Electricity prices surge twice as fast as inflation, driven by AI data centers

Electricity prices are surging more than twice as fast as overall inflation, creating a financial strain for households nationwide as they grapple with soaring summer cooling costs. The rapid price increases stem from multiple factors, including rising natural gas costs, explosive growth in power-hungry AI data centers, and increased natural gas exports that drive up domestic energy prices.

What you should know: American households are facing unprecedented electricity cost increases that far exceed general inflation rates.

• Electricity prices have jumped more than twice as fast as the overall cost of living in the past year, hitting families hardest during peak summer months when air conditioning usage spikes.
• In Florida, residents like Ken Thomas and Al Salvi report monthly electric bills reaching $400 to $500 during summer months, despite energy-saving investments.
• One in six households already struggle to pay their current electric bills, creating difficult choices between essential needs and energy costs.

The big picture: Multiple demand and supply factors are converging to drive electricity prices higher across the country.

• Power-hungry data centers supporting the AI boom are dramatically increasing electricity demand, with the Energy Department projecting that data centers and commercial customers will consume more electricity than households for the first time ever next year.
• Natural gas, which generates more than 40% of America’s electricity, has become significantly more expensive due to increased exports as liquefied natural gas (LNG).
• The Energy Department reports that gas costs for power generation jumped more than 40% in the first half of this year compared to 2023, with another 17% increase expected next year.

What they’re saying: Industry experts and affected residents highlight the growing burden on consumers.

• “You just don’t realize how important your power is until you don’t have it,” says Ken Thomas, a retired air traffic controller in Boca Raton. “In Florida’s heat, you just can’t live without air conditioning.”
• Al Salvi, a 63-year-old Florida resident on disability, explains the harsh reality: “Now we got to decide whether we’re going to pay the electric bill or are we going to buy medication. And it’s not fair to us.”
• “Regulators always play catchup,” notes John Quigley from the University of Pennsylvania’s Kleinman Center for Energy Policy. “The growth of data centers is far outpacing the response by grid managers.”

Policy challenges: Government assistance programs face pressure as energy costs climb.

• The federal government currently spends about $4 billion annually to help low-income families with energy bills, but advocates say this isn’t sufficient to cover rising cooling costs.
• President Trump’s proposed budget would eliminate energy assistance programs entirely, potentially leaving vulnerable households without support.
• Mark Wolfe of the National Energy Assistance Directors Association warns that “for low income families and people living in poverty, they don’t have the ability to pay any more than they’re currently paying.”

Market response: Utilities are seeking rate increases while facing consumer pushback.

• Florida Power & Light applied for a rate increase that would boost typical South Florida bills by about 13% over four years, prompting AARP to launch a petition drive that gathered tens of thousands of signatures.
• The utility announced a tentative agreement with commercial and industrial customers last week, though details haven’t been made public.
• Solar and wind power can be cheaper than gas-fired plants even without subsidies, but building new infrastructure requires significant upfront investment.