Why electric bills are going up and how AI, new data centers are to blame

You may have no clue what a data center does.

But a boom in these high-tech operations in the Chicago area and around the country — as the United States races to be a world leader in artificial intelligence — will hit home in the form of higher electricity bills next year.

The average increase is expected to be $10.50 a month for each ComEd residential customer by the middle of next year. That’s on top of the typical electricity bill in the Chicago area, which is about $100 a month.

The price of electricity is going up due to energy-hungry big data centers that are expected to dramatically increase demand for power. ComEd and other utilities pay upfront to make sure an electric grid that extends from Chicago to the East Coast has plenty of power over time and won’t see blackouts because of these new electricity hogs.

A typical consumer probably doesn’t have a sense of how these high-tech operations affect electricity demand. It’s unlikely many have heard of PJM Interconnection, a government-regulated nonprofit that operates the grid and oversaw the process that led to the upcoming bill hike.

But those same customers notice when their bills start to rise. And so do politicians.

Some, including Gov. JB Pritzker, blame PJM for the upcoming spike in electric bills to which the grid operator says it simply exists to make sure the lights stay on even as power usage soars. A large data center uses enough electricity to power entire neighborhoods or small cities. This is happening as Illinois and other states seek to phase out fossil fuel energy sources to fight climate change.

Linda Young, 68, sees nothing positive about a proposed “quantum computing” project at a long-abandoned steel mill site along Lake Michigan just over two miles from her South Shore home.

She’s worried about the effects on the lake and other environmental ramifications from the almost 130-acre development but is also concerned about the potential for higher property taxes.

The South Side project by developer PsiQuantum is separate from AI research and is not a data center, but its electricity use is likely to be similar to that of a data center, a company spokesman says.

When told that data centers and other projects by tech companies are helping to increase ComEd bills because of high electricity demand, Young balks.

“Just living is enough of a struggle,” says the retired grandmother of four. “Is quantum computing really about making our lives better?”

A data center is a building or complex that houses equipment used for applications such as cloud computing and AI, among others. Leading data center companies include subsidiaries of Amazon, Meta and Microsoft.

McKinsey and Co., the consulting firm, says data centers are responsible for up to 4 percent of the country’s electricity demand today, and this will grow to 11 to 12 percent by 2030.

Chicago is the third largest data center market in the country, just behind Dallas-Fort Worth, and way behind the leader, Northern Virginia, according to the real estate firm CBRE.

Pritzker says data centers are a huge piece of Illinois’ economic future, and the governor's not alone. There’s a competition among states to lure and build massive data centers as the United States races to beat China to be the world’s AI leader.

There’s also a huge potential cost as these operations suck large amounts of power, and ComEd customers may feel the pinch.

Even with the boom in data centers in Illinois, ComEd says it still has plenty of power. There are more than 80 data centers sucking up power now and more than 30 planned, plus the large quantum project. That still leaves the Chicago area with more than enough power, ComEd says.

However, the utility believes there’s “a critical need for infrastructure investments to ensure the strength and reliability of the energy grid now and in the foreseeable future,” spokeswoman Lauren Huffman says.

The expected $10.50 spike in ComEd customers’ monthly bills is tied to an auction process that PJM holds each year to make sure that its multistate territory has enough power to meet demand. The most recent auction resulted in high prices in part because of an increase in projected electricity demand, which contributed to high auction prices.

That’s a shock to residents, such as Liyola Taylor, 51, in Austin. She says she battled ComEd last year to keep the lights on at her West Side apartment where she lives with her teenage son. The disconnection notices have stopped for the time being, but that extra money owed will be “painful.”

“It’s more of a headache,” Taylor says. “I don’t really have income right now.”

Pritzker, the champion of data center investment in Illinois, lashed out last month in a letter to PJM, the operator of an electric grid that keeps the lights on in all or part of 13 states and Washington, D.C. Northern Illinois is on the western edge of this grid, while Southern Illinois is served by another power-grid operator.

“These record-high prices are a serious concern,” Pritzker said in the letter, also signed by the governors of Delaware, Maryland, New Jersey and Pennsylvania. The governors said the costs “will be paid by our residents and our businesses and could deter future economic development.”

This demand for more power comes as Illinois and other states carry out plans to retire fossil fuels for electric power generation in favor of renewable energy, such as solar and wind. Indeed, hundreds of renewable projects are waiting to be connected to the electric grid in ComEd territory.

Pritzker’s office and clean energy organizations have been frustrated, saying that PJM-related costs are soaring because of rising demand for electricity at the same time that PJM also has been slow to approve grid connections for new power plants to come online.

A report from Lawrence Berkeley National Laboratory showed that 295 projects were waiting in the PJM queue for grid connections in ComEd territory as of the end of last year. Solar farms are the most common type of power plant in the queue.

PJM, based in Pennsylvania, responds that it has increased its pace for approving grid connections and is working to respond to concerns. Also, PJM says part of the problem is that older power plants are closing prematurely.

“PJM has been warning for some time that policy pressure on generators to retire before their replacement is in place could result in a supply crunch,” PJM spokesman Jeff Shields says.

He says there are thousands of renewable projects across the grid that need to be studied and approved before they can connect. PJM is doing what it can to get through the applications, he says.

And some renewable projects don’t get completed, which is not the fault of the grid operator, he says.

“These projects are not coming online at the pace we need to replace retiring generators,” he says. “This is not due to PJM’s interconnection process, but due to difficulties with siting, supply chain and financing.”

The policy pressure to shift energy sources is coming from several states in PJM territory, including Illinois, which passed the Climate and Equitable Jobs Act in 2021. The landmark law was part of an effort to shift away from coal and natural gas power plants and boost carbon-free resources such as nuclear and renewables.

But it would be incorrect to blame the 2021 law for plant closings that are contributing to high prices today in Illinois, says Will Kenworthy, Midwest regulatory director for the advocacy group Vote Solar. He noted that plant closings related to the law won’t happen until 2030 at the earliest.

Kenworthy and other renewable energy advocates are wary that wind and solar power are being blamed for rate increases, when the main culprit is the increase in electricity demand.

“We’re heading toward a period of higher prices,” he says.

Sarah Moskowitz, executive director of the Citizens Utility Board, a Chicago-based consumer advocacy group, says the blame for high utility bills can be spread far and wide. This includes politicians, regulators, PJM, ComEd and the companies developing data centers and other electricity-hungry projects.

“There isn't one single entity that we can blame for high electric bills, because our power bills are the result of a plethora of public policy and regulatory decisions,” Moskowitz says. “So I think a lot of my job as a consumer advocate is to just start to familiarize the public with what forces are at play here so that they can look to the regulators and the policymakers and demand better and make wiser choices for themselves as well.”

Dan Gearino reports for Inside Climate News.