U.S. retail electricity prices have increased faster than inflation, on average increasing by 13% from 2022 to 2025. From April 2025 to April 2026 residential electricity prices increased by 7.3%. 1 in 20 households are going into utility debt. And customers are feeling the pressure of rate increases.
Electricity affordability is shaped by both electricity prices and electricity consumption. Electricity prices are influenced by regulations, utility structures, fuel costs, grid maintenance costs, and impacts of extreme weather events on the grid. Either temporarily or permanently, natural disasters, extreme weather, and wildfire mitigation efforts have led to increased prices. Now, data centers are an additional factor. A Bloomberg News analysis found that areas near data centers have seen electricity costs increase as much as 267% for a single month as compared to five years ago. As electricity prices rise, regulators and customers alike are grappling with affordability concerns amid extreme weather events and the data center boom.
Extreme Weather
June 2026 saw record-breaking heat in France, where temperatures of 104 degrees Fahrenheit caused over 2,000 heat-related deaths. In the U.S., over the July 4th weekend, a heat dome caused the heat index (the “feels like” temperature) in the east coast to range from 100 to 105 degrees Fahrenheit. The west coast of the U.S. is also experiencing major heat risk. Extreme heat results in increased demand on the electric grid due to increased residential cooling needs and older transmission equipment, leading to emergency alerts and blackouts.
Proposed longer-term solutions for this increased demand include using battery storage and solar panels either at the household- or utility-level to reduce stress on the grid during heat waves by storing solar generation for use during high-demand hours. Some state legislatures have also passed bills supporting grid modernization for natural disasters and extreme weather events. For example, Illinois enacted SB 2408 “Energy Transition Act” in 2021 that invested in grid modernization projects, including during extreme weather events.
Data Centers
Meanwhile, data centers are adding additional stress to the grid. For instance, data centers require means to cool computer servers, either through energy-intensive refrigeration-based cooling or water-intensive evaporative cooling. As temperatures increase, data centers accordingly require more power to cool and have a greater power demand to operate. Extra demand from data centers, especially during extreme heat events, puts more pressure on the grid, such as in Virginia’s data center alley, and could result in power outages. And data center demand is only predicted to increase. For example, a Wisconsin draft report estimated that electricity demand in the state is expected to grow by over 40% by 2032, primarily due to data centers.
Extreme weather and data center load issues are coming to the forefront more often. In tandem, both present a stress test for the grid, underscoring the need for a more resilient, flexible, and responsive grid. The grid will need to accommodate demand while addressing weather risks, thus planning must focus on not only unprecedented need for generation and transmission but also resilience, recovery after outages, flexibility to respond to rapidly changing conditions, and coordination between transmission planning, generation development, and large-load interconnections. Efficiently addressing the impacts of extreme weather events and large loads on the grid is essential to grid reliability, management, and affordability for consumers.
For further information, please reach out to Sean Neal or Lisa Gast.
Article By DWGP Summer Associate Jackie Dall – UC Berkeley School of Law, May 2027
