Guest Opinion: Why Large Data Centers Increase Our Energy Bills
- waterfallunityalli
- 4 days ago
- 2 min read
PUBLISHED: 12/21/25
SUMMARY
Since the debate over the TeraWulf data center proposal began, I have repeatedly heard the claim from proponents that data centers do not increase our energy bills. That argument persists, in part, because the structure of our energy system, and how costs are allocated among different customers, is technical and not widely understood. When the system is complex, it becomes easier to make confident assertions that are difficult for the public to evaluate or challenge.
The purpose of the following paragraphs is to clearly explain how our energy bills are calculated, how large energy users uniquely affect grid costs, and why residential and small commercial customers end up paying a disproportionate share of the infrastructure expenses required to support large new loads. My hope is that by laying out how the system actually works, we can engage in a more informed and productive conversation about decisions that will directly affect housing affordability, small businesses, and household budgets across our community.
Why Households and Small Businesses Bear a Disproportionate Share of the Infrastructure Costs Required for New Data Centers
In New York State, differences in how utility rates are determined and how power is procured by different customer classes help explain why large data centers often pay far less per kilowatt-hour than households and small businesses.
Most residential and small commercial customers pay bundled retail rates that include energy supply, transmission and distribution costs, the recovery of long-lived grid investments approved in rate cases, and various system and public benefit charges. These rates rise each time a new rate is approved by the PSC, and the increase paid per kilowatt-hour reflects the growth of the utility’s infrastructure. In other words, our energy bills rise as the grid expands.
Large data centers, by contrast, are classified as large commercial or industrial customers and are served under different rate structures. New York allows large customers to procure electricity outside the bundled retail utility rate, and many data centers purchase supply through Energy Service Companies (ESCOs) or long-term power purchase agreements (PPAs) linked to wholesale market prices. These arrangements allow them to secure electricity priced much closer to significantly lower wholesale supply costs than the retail supply rates paid by households and small businesses.
On the delivery side, data centers often take service at higher voltages and are located closer to the transmission system. These factors reduce delivery costs compared to residential customers who rely on lower-voltage distribution networks. Their large, steady electricity use also spreads fixed delivery costs across a very large number of kilowatt-hours. These factors collectively result in lower per-unit delivery charges under existing rate designs.
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