Electricity prices are rising by double the rate of inflation. Data center demand means no relief ahead

• Household electricity prices expected to rise another 6% through 2027 before slowing to 3% in 2028, with regional variations across U.S. markets
• In the PJM grid covering 13 Mid-Atlantic and Midwest states, data centers are responsible for $23 billion in costs that get passed to consumers, termed a 'massive wealth transfer' by regulators
• Lower-income households will be disproportionately impacted as electricity accounts for a greater share of their budgets, while higher electricity costs will add 0.1% to core inflation through 2027

Summary: Electricity Price Surge Driven by AI Data Center Demand

Key Findings:

According to Goldman Sachs research, U.S. electricity prices jumped 6.9% year-over-year in 2025—more than double the headline inflation rate of 2.9%. This trend is expected to continue through the decade with no near-term relief for consumers.

Primary Driver:

AI-powered data centers will account for 40% of electricity demand growth through the end of the decade. Rapid data center expansion is colliding with constrained power supply due to regulatory barriers and labor/material shortages for new power plant construction.

Economic Impact:

• Household electricity prices projected to rise another 6% through 2027, then moderate to 3% in 2028
• Consumer spending growth will decline 0.2% through 2027
• Economic growth will slow by 0.1%
• Core inflation will increase 0.1% through 2027 and 0.05% in 2028 as businesses pass costs to consumers
• Lower-income households will be disproportionately affected

Regional Variations:

Wholesale electricity prices will surge particularly in California, the Midwest, and Mid-Atlantic regions. The PJM Interconnection market (covering 13 states) faces especially severe disruption, with $23 billion in costs attributed to data centers—described by watchdog Monitoring Analytics as a "massive wealth transfer" to consumers.

Political Ramifications:

Rising electricity costs have become a major political issue ahead of November mid-term elections. President Trump, while supporting AI industry growth, views electricity prices as a threat to Republican electoral prospects. His administration secured commitments from Microsoft and brokered agreements requiring tech companies to fund new power plants.

The analysis indicates households should prepare for sustained electricity cost increases that will pressure disposable income and economic activity through the remainder of the decade.