US electricity bills may rise as America’s largest grid struggles with AI demand

The largest power grid in the United States is under pressure as demand from data centers and AI systems grows faster than new power plants can be built.

Electricity costs are expected to rise by over 20% this summer in parts of PJM Interconnection’s territory. The grid spans 13 states from Illinois to Tennessee and Virginia to New Jersey serving around 67 million people in a region with the highest concentration of data centers globally.

Tensions around the grid have escalated. Pennsylvania Governor, Josh Shapiro has threatened to leave the system, PJM’s CEO has announced plans to step down, and both the board chair and another board member were recently removed.

The current instability began a year ago when prices in PJM’s annual capacity auction surged by more than 800%. Those prices eventually make their way into customers’ bills.

Tribune Online gathered that PJM is preparing for another auction on Wednesday, where prices could rise again.

The auction sets the price power producers receive for guaranteeing electricity supply during periods of peak demand, typically on the hottest or coldest days of the year.

In theory, higher prices encourage the building of new plants. But construction in PJM’s region has lagged behind, even as older plants retire and data center growth accelerates.

More than a dozen developers, regulators, energy lawyers and other experts told Reuters that PJM contributed to the delay by postponing auctions and pausing applications for new projects.

In an interview with Reuters, Shapiro stated that “We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM,” “I think they’ve taken some steps in that direction which is really encouraging to me and we’re going to continue to work at it.”

PJM says much of the strain comes from outside its control. That includes state policies that led to early closures of fossil fuel plants and a surge in data center development particularly in Northern Virginia’s “Data Center Alley” and other growing hubs in the Mid-Atlantic.

“Prices will remain high as long as demand growth is outstripping supply this is a basic economic policy,” said PJM spokesman Jeffrey Shields. “Right now, we need every megawatt we can get.”

While about 46 gigawatts of capacity enough to power 40 million homes has been approved in recent years, many of those projects remain unbuilt due to local opposition, supply chain delays or financing problems, Shields said.

In the last decade, PJM has seen a net loss of over 5.6 gigawatts as plant closures outpaced new projects, according to documents filed by PJM with regulators. In 2024, the grid added only about 5 gigawatts of capacity less than smaller power grids in California and Texas.

Meanwhile, demand from data centers continues to climb. PJM estimates that by 2030, demand on its system will rise by 32 gigawatts with nearly all of that growth coming from data centers.

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