Deregulated Power Markets, Not Data Centers, Drive Rising U.S. Electricity Prices

While data centers are responsible for the first sustained surge in U.S. electricity demand in a generation, the author argues that the price spike is rooted in deregulated markets that cannot absorb growth efficiently. Historically, rapid demand expansions—such as the massive load from aluminum smelters that once consumed about 8% of national generation—coexisted with falling real electricity prices under vertically integrated utilities.

Since the late 1990s, unbundling generation from transmission created competitive wholesale auctions where added load pushes marginal prices upward, a pattern now evident as both generation and retail prices have risen together since 2020. Empirical work from June 2026 links data-center growth to a 6.1% rise in retail rates in deregulated, privately owned utilities, while regulated, publicly owned utilities show no comparable increase.

The comparison also highlights a stark labor contrast: smelters once supported thousands of union jobs, whereas data centers generate only a handful of non-union positions per megawatt. The analysis concludes that relying on deregulated structures could force a trade-off between the necessary load growth for decarbonization and affordable electricity for consumers, suggesting a return to regulated utilities as a more resilient solution.