Do data centers actually increase electricity prices? No...and yes

September 10, 2026

AI Summary

5 min read

Data centers are often blamed for rising electricity bills, but the reality is more complicated than a simple yes or no. On a local level, a new data center can actually lower rates for other customers in its utility territory. Globally, however, the sheer scale of new demand from data centers is straining supply chains and driving up costs for every component of the electric grid, which will push prices higher for everyone.

The Local Arithmetic: Why a Big New Load Can Lower Your Bill

The core mechanism is straightforward utility rate-setting. A utility's cost to serve all customers is divided by the total kilowatt-hours sold to set rates. Adding a massive new load like a data center increases the denominator (total energy sold) significantly. If the utility has spare grid capacity, the cost to serve that new load (the numerator) might increase only modestly, meaning the data center’s contribution to revenue outweighs its contribution to new costs. The result? Rates for existing customers can go down.

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What you'll learn

1 (00:07) **Introducing the Core Question** - Shayle Kann sets up the episode by introducing Andy Lubershane's central thesis: data centers are not raising electricity prices locally, but they are contributing to higher prices globally.
2 (03:26) **The Local Case: Why Data Centers Lower Rates** - Andy explains the basic utility rate structure and why, in many cases, a new large load like a data center should reduce rates for other customers.
3 (12:28) **The Local Dynamic: Why It's Trending Toward Rate Cuts** - The conversation shifts to the market and political forces that are pushing data centers to guarantee local rate reductions.
4 (15:51) **The Trust Problem and the Counterfactual** - Andy and Shayle discuss the risk that even if data centers lower rates in a relative sense, customers won't notice if their bills are still rising due to other factors.
5 (18:18) **The Global Perspective: A Demand Shock** - The conversation pivots to the macro-level impact, where data centers are the primary driver of surging electricity demand, creating systemic inflation.
6 (21:53) **Specific Cost Increases Across the Supply Chain** - Andy details how much key components of the grid have become more expensive due to the demand shock.
7 (23:35) **Other Inflationary Pressures on Electricity** - The discussion broadens to include factors orthogonal to data centers that are also driving up electricity prices.

+ Full timestamped outline available in the app

Show Notes

You don’t have to look far to see the vitriol and backlash ignited by the rapid expansion of hyperscaler data centers. While critics and activists tend to focus their ire on resource consumption and residents’ electricity bills, the reality of data center economics is far more complex.

In this episode of Catalyst, host Shayle Kann sits down with Andy Lubershane, head of research at Energy Impact Partners, to unpack the nuances. They crunch the numbers behind utility rate structures, consider the "denominator effect" that can lower customers’ rates, and dig into the supply chain crunches pushing global power system costs higher.

Shayle and Andy discuss:

- Why a new data center can reduce utility rates for locals while contributing to rising costs elsewhere

- How data centers impact utility tariff rates

- Separating public perception of data centers from the reality of the grid

- How soaring demand for transformers, switchgear, conductors, gas turbines, and labor is driving systemic cost increases across the power sector

- Strategies to mitigate rising global grid costs, from load flexibility and distributed energy resources (DERs) to energy efficiency hardware

- Catalyst: What comes after the data center backlash?

- Catalyst: Enter the electric supercycle

- Catalyst: Can AI revolutionize grid operations?

- Catalyst: Inside the AI power wars

- Open Circuit: As midterms approach, electricity bills are on the ballot

- Open Circuit: Data centers have a Texas-sized energy problem

- Latitude Media: The great home battery financing experiment

Credits: Hosted by Shayle Kann. Produced and edited by Max Savage Levenson. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.

Catalyst is brought to you by EnergyHub. Peak season puts every grid to the test — and the utilities that pass are the ones that built flexible capacity before they needed it. EnergyHub works with more than 170 utilities to coordinate 2.5 million devices and 3.4 gigawatts of dispatchable flexibility through a single platform designed to perform when it counts most. See what that looks like at