The Department of Energy’s recent National Transmission Needs Study identifies several of these cases, where regions’ electricity costs would decline substantially if they were connected by a high-capacity transmission line. Providing these benefits to consumers, however, requires confronting not just the incentives that discourage utilities from building interregional lines, but the state laws that let incumbent monopolies control who builds them.
Lawmakers in both parties are scrambling to address the issues revealed by data centers. President Donald Trump, his administration officials, and several governors (including Pennsylvania Gov. Josh Shapiro) signed on to a statement of principles that encourage data centers to bring their own power or pay for the power they need.
Building more is no substitute for building smarter. At times, this has been a challenge for America's energy infrastructure, particularly transmission. It is evident that the U.S. needs more transmission, but which transmission lines it builds matters for protecting ratepayers and keeping costs in check. An overwhelming number of House Members just reaffirmed this guiding principle for how America should approach the development of electric transmission.
As Americans crank up their air conditioning bills in the summer months, the importance of affordable, dependable power is critical but often taken for granted. Especially today, families are more acutely aware of how much they’re paying as electricity rates have risen at a pace more than double the rate of inflation over the past year.
Many American power plants are stuck in a dysfunctional express lane. Energy Resource Interconnection Service, or ERIS was created to give generating facilities a faster, leaner way to connect to the grid without waiting in the main queue. Instead, in many markets, ERIS today places fast-trackers on the same slow schedule as projects in the main line. When new, highly competitive generation cannot be connected to the grid in a timely way, a key affordability and efficiency opportunity is left on the table.
Electricity rates are rising faster than inflation and are felt by households across America. After decades of flat electricity demand, the country is experiencing significant load growth, driven by hyperscale AI data centers, resurgent domestic manufacturing, and the steady electrification of buildings and vehicles.
Across state capitals and in Washington, policymakers are scrambling to address voters’ alarm over electricity bills. The Trump administration is unwinding major climate regulations, Democrats are focusing more on affordability concerns than climate change, and governors are quietly paring back clean energy subsidies and emissions mandates they championed only a few years ago. Climate policies are starting to bite, and the political strategy that helped enact them, downplaying costs and obscuring tradeoffs, is becoming harder to sustain as ratepayers see the impact on their bills.
The surge in data centers with energy needs equivalent to small cities has put a spotlight on the new transmission infrastructure required to serve these customers. But recent action from the Federal Energy Regulatory Commission (FERC), America’s top energy market regulator, takes aim at a more basic question in this rapid buildout: who pays for that new steel in the ground, and when? Right now, the rules that determine cost allocation are opaque enough that customers who never asked for those upgrades can end up footing the bill. That is the cost-shifting problem the Commission just put a target on for transmission utilities across the country.
Electricity bills are up, and data centers are getting the blame. But in the data so far, the states with the fastest-growing power use have mostly seen rates rise slower than elsewhere, not faster. Rising demand is supposed to push rates up, not down, but there are good reasons to think rising demand has held electric rates down in some areas. The question worth asking is whether we can count on that to last.
The surge in AI and data centers risks driving up electricity demand faster than we can deploy the power lines needed to carry it. The high-voltage transmission that this expansion, and economic growth more broadly, relies on is slow and expensive to develop, and stuck in an outdated regulatory system that often hands the work to local utilities without competition. New analysis from the R Street Institute shows what this costs us, finding that, when transmission projects are open to competitive bidding, they get built cheaper and faster.
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