In an effort to tackle rising electricity rates connected to the expansion of data centers, a recently proposed Pennsylvania rate case settlement includes provisions to protect residential and small business customers from shouldering the burden of costs associated with building the new facilities. Consumer advocates say it could serve as a model for reining in rising rates across the state.
One way data centers have caused electric bills to rise for everyone is simple supply and demand. The data centers require enormous amounts of energy to power their servers and generate artificial intelligence and that, combined with diminishing supply as older power plants shutter, is a large component of rising electric rates.
Capacity auctions, organized by the regional grid operator PJM Interconnection have also impacted rates. PJM says the skyrocketing capacity costs, which are also passed through to customer’s bills, have been caused by data center demand.
In 2023, when the auction aimed to secure enough power for delivery in 2025, the price topped out at $28.92 per megawatt-day. The next year, that price had skyrocketed 860% to $269.92 per megawatt-day. The most recent auction in December 2025 reached the cap of $333 per megawatt-day, and did not secure enough power to insure there would not be blackouts. Those capacity costs will continue to raise electric bills.
Another factor driving up rates is the need for more infrastructure to connect the data centers to the grid. Current Pennsylvania rules regarding utilities hold that when a large customer needs additional power lines or substations to send energy to their site, those costs are shared by all customers as long as there is some collective benefit. Consumer advocates say that charges passed on to residential ratepayers in the past from this new infrastructure have been minimal.
But the growth in planned data centers could cause those costs to balloon. Building new transmission and distribution lines to serve the high voltage facilities can be very expensive. At the same time, advocates say there are few guardrails in place to protect residential and other smaller-load customers from unknowingly footing the bill for new infrastructure that provides no widespread benefits beyond the needs of a particular facility.
“Affordability is a critical issue so many of us face, and rising utility rates are a big part of the challenges to keeping a roof over our heads,” said Rev. Gregory Edwards, director of the climate justice group POWER Interfaith, in a statement. The organization is a party to the case as part of a larger coalition of environmental groups known as the Energy Justice Advocates.
“This settlement … protects against possible future increases driven by AI data centers by requiring data centers to pay their own way, rather than leaving residential customers holding the bag,” he wrote.
Data centers would have to pay for their own infrastructure costs
The settlement, which remains subject to approval by the Pennsylvania Public Utility Commission, is between PPL Electric and more than a dozen intervenors that include the state consumer advocates, environmental and community groups like the Energy Justice Advocates, and larger power users like Walmart.
It marks the first time a Pennsylvania utility agreed to shield the average ratepayer from data center costs. In doing so, the settlement creates an entirely new customer rate class for large load data centers, which use extremely large amounts of electricity, and which would abide by different rules than all other classes. The agreement would also protect residential ratepayers from stranded costs, should an operator decide not to complete a planned facility.
EarthJustice attorney Devin McDougall, who represents the Energy Justice Advocates, applauded the agreement with PPL.
“It contains important protections for ratepayers and the reason that we need those protections is that we’re seeing an unprecedented spike in demand for electricity, and that’s really gonna drive up costs for utility service,” McDougall said. “We need a very clear rule that data center customers need to pay for the infrastructure costs that would not be incurred, but for their interconnection. The settlement contains an important mechanism for doing that.”
The new large-load rate class outlined in the pending settlement would apply to new facilities that would use more than 50 megawatts at peak demand. It would also include multiple facilities with a combined peak demand of at least 75 megawatts within a 10-mile radius. The voltage sent to these large load data centers is high — at or above 69 kilovolts.
These extremely high usage customers would also need to commit to operating for 10 years, or face penalties.
“[This is] designed to reduce the risk that other customers could be left paying for infrastructure costs if a large customer scales back or exits after only a few years,” said PPL spokesperson Dana Burns in an email.
If approved, PPL would also be the first utility to require large-load data centers to contribute to the pool of funds that help low-income customers through the Customer Assistance Program and the Low-Income Usage Reduction Program.
“This new rate class will provide $11 million in support for the residential low-income program, helping reduce costs for residential customers, and includes safeguards to manage increased demand from large load customers,” reads a statement released by PPL.
These payments, known as universal service costs, have up until now, been borne solely by residential customers in Pennsylvania.
The Public Utility Commission’s Vice Chair Kimberly Barrow commented as part of the proceeding that due to the rising costs associated with the growth of data centers, more customers are in need of assistance. Barrow said that since the data centers have caused rates to rise, they should also pay to compensate low-income ratepayers rather than place the burden on other residential customers. Those additional costs were estimated at $11 million.
How data centers could speed up in just a few years ‘growth that took over a century’
Pennsylvania currently has 11 operating data centers that have the capacity to consume up to 95 megawatts of electricity, according to information compiled by Cleanview. The company has tracked 38 planned projects in the state, which if they were all to be built, would require up to 19,632 megawatts of energy, an astronomical jump in electricity demand.
The state’s current largest data center, Montgomery County’s Tierpoint Valley Forge, has a capacity of 23 megawatts. Compare that to the planned conversion of the former coal burning power plant Homer City, in Indiana County, which has a planned capacity of 4,500 megawatts. Plans for Homer City include on-site natural gas generators, however the surge in planned data centers in PPL territory alone includes signed contracts for the utility to provide an additional 25.2 gigawatts of energy.
That is more than double PPL’s current peak of 7.8 megawatts, according to the settlement agreement.
“The Company is preparing to more than double its system demand in just 5-6 years — growth that took over a century to reach,” the agreement reads.
PPL customers would see a 4.9% increase in rates starting this summer
Apart from the issues surrounding data centers, the settlement will grant PPL $275 million in additional revenue and raise rates for residential customers by 4.9% on July 1, 2026. For the typical residential ratepayer using 1,000 kilowatt hours a month, that would mean bills would increase by about $7.42. There will also be a set monthly fee of $15. It’s the first distribution rate hike for the Allentown-based utility since 2016. PPL serves about 1.5 million customers in central and eastern Pennsylvania.