Californians have faced steadily rising electricity costs for more than a decade. Today, the state has the highest average electricity rates among the contiguous United States, with residential electricity prices 96.7% higher than the national average and industrial rates 171.9% higher, making California increasingly uncompetitive for employers and more expensive for households.

As electricity prices have risen in other states as well, data centers—especially those supporting artificial intelligence and cloud computing—have become the latest target of blame. Data centers are now frequently cited as a major driver of higher electricity bills and, separately, as a strain on water supplies. While the water issue has been addressed elsewhere, this report focuses specifically on electricity prices.

The purpose of this analysis is straightforward. To look at the data and do the math and answer the question: do data centers meaningfully increase electricity costs, or are state energy policies the primary driver?

To answer that question, we examined how electricity prices vary across states based on: the presence and scale of data centers, and state energy policies, particularly renewable portfolio standards (RPS) and clean energy mandates.

The goal is not to explain every factor affecting electricity prices, but to test whether the current narrative blaming data centers is supported by data—and, if not, where policy attention should be focused instead.

The data does not support the claim that data centers are driving higher electricity prices.

After testing multiple models and specifications:

• Data center electricity use is not associated with higher electricity rates.
• In fact, where statistically significant, higher data center usage is associated with lower average electricity rates. The effect is small but uniformly negative.
• State energy policies—especially the more aggressive renewable mandates—are strongly associated with higher electricity costs.

More specifically:

• States with a Renewable Portfolio Standard (RPS) of 50% or higher have electricity rates that are about 6 cents per kWh higher for residential customers.
• States with an RPS of 100%, such as California, have rates that are another 6 cents per kWh higher.
• By contrast, data center electricity consumption at levels comparable to California’s is associated with a reduction of about 1.1 cents per kWh.

Together, these factors explain more than 40% of the variation in electricity prices across states, indicating that policy choices—not data center growth—are the dominant cost driver.

Despite recent media attention, states with the largest data center footprints have not experienced larger electricity price increases.

Looking at electricity price changes from 2022 (pre-ChatGPT) to 2025:

California

• Data centers use 3.7% of total electricity
• Average total electricity rates increased nearly 25%
• California also has among the strictest renewable mandates in the country

Virginia

• Data centers use 25.6% of total electricity (the highest in the nation)
• Average electricity rates increased by only 8%

When states are grouped:

• States where data centers use more than 10% of electricity saw average total rate increases of 10.1%
• States where data centers use 5% or less saw higher increases, averaging 12.0%
• Residential rates show a similar pattern, with no meaningful difference between high and low data-center states

There is no observable relationship between data center intensity and higher electricity prices.

The negative relationship between data centers and electricity prices may seem counterintuitive, but several factors may help explain it:

• Data centers improve base-load demand, allowing utilities to spread fixed grid costs across more consistent usage
• They make better use of renewable generation when it is available
• They are often positioned to absorb excess renewable power that would otherwise be curtailed and sold at very low prices
• Many data centers maintain on-site backup power, improving grid resilience during shortages
• Large projects increasingly self-supply electricity, reducing strain on the grid rather than adding to it

Alternatively, states with large data center industries may simply manage electricity systems more carefully, prioritizing cost control and reliability—unlike California, where renewable mandates are often pursued without sufficient attention to cost impacts.

State energy policies were evaluated using a binary framework based on the Lawrence Berkeley National Laboratory’s State Electricity Resource Standards database.

Policies analyzed include:

• Any Renewable Portfolio Standard (RPS)
• RPS requiring 50% or more renewables
• RPS requiring 100% renewables
• Clean Energy Standards (CES)

Key results:

• RPS policies at 50% or higher are consistently associated with higher electricity prices, increasing prices by 5.1 cents/kWh in the final specification
• RPS at 100% (California’s standard) adds even more cost, increasing prices by 6.8 cents/kWh
• Clean Energy Standards were not statistically significant

Blaming data centers for rising electricity prices misdirects attention from the real drivers of higher costs. The evidence shows that policy choices—particularly rigid renewable mandates adopted without cost discipline—are the primary contributors.

Data centers remain critical to California’s economy, supporting high-wage employment, Silicon Valley’s global competitiveness, and the industry that produces a growing share of state tax revenues.

Ironically, California’s electricity policies, which have shown to drive up the cost of electricity, increasingly push these investments to other states, exporting growth while forcing residents and businesses to absorb higher costs at home.

The data is clear. If policymakers want to address electricity affordability and the broader cost-of-living crisis, the focus must be on energy policy design—not scapegoating data centers.

Methodology

The analysis uses linear regression models to estimate how much electricity prices are associated with:

• Data center electricity use, and
• State energy policies.

The models focus on:

• Average residential electricity rates
• Average total electricity rates

Prices are measured as 12-month averages ending with the latest data from October 2025, with comparisons to:

• October 2020 (start of recent price acceleration)
• October 2022 (pre-ChatGPT)

Data Sources

All data is publicly available and reproducible:

• Electricity prices: U.S. Energy Information Administration (EIA)
• Data center electricity share: 2024 Electric Power Research Institute (EPRI)
• Energy policy classifications: Lawrence Berkeley National Laboratory
• Data center inventories: Cross-checked across multiple public sources (Aterio, Data Center Map, Business Insider), acknowledging variation in coverage and definitions

Regressional Results

• The final selected models explain 41–46% of state-level electricity price variation
• Data center variables were statistically significant only in limited cases—and always with negative coefficients
• Energy policy variables were consistently significant and positive at higher mandate levels