Data centers should pay the cost of their grid connections—but instead, they’re passing those expenses to you.
That’s the clear takeaway from my study of data center transmission costs from earlier this fall. My examination of utility filings showed costs shifted by local utilities to consumers in 2024 was at least $4.3 billion in just seven states (and $3 billion more in 2025) within the territory of PJM, the grid operator for the Mid-Atlantic (you can read the full policy paper here). In the weeks since, a consensus emerged that a review and reform of this practice is due.
A moment of consensus
Late last week, the US Secretary of Energy pushed for the Federal Energy Regulatory Commission (FERC) to begin a rulemaking regarding connection of large loads. That led FERC to initiate a rulemaking process the next day, the first formal steps to adopt rules requiring data centers pay their grid expansion costs. The US Secretary of Energy recognizes that pushing costs from data centers onto the bills of other consumers is a widespread and continuing problem. Prior to my report, these costs were a footnote in advocacy efforts. Now, the Secretary of Energy has put the solution on a fast track.
With the actions last week by Republican appointees, this appears to be a rare example of a bipartisan policy. Past statements by members of Congress and multiple public opinion polls show this is a widely held position.
For consumers, this part of the proposed rule change comes as welcome news. But this initiative also contains ideas that are not so consumer-friendly, such as changes to boost building gas-burning powerplants which will raise consumer costs and lead to more unhealthy carbon pollution. (And as a reminder, over two thirds of the country prefers renewable alternatives over increasing fossil fuel sources.)
Action is needed from FERC, as more data centers are coming and their transmission-connection costs will only grow beyond the billions of what I initially reported. Preliminary information shows $3 billion more in data center connection costs have made it through the first half of the process described in the earlier blog. And this is just a slice of the pie: many other states are seeing data center construction, but their respective utility cost shifts are obscured.
State regulators are responding to reform suggestions from utilities at the same time that some of these issues need attention from FERC. UCS is active in cases in Illinois and Pennsylvania as data center policy is unfolding rapidly. Without some standards, that unfolding could lead to unraveling, with costs and reliability as collateral damage.
Billions in data center costs already paid by consumers
Here’s an update following the same process as my earlier study, accounting for some updated 2024 projects, definitive plans for 2025, and preliminary signs of more coming.
The utilities continue to plan and build transmission connections for data centers. In some instances, they have raised the cost for a project. In others, additional work on the grid was identified and is now included, raising my earlier summary of total costs carried by consumers within PJM’s territory for 2024 from $4.3 billion to $4.6 billion.
An identical process was conducted to examine plans within the region for 2025, which uncovered a projected $3.1 billion in data center transmission costs—all of which is expected to be paid for by consumers.
The third category is a count of the projects on the horizon for which the design and cost projections have not been prepared yet by the utilities. But the average cost-per-project over 2024 and 2025 was roughly $42 million—so if that holds, consumers would be on the hook for another $4.3 billion in costs from those 102 projects.
Reforms cannot wait
Just as in our September report, these numbers summarize the presentations made by utilities for planning their transmission and collecting payment from all their customers. In September, we called for state and federal regulators to prevent these costs from falling through a gap and ending up on consumers’ bills.
Now, surprisingly, there is a policy consensus emerging and a formal proposal from the federal government to make this right. We will make formal comments, arguing for clear and binding language for these new rules. The Secretary of Energy put a deadline of April 30, 2026 on this rulemaking.
There is likely going to be a jurisdictional fight from utilities, but we suspect the big data companies will accept these new rules if that speeds up the grid connections they so clearly want and need.