Understanding the Drivers of Rising Electricity Rates

This report examines the complex relationship between rising electricity rates and the growth of data centers in the U.S. It outlines how various factors, including demand growth driven by electrification, industrial reshoring, and data center expansion, influence retail electricity rates. The analysis indicates that while data centers have become a focal point in discussions about rising costs, they are not the sole contributors. The report details that broader supply-demand dynamics, market design choices, fuel cost volatility, and utility investments also play significant roles. It highlights that there is no evidence of systematic cost shifting from data centers to other customers, and in some cases, data centers may generate surplus revenues that could lower rates for others. The report further discusses the evolution of regulatory tools and rate designs aimed at managing the impacts of load growth, emphasizing the need for timely updates to utility cost allocation to prevent cost shifting and ensure ratepayer protections.