Thoughts on the Market — Will the Data Center Boom Impact Your Wallet?

Podcast: Thoughts on the Market
Host(s): Michelle Weaver (Morgan Stanley U.S. Thematic & Equity Strategist), Dave Arcaro (U.S. Power Utilities & Cleantech Analyst)
Date: December 23, 2025

Episode Overview

This episode explores a pressing question as electricity prices creep upward in the U.S: Is the rapid boom in data centers—driven by surging AI and cloud needs—responsible for rising household electric bills? With both regional nuances and evolving policy responses, hosts Michelle Weaver and Dave Arcaro break down how the data center explosion is reshaping utility costs and what consumers, utilities, and policymakers are doing about it.

Key Discussion Points & Insights

1. The Data Center Demand Surge

• Dramatic Growth Expected:
  • In 2024, data centers made up about 6% of total U.S. electricity consumption.
  • Forecast: This share is expected to triple, reaching 18% by 2030 and 20% in the early 2030s.
  • Quote: “We’re actually forecasting that [data centers’ share] to triple to 18% by 2030... very strong growth and increasing proportions of the overall utility electricity use.” — Dave Arcaro [01:10]
• Grid and Infrastructure Impacts:
  • This translates to the need for ~150 gigawatts in new data center capacity by 2030.
  • Result: Major new strains on the grid, requiring transmission upgrades and more power generation (gas, renewables, battery storage).
• Cost Recovery = Higher Bills?
  • Large infrastructure investments typically get passed to consumers via higher rates.

2. Challenges for Utilities

• Affordability Tension:
  • Utilities must balance the need to recover costs, keep the grid reliable, and avoid politically and regulatorily sensitive rate hikes.
  • Quote: “Managing affordability is one of the biggest challenges the industry faces right now... this overall data center growth is absolutely a shock to their business and it needs to be managed carefully.” — Dave Arcaro [02:23]
• Reliability Risks:
  • New power plants and transmission often lag behind demand surges.
  • Faster demand, slower infrastructure = increased risk of outages, especially during extreme weather events.

3. How Utilities and Regulators Respond

• Isolating Data Center Costs:
  • Many utilities are “ring fencing” data centers, charging them higher electricity rates to recoup infrastructure costs without affecting regular customers.
    • Example: In Indiana, a utility builds new plants for a single data center and passes the bill only to that customer.
    • Example: In Georgia, higher rates for data centers even result in bill credits or reductions for other consumers.
    • Example: In Pennsylvania, ample infrastructure lets data center growth lower customer bills by spreading costs.
• Self-Powering Data Centers:
  • Some centers deploy their own on-site generation (e.g., gas turbines, fuel cells) to sidestep grid reliance and consumer rate impacts.
    • Companies like Solaris Energy and Bloom Energy provide these solutions.
• Demand Flexibility:
  • Data centers are exploring shutting down or reducing grid usage during peak stress periods (e.g., heatwaves), helping stabilize the grid.

4. Regional Differences

• Not All States Are Affected Equally:
  • Northeast (New England, New York): Minimal data center growth, so limited bill impact.
• Electricity Market Variability:
  • Some states have regulated rates, limiting data center impacts on general customers.
  • Others (e.g., New Jersey, Maryland, Illinois, Pennsylvania, Ohio) have market-based pricing. Rising demand here leads more directly to price hikes for everyone, with less ability to protect consumers via regulatory tools.
    • Utilities like Nextera, Sempra, AEP generally have less exposure to affordability risk compared to other companies operating in exposed states.
  • Quote: “There just isn’t an easy way in that case to ringfence [data centers] and protect consumers from the impact... so unique challenges can arise...” — Dave Arcaro [06:38]

5. Consumer Impact & Sentiment

• Electricity’s Unique “Essential” Role:
  • Households can’t easily cut back on electricity as with gas or other purchases—it’s needed for basic living.
  • Lower-income households feel bill increases most acutely.
    • Quote: “Electricity... is an essential good. You need to have it, and it’s a network service that households are structurally locked into.” — Michelle Weaver [08:06]
• Blame and Backlash:
  • More consumers are pinning high bills on data centers, regardless of actual regional impact.
  • NIMBY (“Not in my backyard”) sentiment is rising, with communities pushing back, sometimes canceling projects.
  • Poll: Over half of respondents believe AI/data centers are contributing to their electricity price pain, and this belief is widespread across the U.S. and political affiliations.
    • Quote: “Data center development is quickly becoming a NIMBY... issue with communities pushing back and even getting projects canceled.” — Michelle Weaver [09:07]

Notable Quotes & Memorable Moments

• On the rapid expansion:
  “We’re actually forecasting that to triple to 18% by 2030 and then hit 20% in the early 2030s.” — Dave Arcaro [01:10]
• On affordability pressure:
  “Managing affordability is one of the biggest challenges... this overall data center growth is absolutely a shock to their business and it needs to be managed carefully.” — Dave Arcaro [02:23]
• On essential nature of electricity:
  “You need to have it, and it’s a network service that households are structurally locked into. Unlike gas, where you could adjust your trip frequency or take a different type of transport, there really aren’t good substitutes for electricity.” — Michelle Weaver [08:06]
• On consumer perceptions:
  “A recent poll of around 2,200 voters found that just over half of respondents attribute overall electricity price increases to AI data centers at least somewhat...” — Michelle Weaver [09:07]

Key Timestamps

• [01:03] – Data center electricity consumption forecasts
• [02:17] – Utility company challenges: affordability and reliability
• [03:45] – Utility & regulatory responses: isolating data center costs, on-site generation, flexible demand
• [06:16] – Regional differences in data center growth and electricity price impacts
• [08:06] – How higher bills affect American households
• [09:07] – Public sentiment and NIMBY backlash

Conclusion

The data center boom is a major force reshaping the U.S. electricity landscape. Utilities, regulators, and communities are grappling with how to balance infrastructure needs, cost recovery, and affordability—especially in regions most exposed to volatile market rates. While not all regions are equally affected, consumer sentiment is shifting nationwide, with growing scrutiny on AI and cloud infrastructure as a perceived source of bill increases. Expect this debate to intensify as elections near and data center expansion continues.