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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hey, mister Stanley, how you doing great?

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Speaker 3: How are you doing?

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Speaker 4: I'm good, So I'm Josh.

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Speaker 2: We talked on the phone all right.

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Speaker 5: Earlier this month, Bloomberg reporter Josh Sall visited a man

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Speaker 5: named Kevin Stanley. He's fifty seven and he lives in Baltimore.

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Speaker 3: Do you'll need me to turn the lights on more

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Speaker 3: because this sounding here can get kind of dark here.

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Speaker 5: Josh was in Maryland to report on the effects that

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Speaker 5: data centers have on people who live near them. Kevin

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Speaker 5: lives about a two hour drive from an area known

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Speaker 5: as Data Center Alley, the world's largest concentration of data centers,

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Speaker 5: topping other hotspots like Iowa and Oregon, and Josh was

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Speaker 5: there to talk to him about one thing, in particular,

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Speaker 5: his electricity bill, which has gone up ever since data

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Speaker 5: centers came to the region.

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Speaker 4: Kevin's a really nice guy, really interesting guy, and he

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Speaker 4: talked about how his high power bills have had a

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Speaker 4: really rough effect on his life. He has had to

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Speaker 4: cut back on buying the groceries he likes, getting haircuts

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Speaker 4: as often as he likes. He tries to make his

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Speaker 4: diabetes medication stretch out.

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Speaker 3: The power bills just keep going up and up, and

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Speaker 3: for me, I'm a single person in here, so I'm like, wow, Wow,

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Speaker 3: the bill's gone up so much.

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Speaker 5: Kevin is blind and he lives on disability payments. He

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Speaker 5: says his energy bills are now eighty percent higher than

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Speaker 5: they were just about three years ago. And there were

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Speaker 5: days when the utility asks customers like him to use

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Speaker 5: less power to prevent blackouts or encourages them to use

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Speaker 5: less power to save money.

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Speaker 3: They have days where they tell us, don't use any electricity,

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Speaker 3: don't run air and dig but it's like ninety five degrees,

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Speaker 3: I'll dine here.

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Speaker 5: It can be difficult to pinpoint the exact root of

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Speaker 5: higher electricity bills and strain on the electrical grid, so

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Speaker 5: Josh set out to put some numbers to the growing

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Speaker 5: pressure data centers are putting on local power supply, and

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Speaker 5: he found that at a time of rapid data center

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Speaker 5: construction and investment in AI technology that needs them, demand

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Speaker 5: is driving up wholes energy costs and those costs are

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Speaker 5: being passed on to consumers.

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Speaker 2: Josh spoke to some people that you know, started telling

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Speaker 2: him that their bills were really high.

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Speaker 5: That's Leonardo Nicoletti, a data visualization reporter at Bloomberg who

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Speaker 5: traveled with Josh and crunched the numbers.

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Speaker 2: When we were thinking about it. They seem to be

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Speaker 2: living close to the hotspots of you know, AI data

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Speaker 2: centers in the United States. The main finding was that,

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Speaker 2: quite strikingly, if you are in an area that is

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Speaker 2: located close to data centers or data center activity, you're

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Speaker 2: much more likely to experience high price increases.

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Speaker 4: The massive increase in the demand for AI and the

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Speaker 4: speed with which the data centers get bigger and bigger.

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Speaker 4: I think it's been a huge surprise to all of us.

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Speaker 5: I'm David Gerrett, and this is the big take from

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Speaker 5: Bloomberg News today. On the show, the staggering electricity needs

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Speaker 5: of AI data centers and how you could end up

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Speaker 5: putting the bill. AI needs a lot of energy to

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Speaker 5: work from summarized answers on Google to chat, GPT, grocery lists.

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Speaker 5: The rapidly growing technology requires massive amounts of computing power,

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Speaker 5: which requires a lot of actual power.

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Speaker 2: We actually quantified this in an earlier story that Josh

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Speaker 2: and I worked together. We compared the total amount of

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Speaker 2: electricity that data centers use yearly to how much electricity

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Speaker 2: individual countries use. And we've found that, for example, countries

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Speaker 2: like Italy or Australia are using actually less electricity as

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Speaker 2: a total than data centers use globally. And these numbers

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Speaker 2: are actually higher now because we did this one year ago,

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Speaker 2: and electricity demand is growing exponentially from data centers.

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Speaker 4: That numbers supposed to keep going up and up. So

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Speaker 4: Bloomberg NIF projects that it's supposed to be over four

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Speaker 4: percent by twenty thirty five total global electricity consumption. So

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Speaker 4: if you took all the data centers at that point

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Speaker 4: and made them their own country, at that point, they'd

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Speaker 4: be the fourth biggest consumer of electricity after China, the US,

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Speaker 4: and India.

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Speaker 5: But what Josh and Layo wanted to understand was whether

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Speaker 5: the huge demand for electricity was showing up on customers' bills.

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Speaker 2: It took us like three months to find the data

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Speaker 2: because you know, it's actually really hard to get granular

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Speaker 2: data on power prices.

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Speaker 5: To get that more granular picture, Layo and another Bloomberg

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Speaker 5: data visualization reporter named Demetrius Pogcas found a company called

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Speaker 5: grid Status that collects real time data for more than

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Speaker 5: twenty five thousand nodes around the US.

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Speaker 2: A node is like the location on the grid, so

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Speaker 2: that's connected to transmission lines and it measures real time congestion,

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Speaker 2: real time fuel prices, and real time like supply costs,

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Speaker 2: things like that, right, and then the different factors that

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Speaker 2: are measured by that node then make up the price.

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Speaker 5: With that data as well as data on the locations

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Speaker 5: and capacity of data centers from a company called dc Byte,

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Speaker 5: the reporters measured the distance between those nodes and areas

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Speaker 5: where there's significant data center activity. They use that to

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Speaker 5: create a data set that showed the price changes recorded

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Speaker 5: in those areas over time since twenty twenty.

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Speaker 2: Essentially, the main finding is that seventy percent of nodes

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Speaker 2: that recorded price increases are located within fifty miles of

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Speaker 2: significant data center activity.

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Speaker 4: And if you look at your power bill, you're going

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Speaker 4: to see in most places a distribution charge. That's what

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Speaker 4: you're paying for all of the infrastructure, all the wires.

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Speaker 4: But you're also going to see a supply charge. And

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Speaker 4: the supply charge is what you're paying for that wholesale power.

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Speaker 4: So what Lao's research says is by pushing up the

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Speaker 4: price of wholesale power. Data centers are putting that upward

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Speaker 4: pressure on your power bill.

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Speaker 5: So effectively, if I open up that bill, I'm not

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Speaker 5: going to see AI data centers as a line item,

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Speaker 5: but it's having that effect on what you're describing exactly.

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Speaker 5: Josh says there are two key mechanisms that drive up

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Speaker 5: electricity costs around data center hotspots.

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Speaker 4: The first, to really summarize supply and demand. They use

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Speaker 4: a lot of electricity, which can make electricity more expensive

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Speaker 4: for everybody, So that's one way that can push up

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Speaker 4: customer bills. The other ways that they require a lot

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Speaker 4: of new infrastructure, mostly transmission lines, but also new power

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Speaker 4: plants and the costs of building that are spread out

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Speaker 4: among all customers, including regular people like you.

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Speaker 5: Monitoring Analytics is an outside watchdog that keeps an eye

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Speaker 5: on the largest US electric grid, PJM, and it says

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Speaker 5: that data center development raise costs for customers on pjm's grid,

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Speaker 5: which spans from Illinois to Washington, DC, by more than

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Speaker 5: nine point three billion dollars over a twelve month period

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Speaker 5: starting in June. Today, thirty three percent of all the

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Speaker 5: electricity used in Oregon is attributed to data centers. In Virginia,

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Speaker 5: it's thirty seven percent. That's according to data from dc

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Speaker 5: BYTE and the US Energy Information Agency. Communities in surrounding

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Speaker 5: areas are starting to do the map, and they're also

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Speaker 5: connecting higher bills to data centers.

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Speaker 6: You don't have to see those data centers to see

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Speaker 6: the higher electric bills.

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Speaker 5: That's David Lapp, a consumer advocate from the Maryland Office

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Speaker 5: of People's Council.

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Speaker 6: We don't have in Maryland too many data centers, so

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Speaker 6: the costs are being driven up by data centers that

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Speaker 6: are out of state, largely in many of them in

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Speaker 6: northern Virginia.

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Speaker 5: In February, the Baltimore City Council led a hearing on

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Speaker 5: the issue of rising Baltimore gas and electric bills.

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Speaker 4: The current state of these BGE bills and the skyrocketing

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Speaker 4: rates is simply not sustainable for our constituents.

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Speaker 5: And one of the people who spoke at the hearing

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Speaker 5: was Kevin Stanley, the man Josh and Lao interviewed in Baltimore.

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Speaker 3: Yes, good evening, everyone, My name is Kevin Stanley.

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Speaker 5: Kevin didn't know what was causing his bills to spike.

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Speaker 5: He just knew it was a problem.

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Speaker 3: And there's no reason that Baltimore is shold have the

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Speaker 3: excess of gas electric Race said that.

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Speaker 2: When Josh asked Kevin Stanley what he thought about data centers,

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Speaker 2: his reply was.

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Speaker 3: So they could say, oh, this is going to help

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Speaker 3: with AI. But how's that going to help me? How's

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Speaker 3: that going to help me pay my bill?

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Speaker 5: So how do utilities decide who fronts the cost? And

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Speaker 5: how are those communities responding? That's after the break. A

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Speaker 5: team of Bloomberg reporters dug into the rising costs of

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Speaker 5: electricity to see if the rapid construction of data centers

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Speaker 5: in some areas could be to blame, and they found

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Speaker 5: a link. Places with heightened data center activity were more

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Speaker 5: likely to see higher wholesale energy costs, meaning the presence

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Speaker 5: of data centers was raising power prices and eventually pushing

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Speaker 5: up customer bills. I asked Bloomberg reporter Josh Saul about

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Speaker 5: why that's happening when people usually expect to pay for

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Speaker 5: their own utility costs. I think about how I study

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Speaker 5: my electricity build to the extent that I do, And

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Speaker 5: maybe in the summer I'm using my air conditioner more.

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Speaker 5: Maybe in the winter I'm using my heat more. But

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Speaker 5: these are all kind of selfish things. I'm determining when

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Speaker 5: the bill goes up or down, why should I be

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Speaker 5: paying for the expenses of associated with these data centers.

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Speaker 4: I think there's two arguments that people make. I mean,

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Speaker 4: the first is that AI, whether you like it or not,

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Speaker 4: is becoming an increasingly large part of our world. So

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Speaker 4: from national security to the argument that we don't want

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Speaker 4: other countries to be way better at AI than we are,

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Speaker 4: to the fact that now our Google searches and even

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Speaker 4: our texts to our friends are guided by or instructed

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Speaker 4: by AI. So there's one argument there that we're all

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Speaker 4: using AI. And there's also an old utility law. The

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Speaker 4: way we do this is that the costs are shared

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Speaker 4: among everyone. So if you build a new house or

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Speaker 4: hook up to the grid as a new business, you

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Speaker 4: don't pay for all of those costs to hook you up.

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Speaker 4: It's socialized among everyone on the grid. So utilities are

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Speaker 4: following that general principle. Now now with these large new

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Speaker 4: customers data centers.

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Speaker 5: It's tech companies that are deciding when and where to

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Speaker 5: build a new data center. Amazon, Microsoft, and Alphabet's Google

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Speaker 5: are the three biggest US cloud providers in twenty twenty four,

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Speaker 5: those companies spent more than two hundred billion dollars on

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Speaker 5: capital expenditures, most of it to build new data centers.

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Speaker 5: What's the relationship like between these tech companies that need

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Speaker 5: all of this power and the utilities themselves. Are they

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Speaker 5: paying their fair share? Are they paying a disproportionate amount?

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Speaker 5: How's that shaking out?

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Speaker 2: Well?

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Speaker 4: Utilities are really excited because it's a huge new customer

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Speaker 4: base for them, and this is coming after decades of

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Speaker 4: very flat growth. At the same time, there's some conflicts.

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Speaker 4: Tech is known for moving fast and breaking things, that's

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Speaker 4: their philosophy. Utilities are known for moving very slow and

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Speaker 4: making sure nothing ever breaks, you know, making sure the

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Speaker 4: lights stay on. So they're working together here. But one

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Speaker 4: thing that we're seeing is that utilities are actively figuring

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Speaker 4: out how to make sure that big tech is paying

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Speaker 4: its share for these data centers. They're doing things like

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Speaker 4: creating new customer classes for data centers to pay differently

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Speaker 4: than say, residential or small businesses. They're creating requirements like

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Speaker 4: data centers have to pay for certain costs, pay for

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Speaker 4: a minimum amount of power over fifteen years, even if

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Speaker 4: they use less putting, non collateral different things like that

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Speaker 4: to protect their existing customers.

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Speaker 5: Josh Leo and their team reached out to Amazon, Microsoft,

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Speaker 5: and Alphabet for comment. An Amazon spokesperson said the company

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Speaker 5: works closely with utilities and grid operators to plan for

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Speaker 5: future growth. Microsoft's vice president of energy told them, quote,

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Speaker 5: it's literally our responsibility to make sure that when we

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Speaker 5: come to a community, when we get connected to a grid,

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Speaker 5: that the cost of the infrastructure that's being dedicated to us,

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Speaker 5: that those costs of service get allocated to us. Google

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Speaker 5: said it's been working to use less electricity even as

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Speaker 5: it expands data centers, and that it supports paying its

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Speaker 5: fair share. What did you hear from utilities about this phenomenon?

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Speaker 5: What do they say about why builds your going up?

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Speaker 5: And what they intend to do about it?

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Speaker 4: Utilities mostly point to the idea that data centers are

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Speaker 4: paying their fair share. So if a data center requires

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Speaker 4: a specific substation for its operations, the tech company will

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Speaker 4: pay for that, and they'll point to the reforms that

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Speaker 4: they're making in their own rate structure to charge these

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Speaker 4: large load customers differently. All of that's true, and all

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Speaker 4: that's good, but it doesn't change the fact that a

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Speaker 4: lot of costs are still being loaded onto regular customers.

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Speaker 5: Dominion Energy, the utility company that serves Northern Virginia's data center,

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Speaker 5: Alley told the reporters quote, we believe data centers should

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Speaker 5: pay for the full cost of their power. That's how

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Speaker 5: we design our rates and it's the standard our regulator

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Speaker 5: uses in reviewing them. The CEO of Exelon, which runs

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Speaker 5: Baltimore's utility, said the company is pushing for long term

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Speaker 5: solutions that are fair and bring peace of mind to customers.

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Speaker 4: Talking to one of the utilities, we asked about how

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Speaker 4: they pass these costs onto customers, and their experts said,

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Speaker 4: we sign long term contracts, so if power spikes up,

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Speaker 4: that's for the power sellers to deal with. Customer doesn't

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Speaker 4: have to deal with that. However, the next time we

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Speaker 4: sign a contract, if there's been a lot of variability

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Speaker 4: in cost in power prices, and if the power prices

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Speaker 4: have been overall just higher, which happens because of data centers,

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Speaker 4: then the next contract that we sign will be for

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Speaker 4: higher prices, and then yes, that will get passed on

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Speaker 4: directly to our customers.

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Speaker 5: Now, some communities are starting to have conversations about what

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Speaker 5: it really means to have these big AI data centers

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Speaker 5: in their backyard. Are we seeing communities, Are we seeing

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Speaker 5: states push back on this in any way?

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Speaker 4: Yeah, I'd say there's more dramatic conversation around the power

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Speaker 4: grid than anytime in my years covering it. There was

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Speaker 4: just a summit in Philadelphia where the governor Pennsylvania, Joshapiro,

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Speaker 4: talked about affordability. We talked about these rising bills.

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Speaker 1: As governor of this great comme, privilege to represent thirteen

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Speaker 1: million pens of land, and I can tell you they

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Speaker 1: can't afford never ending price increases because of pgm's policies.

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Speaker 4: That's something we're seeing from politicians all around. Sometimes there's

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Speaker 4: a little bit of a personality split, where you know,

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Speaker 4: local government's excited for the tax income. They want companies

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Speaker 4: moving in, they want business activity, they want to fund

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Speaker 4: their local school district.

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Speaker 5: In the city of Fayetteville, Georgia, for example, the taxes

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Speaker 5: paid by a new data center developer, we're expected to

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Speaker 5: bring in over one billion dollars in state and local

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Speaker 5: taxes the next fifteen years. Taxes going to the county

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Speaker 5: Board of Education last year covered the equivalent of some

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Speaker 5: half a dozen teachers salaries.

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Speaker 4: Then there's a split between that view and people who

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Speaker 4: live around there who don't want big new transmission lines

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Speaker 4: going through their yards. They don't want big three Walmart

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Speaker 4: stacked on top of each other size data centers. They

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Speaker 4: don't want all of that around them. So, yeah, there

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Speaker 4: can be a lot of conflict in these communities.

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Speaker 5: When you look at projections for the growth of AI

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Speaker 5: data centers, what do they illustrate and what is that

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Speaker 5: likely to mean for the cost of electricity in this country.

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Speaker 4: Think it's something that needs to get figured out. Utilities

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Speaker 4: are working on it. They can't have their customers and

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Speaker 4: their regulators and politicians angry at them. Big tech similarly

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Speaker 4: very attuned to what people think of them. That's why

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Speaker 4: there's a lot of conversations and a lot of push

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Speaker 4: right now to figure out how to charge data centers

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Speaker 4: for both the power that they're using and the infrastructure

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Speaker 4: that has to be built to supply their data centers.

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Speaker 5: In the meantime, Kevin Stanley is doing his best to

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Speaker 5: deal with higher electricity bills.

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Speaker 3: You know, they talk about upgrading to greed and this

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Speaker 3: and that, but we don't see it, especially when you're

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Speaker 3: dealing with low income people or working class people. They

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Speaker 3: have to feel something. It has to be more tangible.

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Speaker 3: You would tell people what is a data center? Say, well,

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Speaker 3: what is it? But just surviving.

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Speaker 5: This is the Big Take from Bloomberg News. I'm David Gerra.

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Speaker 5: To get more from the Big Take and unlimited access

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Speaker 5: to all of Bloomberg dot com, subscribe today at Bloomberg

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Speaker 5: dot com slash podcast offer. Thanks for listening. We'll be

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Speaker 5: back tomorrow.