The rapid expansion of data centers for artificial intelligence (AI) is leading to fears that they will raise electricity prices for ratepayers. Some states and cities are proposing moratoriums on new data centers, while others are imposing stringent environmental and cost requirements. But a new report from the Institute for Energy Research (IER) should put this misconception to rest.
Looking across data from all 50 states, IER found that there’s no statistically significant correlation—or put simply, there’s no clear connection—between the number of data centers in a state and its electricity prices. The ten states with the most data centers, including Virginia, Texas, California, Illinois, and Ohio, among others, averaged electricity prices at 14.46 cents per kilowatt-hour. This is nearly identical to the 14.39 cents per kilowatt-hour average across all other states.
If data centers were driving up electric bills, there would be a significant difference between these numbers. The same holds true over time: IER compared the top 10 data center states against the rest and found that the differences in price growth from 2015 to 2025, and from 2021 to 2025, fail to reach statistical significance.
Perhaps the most striking finding in the report is that rising electricity demand is actually associated with smaller price increases, at a statistically significant level. States where electricity sales grew fastest from 2015 to 2025 saw average price increases of just 20%. States where sales shrank saw prices jump nearly 40%.
The five states with the largest declines in electricity sales over that period—California, Maine, Connecticut, Massachusetts, and Hawaii—saw average price increases of 58%. The five states with the biggest gains, North Dakota, New Mexico, Texas, Oregon, and Virginia, saw increases averaging just 13%. North Dakota’s prices actually fell 6%.
Why? Electricity grids have fixed costs, including transmission infrastructure, generation capacity, and long-term contracts. When demand grows, those fixed costs are spread across more kilowatt-hours, holding per-unit rates down. When demand falls, the same costs get piled onto fewer customers.
IER is careful to note that this could change as data center buildouts accelerate. But the most recent data is unambiguous about the trend so far: Data centers are not responsible for higher electricity rates.
Then, what does explain electricity rates? IER and Always On Energy Research’s Blue States, High Rates report points to state-level energy policies, particularly the mandates, subsidies, and premature plant retirements favored by blue-state legislatures, as a better explanation for why some Americans are paying dramatically more for electricity. Ironically, many of the same states imposing costly new requirements on data centers are the ones whose own energy policies are the real price driver.
Voters are right to worry about their electricity bills, but IER’s report suggests that they should be looking at their state’s energy mandates, not data centers.