September 1, 2025 - Electricity prices are surging across the country as a perfect storm of aging equipment and AI demand slams the nation's grid.

Why it matters: Paying more to keep air conditioners, laptops and other electronics running is straining household budgets as Americans deal with other rising costs. 

The big picture: Prices are up and projected to keep rising in 2026, even as President Trump campaigned on pledges to sharply cut energy costs.

• The nationwide average retail residential price for electricity is about 7% higher than this time last year and 32% higher than it was five years ago, according to Energy Department data.

Zoom in: These surging prices are driven by infrastructure problems, public policy and — increasingly — massive new AI data centers.

1. Outdated power grid. Experts say the pressure being put on the electricity grid to handle more transmission is a big reason.

• Limited transmission capacity increases prices by creating "congestion," with overloaded power lines unable to carry more electricity because of overheating risks. That leads to using higher-cost, less-efficient electricity to meet demand.
• "It's like a two-way highway that was built decades ago that's now expected to carry rush-hour traffic to and from a major city every time — every day of the year [there are] more cars, bigger trucks, constant congestion," Sen. Mike Lee, chairman of the Senate Energy and Natural Resources Committee, said at a July hearing.
• "And if the road hasn't changed, but everything around it has changed, that's going to be an issue."

2. Data-center demand. Many analysts point to power-hungry AI data centers as a driver of rising rates, especially in data center hot spots.

• That's partly because of data centers' huge demand for energy. But it's because investments in new transmission lines and other gear are being passed on to customers.
• Data centers consumed about 4% of the nation's total electricity in 2023. The Energy Department estimates it could increase to 12% by 2028.
• But there are other demand drivers: Hotter summers, new manufacturing; EVs, and the wider electrification and digitization of the economy.

3. Generation capacity. That's the maximum amount of electricity that can be produced when going full-bore — and it's scarce. That has raised prices for equipment needed to meet the demand.

• The country's largest grid operator announced price increases to try to encourage more power plant development. That will translate to a year-over-year increase of 1.5% to 5% in some customers' bills, it said.

4. Red tape. Energy projects regularly face bureaucratic delays and denials. Many in Congress and the Trump administration seek to overhaul permitting to speed up projects, though they disagree about how much priority fossil-fuel projects should get.

• Natural gas plants and other sources "are trying to connect and they are experiencing the same slow and complicated interconnection process that results from limited capacity," Rob Gramlich, president of Grid Strategies LLC, told the Senate panel.
• "Soon we may see nuclear, advanced geothermal, hydro, thermal, and other resources connect and the constraints will affect them as well."

5. Mother Nature. Hurricanes, wildfires, high winds and other weather-related threats have spurred a need for investing in stronger — but costly — towers, poles and other equipment.

Between the lines: All of this is happening while Trump is tamping down on renewable energy, a major potential sources of electricity. 

• U.S. investment in renewables plunged by about 36% in the first half of 2025 — roughly $20.5 billion — as uncertainty over federal support chills the market.
• The administration has halted or moved to block major offshore wind projects, decisions that could sideline enough electricity to power hundreds of thousands of homes.
• Trump's "big, beautiful bill" scrapped or significantly reduced incentives for electric vehicles, solar, and other renewables — locking in a "drill, baby, drill" preference for fossil fuels.

Zoom out: The price-raising perfect storm hasn't just been happening here.

• In Europe, a confluence of soaring natural gas prices triggered by Russian supply issues, high coal prices, low wind speeds and scorching weather also led to skyrocketing rates in several countries.

State of play: Democrats' campaign arms and allied groups are placing digital and TV ads, billboards and more that hit Republicans over utility bills.

• It's part of a wider message on consumer costs, flipping the script on the inflation that damaged Democrats and President Biden.
• Energy Secretary Chris Wright recently acknowledged the GOP will get blamed — unfairly, he says — at the polls for rising prices. Democrats respond that Trump moves — such as halting an offshore wind project that's 80% complete — will hike rates.

Reality check: Power bills, paid less often than most people fill up cars, may lack the day-to-day resonance of gasoline.

• "Power bills sting, but they're invisible compared to gas stations or gas prices, something [voters] see every day," said George Washington University's Casey Burgat.