Connecting the dots on AI and electric bills

By Gay Nicholson, President, Sustainable Finger Lakes

Thanks to excellent coverage by local journalists at Ithaca Voice, Tompkins Weekly, and Ithaca Times, our community has been briefed on the basic issues of the proposed hyperscale AI data center at the old coal plant site in Lansing by bitcoin miner TeraWulf. Local opinion is generally opposed to the proposal with 88% against it in an Ithaca Times poll, and over 90% opposed in 300+ letters sent to the Lansing Town Board.

Much of the national conversation has been focused on the environmental and climate impacts of the massive buildout of AI data centers, but coverage of the impacts on electricity prices and utility business models is increasing.

It is the usual dynamic between supply and demand in a market. It takes a long time to add electric supply to a grid, and demand from these huge data centers (some have nearly the footprint of Manhattan) quickly puts upward pressure on prices. A recent Bloomberg Tech study of wholesale electric prices across tens of thousands of US locations found that price increases were associated with proximity to data centers, as much as 267% of prices five years ago. Utility bills used to be a sleeper issue, but now have significant political and economic impact during a time of inflation and an affordability crisis.

Governor Hochul has embraced AI and adding frack gas and nuclear power plants, in direct contradiction to our 2019 climate law. Developing vastly more NY electric supply for AI means more fracking, hasty construction of unproven nuclear technology, and more farmland taken for solar and wind in order to…. what? The AI industry has poured millions into hype about the promise of AI curing cancer and other big problems. But reality shows that much of that electricity is going to uses such as Open AI’s new Sora platform on social media so folks can make their own instant deep fake videos for entertainment or misinformation — or for Palantir’s investments in drone warfare and lucrative federal contracts.

NYSEG got a 62% increase in delivery rates in 2024-25 and is now asking for another 35% increase next year. For most homes, this is another $33 per month on top of the earlier increases. Our Assemblywoman Anna Kelles and Senator Lea Webb have heard from thousands of modest-income constituents who are already facing utility shutoffs because they struggle to pay their electric bills.

If TeraWulf’s proposed 3 million square foot data center ends up using an estimated 400 MW of capacity, the supply part of our bills will undoubtedly increase as well. TeraWulf’s prospectus talks of a $0.05/kwh price (our residential rate is around $0.25/kwh). That rate assumes that our NY Power Authority will sell them our hydropower resources for a cheap price, leaving less of our clean energy for our own homes and local businesses.

Let’s avoid the fate of so many communities in Virginia, Georgia, Oregon and elsewhere who woke up too late to the harms to the environment and quality of life for those near data centers, and the impact of rising electric bills on everyone else in the region. It is probably a sure bet that any local property tax revenues from a data center will be dwarfed by the increase in everybody else’s electric bills, harming our most vulnerable residents.

It is not just rising electric supply rates to worry about as AI increases demand. There is also an impact on electric delivery rates as investor-owned utilities leap to create more infrastructure on behalf of AI and crypto speculators – investments that will have to be paid by ratepayers if the demand does not materialize at prices profitable for the data center’s clients.

Utilities like NYSEG have agreements with state regulators for a guaranteed 10% return for their investors; this makes them eager to install new infrastructure capacity and make more profit. A number of business articles are pointing to the speculative bubble developing as investors jump into the data center game at the same time that evidence is accruing that “AI is failing to deliver in the real world.” If the bubble collapses, ratepayers will be left on the hook to pay for unused capacity. Some utilities are insisting that data centers pay up front for any additional infrastructure upgrades, and Oregon made a new rate class for this industry forcing them to pay higher rates than homes and local businesses.

We need our existing electric supply and utility infrastructure for our homes and local businesses – they are essential services and must remain affordable. We should not waste any of it on AI or crypto that only benefits wealthy outside investors. With climate disruption accelerating, communities like Lansing need to exercise their home rule privilege of a moratorium on large-scale development while they assess the risks the future will bring and rezone accordingly.

Since 2004, Gay Nicholson has led Sustainable Finger Lakes in designing and implementing an integrated program to advance the creation of a more sustainable regional community. Gay emphasizes a systems approach to working with partners to build the infrastructure and social capacity for more sustainable ways of living and working. Gay participates in a number of regional partnerships related to energy and climate, equity as an economic driver, and sustainable agriculture.