Over the past few years, millions of Americans have seen their electricity bills skyrocket. Since February 2020, electricity prices have increased by an average of 40 percent across the country. In some areas, the rate is even faster — in Washington, D.C., electricity costs increased 93 percent from July 2020 to July 2025.
But the rise in costs hasn’t affected each type of user equally. According to recent data from the Energy Information Administration (EIA), residential electricity costs — the average price faced by ordinary home and apartment dwellers in the U.S. — rose by 10 percent between 2022 and 2024. Commercial users, spanning everything from small corner stores to giant, energy-sucking data centers, have seen rates increase just 3 percent. And industrial users saw prices fall by 2 percent during the same period. The data was recently covered by Yale Climate Connections.
That means that even as huge data centers — some using as much electricity as a small city — have plugged into the grid in recent years, they aren’t seeing the same spikes in prices as residential customers. That may come as a surprise to many electricity users.
“This is a phenomenon that utility regulators have to protect people from,” said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.
There are a few good reasons companies may pay less for electricity than people living in homes and apartments. A huge portion of electricity costs come from the poles, wires, and transformers needed to bring high-voltage electricity into homes scattered across suburban and rural neighborhoods. Those poles and wires are also the parts of the electricity system that are most vulnerable to extreme weather — and spending on them has skyrocketed in the past few years as utilities contend with an aging grid and rising threats from wildfire and hurricanes.
“California has seen a gigantic increase in distribution costs because of wildfire issues,” said Severin Borenstein, professor of public policy at the University of California at Berkeley. “And California is 7 or 8 percent of national load — it’s not nothing.”
Big commercial players such as data centers, on the other hand, can often plug directly into high-voltage transmission lines — bypassing the distribution system entirely, and leading to lower prices. According to the EIA, the average electricity price at the end of 2024 was 16 cents per kilowatt-hour for homes and apartments, and just 13 cents for commercial customers.
But there are more complex reasons as well. To set prices for each sector, utilities submit plans to their local regulator, and then face a complex system of political bargaining and negotiation. In theory, each group is supposed to pay an amount that aligns with the cost to bring them power — but in practice, different groups can lobby for lower prices.
“This is not a physics problem that has one right answer,” Peskoe said. “Everybody comes in with their own self-interest.”
In general, residential customers have the least lobbying power, compared with large data centers or other companies. “Residential consumers feel like they don’t have a voice in our utility regulatory system,” said Charles Hua, founder and executive director of PowerLines, a group that works to lower costs of electricity for consumers around the country.
In late 2023, for example, the grid operator PJM, which manages transmission from Ohio to Maryland, approved a $5 billion project to update transmission lines, partly because of data centers. In Virginia and Maryland, most of the costs of that project were borne by residential customers — even though the transmission line was not primarily for the use of people living in homes and apartments.
Then there’s another issue. Historically, utilities have tried to attract commercial facilities — including things like data centers — to an area in an attempt to boost jobs and the local economy. They have done that by offering preferential rates, trying to draw in facilities that could, in principle, go anywhere around the country.
From a utility perspective, drawing in data centers makes sense: Utilities make their profits off big capital spending, like building new power plants or transmission lines. But if companies offer artificial intelligence data centers a break on costs, to attract their business, that cost could get shifted onto residential consumers.
According to a report from Harvard University earlier this year, utilities often sign special contracts with data center customers that place them outside standard pricing agreements. “I’m not even sure if data centers are paying the ‘commercial’ price,” said Peskoe, one of the authors of the report. “We were finding across states the way data centers were coming online in many states was through these secret contracts.”
For example, the utility El Paso Electric in Texas offered Meta a special electric rate to build a $1.5 billion data center — at the time, the utility promised that the rate would not be pushed onto residential consumers. But, according to the Harvard report, the utility also petitioned to keep the proposal hidden from public view. Other utilities in Minnesota, Indiana and Wyoming have taken similar steps.
Some states have started to take action to treat data centers as a separate class of customers — with their own prices. Virginia recently established a new class for data centers and other huge users of electricity, with agreements in place to make sure the data centers pay for more of the grid upgrades required. Other states, including Wisconsin, are looking to do the same.
But at the end of the day, experts warn that continued increase in residential prices will anger voters — and contribute to inflation. “Electricity is the new eggs,” Hua said.
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