Report: Electric Customers Paying Upgrade Costs for Data Centers

Electric customers in seven PJM states, including Pennsylvania, paid more than $4.3 billion in data center transmission costs in 2024, a new report found.

The report from the Union of Concerned Scientists said that the costs, for local transmission upgrades made to provide transmission service directly to data centers, have contributed to rising electric bills due to a “loophole” in the current regulatory structure. The Union of Concerned Scientists is an advocacy group that puts science into action, developing solutions and advocating for a healthy, safe, and just future.

PJM is the regional transmission organization serving 13 Mid-Atlantic states, including Pennsylvania, and it has seen the most growth in data centers and need for new electric supply. New transmission lines are also needed to handle that additional power and under the current structure, all customers within a utility share those costs. “Such costs are passed on to all customers because existing rules for recovering the costs of transmission upgrades did not anticipate that individual customers could create such high demand and subsequent high costs,” the report states.

The report calls for new rules to be put into place to close a “regulatory gap” that did not anticipate large data centers’ impact on local utilities and their infrastructure costs. State and federal regulators should require that data-center related transmission costs be assigned to the specific customer, or a particular rate class, to prevent subsidization by other customers, it suggests.

More than 150 local transmission projects were started between 2022 and 2024 to serve data centers in Pennsylvania, Virginia, Illinois, Maryland, New Jersey, Ohio, and West Virginia, the authors found after examining utility-level data.

Of the $4.35 billion spent in those states on data-center related costs in 2024, almost half, $1.98 billion, was in Virginia, home to numerous data center hubs. Ohio was second with $1.3 billion, and Pennsylvania utilities spent almost $492 million.

The transmission costs are in addition to increasing costs for wholesale electricity due to increasing power demand and constrained supply. PJM saw a big spike in wholesale prices in 2024, with a nine-fold increase in the price for firm capacity. Consequently, residential electric customers have seen a jump in their electric bills, and Pennsylvania’s governor is calling on PJM to make rapid changes to address these issues. Gov Josh Shapiro has gone so far as to threaten to pull Pennsylvania - which produces more energy than it consumes and exports much of that to other states - out of PJM.

Regulators are working to develop new procedures for providing data center power and determining how costs should be assigned. But until changes are made, all utility customers will continue to feel the pain of rising prices and high demand for electricity.