On Friday, Zero Hedge posted an article that partially explains the abrupt rise in residential electric bills. Part of the rise is due to the green energy policies of the Biden administration, which moved toward more expensive sources of energy, but a major part of the problem is the rise in the use of electricity by data centers.
The article reports:
Back in August, when the American population was just waking up to the dire consequences the exponentially growing army of data centers spawned across the country was having on residential electricity bills, we said that the chart of US CPI would soon become the most popular (not in a good way) chart in the financial realm.
This is the chart:
The article continues:
Turns out we were right.
And while Trump obviously can not pull a communist rabbit out of his hat, and centrally plan the entire US power grid, what he can do is precisely what he is about to announce.
According to Bloomberg, Trump and the governors of several US Northeastern states agreed to push for an emergency wholesale electricity auction that would compel technology companies to effectively fund new power plants, effectively putting a cap for residential power prices at the expense of hyperscalers and data centers. Which, come to think of it, we also proposed back in October.
The article concludes:
Trump’s initiative will deliver another benefit: the effort has the potential to help PJM tackle a significant roadblock: improving the accuracy of its forecasts for demand growth. With tech giants paying for the power plants they need, the approach could weed out speculative projects that have skewed demand growth projections, something we discussed earlier.
As Bloomberg notes, the involvement of Democratic governors – including Pennsylvania’s Josh Shapiro and Maryland’s Wes Moore – is seen by the Trump administration as helping to anchor the effort, since state policies have driven recent changes in the power mix, including the retirement of coal and gas plants. The initiative is also seen aiding hyperscalers by ensuring reliable power supply, and it could be a model for other parts of the country, the White House official said.
Governors are committing to implement and assign these costs to the data centers, ensuring the price of these new power plants doesn’t land on the average household, the White House official said.
PJM’s auctions have emerged as a political flashpoint in the national debate about affordability after prices reached record levels in 2024. Although Pennsylvania’s Shapiro struck a deal with PJM to cap prices in future auctions, costs hit new highs in two subsequent sales. In fact, had it not been for an implicit cap in the latest auction, residential prices would have been 60% higher (see “Inside The PJM Auction Report, Something Crazy: Without Price Controls, Electricity Bills Would Explode“.)
The most recent auction, in December, also fell 6.6 gigawatts short of supplies, which PJM blamed on the frenzy to build massive data centers. PJM is now being asked to extend the price cap for auctions held through this year, the White House official said.
While the statement of principles being signed Friday isn’t a binding legal document, administration officials have discussed the plan with a host of stakeholders, from PJM executives and state officials, to utilities, power-plant developers, Wall Street and the hyperscalers building these data centers, the official said.
I don’t claim to understand all of this, but I do know that in recent months my electric bill has increased significantly.
