The AI Boom’s Hidden Cost: Wholesale Prices Are Surging 41% in America’s Largest Electricity Market
America's largest electricity market is undergoing a dramatic repricing that most of the country will never see, and the force driving it has nothing to do with weather or fuel costs anymore.
The U.S. Energy Information Administration published its October Short-Term Energy Outlook this week. The most important number in it got very little attention. Wholesale electricity prices in PJM, which runs North America’s largest wholesale electricity market, are forecast to rise 41% in 2026 compared with 2025. PJM serves more than 67 million people across all or parts of 13 states and Washington, D.C., and no other region EIA tracks is forecast to rise as much.
The national picture is much softer. Average U.S. wholesale prices are expected to rise 11%, to $52 per megawatt-hour, and prices at Northwest Mid-Columbia are forecast to fall 23%. In other words, the Mid-Atlantic and Midwest are being repriced while much of the country is not.
Weather Started It, Data Centers Sustain It
EIA attributes much of this year’s increase to unusually high summer temperatures and winter storms. The fuel data backs that up. The Henry Hub natural gas spot price spiked to $30.72 per million BTU on January 23 during the winter cold. It has since fallen back to $3.03 on October 6.
The gas shock is over, but the pressure on PJM remains, and the reason is structural. PJM’s independent market monitor found that “data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices” in a region with the nation’s highest concentration of data centers. EIA now expects U.S. power use to beat record highs in 2026 and 2027 as AI use surges. It projects commercial demand, the category that includes data centers, to grow another 2.8% in 2027, with industrial demand up 2.7%.
The economy behind that demand is large. The information sector produced $1.77 trillion in value added in 2025. Utilities, the industry expected to power it, produced $507.7 billion.
Grid Upgrades Get Expensive as Borrowing Costs Rise
Meeting that load means new transmission lines, substations and power plants, all financed over decades. That money is getting more expensive. The 10-year Treasury yield stood at 5.22% on October 8, up from 4.94% on Sept. 17. When a utility borrows more at higher rates, regulators usually let it recover those costs from every customer.
Overbuilding is a real risk. A Colorado legislative staff analysis notes that data center developers often submit proposals with multiple utilities at the same time. If projects never show up or use less power than promised, the infrastructure built for them may increase electricity costs for other customers. In that case, households pay for the AI boom’s grid.
Household bills will rise far less than 41%. Retail rates also include transmission, distribution, capacity charges, and regulatory decisions. Even so, the direction is clear. EIA’s May outlook put the average Middle Atlantic retail price across all sectors at 19.55 cents per kilowatt-hour in 2026, up from 18.07 cents in 2025. The U.S. average was 14.26 cents, up from 13.63.
Which Power Companies Gain Without Taking On Debt Risk
Demand growth helps utilities, independent power producers, natural gas suppliers and electrical equipment manufacturers, but it helps them in different ways. Generators selling into PJM’s wholesale market earn the higher prices directly. Regulated utilities take on the capital spending, borrow at today’s yields and then wait for rate cases to recover their costs. For investors, the key question is which companies can turn rising demand into higher earnings without taking on oversized financing risk (we profiled seven of the suppliers behind the data-center expansion, from power to cooling, in a free report you can grab here).
There are three signs to watch over the next two quarters. First, whether the 10-year yield stays above 5%, since that sets the cost of every grid project now being planned. Second, whether PJM’s next capacity auction clears at prices that confirm the market monitor’s warning. Third, whether more states adopt standardized large-load tariffs that make data centers pay for the infrastructure built for them. If they do not, the cost lands on ordinary ratepayers.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
