesale power costs account for “only a portion of the retail bill.”

“Across PJM, electricity demand driven largely by data centers has outpaced the development of new power generation resources, resulting in a mismatch between demand and supply,” Shields said.

AES Ohio

The Charles River study noted that the largest retail rate impacts from PJM’s rate increases are felt by customers of utilities that do not generate their own power.

Electric rates can be broken down into three components: generation (producing electricity), transmission (moving it over long distances) and distribution (delivering it to homes and businesses), according to AES Ohio Corporate Communications Manager Mary Ann Kabel.

AES Ohio does not own generation, instead being a transmission and distribution provider regulated by the Federal Energy Regulatory Commission and Public Utilities Commission of Ohio.

All new customers, including large loads and data centers, apply for new service and provide details of electric requirements. AES Ohio then follows a “thorough process” for evaluating data center requests, including initial inquires, site studies and service agreements.

“Large load requests, including data centers, typically need transmission investments but also significantly increase usage,” Kabel said. “That increased usage can offset those investments, reducing the transmission costs for other customers.”

Kabel said the company has an “obligation to serve customers who locate in our service territory.”

“We ensure that the costs of any new transmission infrastructure upgrades are fairly reflected in our transmission rates,” she said.