NATIONWIDE — U.S. utility companies are planning to invest $1.4 trillion over the next five years to update the nation's aging power grid, driven by rising demand from artificial intelligence data centers and the need to harden infrastructure against severe weather. The planned expenditure is more than 20% higher than utilities' prior projections and represents their largest planned investment to date.

PowerLines, a nonpartisan nonprofit consumer education organization, analyzed capital spending plans from 51 investor-owned utilities that serve 250 million U.S. customers. A majority of those companies cited data centers as a top driver of capital expenditures in their earnings reports. Utilities also cited strengthening the grid against severe weather and replacing aging infrastructure as reasons for future investments.

Developers are building data centers across the country as technology companies expand capacity for artificial intelligence computing. U.S. data centers consumed more than 4% of the country's total electricity in 2023, a share that could rise to 9% by 2030, according to the MIT Energy Initiative. Data centers have increased nationwide electricity demand for the first time after decades of remaining flat, according to Charles Hua, founder and executive director of PowerLines. Some data centers can burn through as much energy as the entire nation of Ireland, Hua said.

Capital expenditure plans require approval from state utility regulators, who are responsible for overseeing the spending to prevent excessive cost burdens on customers. Utilities often pass costs onto households through rate hikes. A separate PowerLines report found that 56 million Americans will face higher utility bills due to rate hikes approved in 2025, and average residential electricity prices are projected to increase 5.1% this year, according to the U.S. Energy Information Administration. If the trend continues, residential customers could cover nearly half of the planned capital spending, or around $0.7 trillion.

Electricity costs rose 4.6% in March over the prior year, outpacing the general inflation rate of 3.3%, according to the Bureau of Labor Statistics. Nominal residential electricity prices increased by 33% between 2019 and 2024, while in real dollars they rose by 6% over that period.

Local communities have opposed data center developments over concerns that rising electricity demand will result in higher utility bills. Mike Partin, president of the National Rural Electric Cooperative Association, a trade group representing more than 900 utilities, said data centers can drive jobs, tax revenue, and economic development in rural areas. "New electricity consumers such as data centers can actually apply downward pressure on rates by providing utilities more sources of revenue while spreading fixed costs over a larger customer base," Partin said. He warned that if demand for AI products does not pay off as expected, consumers could be left on the hook to subsidize large technology companies.