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Hey, mister Stanley, how you doing great?
How are you doing?
I'm good, So I'm Josh.
We talked on the phone all right.
Earlier this month, Bloomberg reporter Josh Sall visited a man named Kevin Stanley. He's fifty seven and he lives in Baltimore.
Do you'll need me to turn the lights on more because this sounding here can get kind of dark here.
Josh was in Maryland to report on the effects that data centers have on people who live near them. Kevin lives about a two hour drive from an area known as Data Center Alley, the world's largest concentration of data centers, topping other hotspots like Iowa and Oregon, and Josh was there to talk to him about one thing, in particular, his electricity bill, which has gone up ever since data centers came to the region.
Kevin's a really nice guy, really interesting guy, and he talked about how his high power bills have had a really rough effect on his life. He has had to cut back on buying the groceries he likes, getting haircuts as often as he likes. He tries to make his diabetes medication stretch out.
The power bills just keep going up and up, and for me, I'm a single person in here, so I'm like, wow, Wow, the bill's gone up so much.
Kevin is blind and he lives on disability payments. He says his energy bills are now eighty percent higher than they were just about three years ago. And there were days when the utility asks customers like him to use less power to prevent blackouts or encourages them to use less power to save money.
They have days where they tell us, don't use any electricity, don't run air and dig but it's like ninety five degrees, I'll dine here.
It can be difficult to pinpoint the exact root of higher electricity bills and strain on the electrical grid, so Josh set out to put some numbers to the growing pressure data centers are putting on local power supply, and he found that at a time of rapid data center construction and investment in AI technology that needs them, demand is driving up wholes energy costs and those costs are being passed on to consumers.
Josh spoke to some people that you know, started telling him that their bills were really high.
That's Leonardo Nicoletti, a data visualization reporter at Bloomberg who traveled with Josh and crunched the numbers.
When we were thinking about it. They seem to be living close to the hotspots of you know, AI data centers in the United States. The main finding was that, quite strikingly, if you are in an area that is located close to data centers or data center activity, you're much more likely to experience high price increases.
The massive increase in the demand for AI and the speed with which the data centers get bigger and bigger. I think it's been a huge surprise to all of us.
I'm David Gerrett, and this is the big take from Bloomberg News today. On the show, the staggering electricity needs of AI data centers and how you could end up putting the bill. AI needs a lot of energy to work from summarized answers on Google to chat, GPT, grocery lists. The rapidly growing technology requires massive amounts of computing power, which requires a lot of actual power.
We actually quantified this in an earlier story that Josh and I worked together. We compared the total amount of electricity that data centers use yearly to how much electricity individual countries use. And we've found that, for example, countries like Italy or Australia are using actually less electricity as a total than data centers use globally. And these numbers are actually higher now because we did this one year ago, and electricity demand is growing exponentially from data centers.
That numbers supposed to keep going up and up. So Bloomberg NIF projects that it's supposed to be over four percent by twenty thirty five total global electricity consumption. So if you took all the data centers at that point and made them their own country, at that point, they'd be the fourth biggest consumer of electricity after China, the US, and India.
But what Josh and Layo wanted to understand was whether the huge demand for electricity was showing up on customers' bills.
It took us like three months to find the data because you know, it's actually really hard to get granular data on power prices.
To get that more granular picture, Layo and another Bloomberg data visualization reporter named Demetrius Pogcas found a company called grid Status that collects real time data for more than twenty five thousand nodes around the US.
A node is like the location on the grid, so that's connected to transmission lines and it measures real time congestion, real time fuel prices, and real time like supply costs, things like that, right, and then the different factors that are measured by that node then make up the price.
With that data as well as data on the locations and capacity of data centers from a company called dc Byte, the reporters measured the distance between those nodes and areas where there's significant data center activity. They use that to create a data set that showed the price changes recorded in those areas over time since twenty twenty.
Essentially, the main finding is that seventy percent of nodes that recorded price increases are located within fifty miles of significant data center activity.
And if you look at your power bill, you're going to see in most places a distribution charge. That's what you're paying for all of the infrastructure, all the wires. But you're also going to see a supply charge. And the supply charge is what you're paying for that wholesale power. So what Lao's research says is by pushing up the price of wholesale power. Data centers are putting that upward pressure on your power bill.
So effectively, if I open up that bill, I'm not going to see AI data centers as a line item, but it's having that effect on what you're describing exactly. Josh says there are two key mechanisms that drive up electricity costs around data center hotspots.
The first, to really summarize supply and demand. They use a lot of electricity, which can make electricity more expensive for everybody, So that's one way that can push up customer bills. The other ways that they require a lot of new infrastructure, mostly transmission lines, but also new power plants and the costs of building that are spread out among all customers, including regular people like you.
Monitoring Analytics is an outside watchdog that keeps an eye on the largest US electric grid, PJM, and it says that data center development raise costs for customers on pjm's grid, which spans from Illinois to Washington, DC, by more than nine point three billion dollars over a twelve month period starting in June. Today, thirty three percent of all the electricity used in Oregon is attributed to data centers. In Virginia, it's thirty seven percent. That's according to data from dc
BYTE and the US Energy Information Agency. Communities in surrounding areas are starting to do the map, and they're also connecting higher bills to data centers.
You don't have to see those data centers to see the higher electric bills.
That's David Lapp, a consumer advocate from the Maryland Office of People's Council.
We don't have in Maryland too many data centers, so the costs are being driven up by data centers that are out of state, largely in many of them in northern Virginia.
In February, the Baltimore City Council led a hearing on the issue of rising Baltimore gas and electric bills.
The current state of these BGE bills and the skyrocketing rates is simply not sustainable for our constituents.
And one of the people who spoke at the hearing was Kevin Stanley, the man Josh and Lao interviewed in Baltimore.
Yes, good evening, everyone, My name is Kevin Stanley.
Kevin didn't know what was causing his bills to spike. He just knew it was a problem.
And there's no reason that Baltimore is shold have the excess of gas electric Race said that.
When Josh asked Kevin Stanley what he thought about data centers, his reply was.
So they could say, oh, this is going to help with AI. But how's that going to help me? How's that going to help me pay my bill?
So how do utilities decide who fronts the cost? And how are those communities responding? That's after the break. A team of Bloomberg reporters dug into the rising costs of electricity to see if the rapid construction of data centers in some areas could be to blame, and they found a link. Places with heightened data center activity were more likely to see higher wholesale energy costs, meaning the presence of data centers was raising power prices and eventually pushing
up customer bills. I asked Bloomberg reporter Josh Saul about why that's happening when people usually expect to pay for their own utility costs. I think about how I study my electricity build to the extent that I do, And maybe in the summer I'm using my air conditioner more. Maybe in the winter I'm using my heat more. But these are all kind of selfish things. I'm determining when the bill goes up or down, why should I be paying for the expenses of associated with these data centers.
I think there's two arguments that people make. I mean, the first is that AI, whether you like it or not, is becoming an increasingly large part of our world. So from national security to the argument that we don't want other countries to be way better at AI than we are, to the fact that now our Google searches and even our texts to our friends are guided by or instructed by AI. So there's one argument there that we're all
using AI. And there's also an old utility law. The way we do this is that the costs are shared among everyone. So if you build a new house or hook up to the grid as a new business, you don't pay for all of those costs to hook you up. It's socialized among everyone on the grid. So utilities are following that general principle. Now now with these large new customers data centers.
It's tech companies that are deciding when and where to build a new data center. Amazon, Microsoft, and Alphabet's Google are the three biggest US cloud providers in twenty twenty four, those companies spent more than two hundred billion dollars on capital expenditures, most of it to build new data centers. What's the relationship like between these tech companies that need all of this power and the utilities themselves. Are they
paying their fair share? Are they paying a disproportionate amount? How's that shaking out?
Well?
Utilities are really excited because it's a huge new customer base for them, and this is coming after decades of very flat growth. At the same time, there's some conflicts. Tech is known for moving fast and breaking things, that's their philosophy. Utilities are known for moving very slow and making sure nothing ever breaks, you know, making sure the
lights stay on. So they're working together here. But one thing that we're seeing is that utilities are actively figuring out how to make sure that big tech is paying its share for these data centers. They're doing things like creating new customer classes for data centers to pay differently
than say, residential or small businesses. They're creating requirements like data centers have to pay for certain costs, pay for a minimum amount of power over fifteen years, even if they use less putting, non collateral different things like that to protect their existing customers.
Josh Leo and their team reached out to Amazon, Microsoft, and Alphabet for comment. An Amazon spokesperson said the company works closely with utilities and grid operators to plan for future growth. Microsoft's vice president of energy told them, quote, it's literally our responsibility to make sure that when we come to a community, when we get connected to a grid, that the cost of the infrastructure that's being dedicated to us,
that those costs of service get allocated to us. Google said it's been working to use less electricity even as it expands data centers, and that it supports paying its fair share. What did you hear from utilities about this phenomenon? What do they say about why builds your going up? And what they intend to do about it?
Utilities mostly point to the idea that data centers are paying their fair share. So if a data center requires a specific substation for its operations, the tech company will pay for that, and they'll point to the reforms that they're making in their own rate structure to charge these large load customers differently. All of that's true, and all that's good, but it doesn't change the fact that a lot of costs are still being loaded onto regular customers.
Dominion Energy, the utility company that serves Northern Virginia's data center, Alley told the reporters quote, we believe data centers should pay for the full cost of their power. That's how we design our rates and it's the standard our regulator uses in reviewing them. The CEO of Exelon, which runs Baltimore's utility, said the company is pushing for long term solutions that are fair and bring peace of mind to customers.
Talking to one of the utilities, we asked about how they pass these costs onto customers, and their experts said, we sign long term contracts, so if power spikes up, that's for the power sellers to deal with. Customer doesn't
have to deal with that. However, the next time we sign a contract, if there's been a lot of variability in cost in power prices, and if the power prices have been overall just higher, which happens because of data centers, then the next contract that we sign will be for higher prices, and then yes, that will get passed on directly to our customers.
Now, some communities are starting to have conversations about what it really means to have these big AI data centers in their backyard. Are we seeing communities, Are we seeing states push back on this in any way?
Yeah, I'd say there's more dramatic conversation around the power grid than anytime in my years covering it. There was just a summit in Philadelphia where the governor Pennsylvania, Joshapiro, talked about affordability. We talked about these rising bills.
As governor of this great comme, privilege to represent thirteen million pens of land, and I can tell you they can't afford never ending price increases because of pgm's policies.
That's something we're seeing from politicians all around. Sometimes there's a little bit of a personality split, where you know, local government's excited for the tax income. They want companies moving in, they want business activity, they want to fund their local school district.
In the city of Fayetteville, Georgia, for example, the taxes paid by a new data center developer, we're expected to bring in over one billion dollars in state and local taxes the next fifteen years. Taxes going to the county Board of Education last year covered the equivalent of some half a dozen teachers salaries.
Then there's a split between that view and people who live around there who don't want big new transmission lines going through their yards. They don't want big three Walmart stacked on top of each other size data centers. They don't want all of that around them. So, yeah, there can be a lot of conflict in these communities.
When you look at projections for the growth of AI data centers, what do they illustrate and what is that likely to mean for the cost of electricity in this country.
Think it's something that needs to get figured out. Utilities are working on it. They can't have their customers and their regulators and politicians angry at them. Big tech similarly very attuned to what people think of them. That's why there's a lot of conversations and a lot of push right now to figure out how to charge data centers for both the power that they're using and the infrastructure that has to be built to supply their data centers.
In the meantime, Kevin Stanley is doing his best to deal with higher electricity bills.
You know, they talk about upgrading to greed and this and that, but we don't see it, especially when you're dealing with low income people or working class people. They have to feel something. It has to be more tangible. You would tell people what is a data center? Say, well, what is it? But just surviving.
This is the Big Take from Bloomberg News. I'm David Gerra. To get more from the Big Take and unlimited access to all of Bloomberg dot com, subscribe today at Bloomberg dot com slash podcast offer. Thanks for listening. We'll be back tomorrow.