While aging infrastructure, extreme weather events, and natural gas price spikes are leading contributors to electricity prices rising 40% since 2001, the growing electricity demand from the data center construction surge has begun to further drive up rates. Residential retail electricity prices increased 7% in 2025 alone, while piped gas prices rose 11% last year, according to the U.S. Department of Energy.

The majority of the rate hikes requested by utilities are already approved, but nearly half remain pending going into 2026 and could receive increased scrutiny from state regulators, said Charles Hua, PowerLines executive director, especially as pivotal midterm elections loom in November.

“These increases, a lot of them have not actually hit people’s wallets yet,” Hua said. “So that shows that, in 2026, the utility bills will likely continue to rise, barring some major sweeping action.”

Wall Street is taking note as well.

Julien Dumoulin-Smith, power and utilities analyst for Jefferies, argued that the industry’s 2026 narrative is shifting from “capex growth at all costs” to “capex growth with a customer permission slip” because of the rising public backlash.

“We believe it is no longer enough for utilities to say they care about affordability; regulators and investors will demand proof of proactive behavior,” he added. “Utilities that fail to demonstrate concrete mitigants face reputational risk and may warrant a credibility discount in valuations.”

Data centers are just a small part of price hikes the past few years, Hua said, but they could become a primary reason for increases in the next five years. The more hyperscalers agree to pay for their own power generation and transmission costs, the less ratepayers will be impacted.

And if power generation is overbuilt, ratepayers could be stuck with the costs for decades to come.

“It’s the new politics of electricity, where electricity is the new [price of] eggs,” Hua said.

“Electricity and [natural] gas are now the two fastest drivers of inflation,” Hua noted. “It’s not just a little bit more, it’s significantly more than what are used to seeing. That is creating this sense of public and consumer frustration that we’re seeing.”

Out of the $31 billion in rate hike requests, the South led the nation with $14.3 billion, dominated by the largest single rate hike in U.S. history in Florida. The utility Florida Power & Light proposed a four-year, $9.8 billion rate hike but eventually reached a compromise for a smaller—but still record-setting—$6.9 billion hike. The utility argued the average monthly bill would only increase about 2% for many ratepayers in 2026.

Elsewhere, the Northeast and West each accounted for $6.5 billion in requests. The Midwest saw the least activity with $3.2 billion in requested hikes. Maine, for instance, already rejected a $400 million hike, so dissent is spreading.

Tackling the ‘root cause’

While data centers dominate the discussion, Hua argued the AI boom is a symptom of the problem, but that the “root cause” is the way utilities are financially rewarded.

Essentially, utilities profit from returns on their investments and are motivated to spend and build more power generation and transmission. Because electricity demand held roughly flat for almost two decades, such growth sprees were hard to justify for years.

“They don’t make any profit on making the grid more efficient,” Hua said, contending that reforms are needed to incentivize efficiency gains. “So they’re constantly trying to build new infrastructure. That is their incentive, that is their job, arguably.”

And the AI boom is the “perfect justification for why they’re building new power plants.”

“This is a golden opportunity where you have a clear stakeholder that you can point to [to] justify the utility spend,” Hua said. “The bottom line is this is now a moment where they can justify to the regulator why that’s happening.”

That’s where the little-known public service commissions in each state come into play. There are about 200 public service commissioners nationwide, representing about $200 billion in annual utility spending—roughly one commissioner for every $1 billion spent. Georgia made headlines in November, for instance, when all the incumbent commissioners were voted out in favor of upstart Democrats, the result of outcry over utility bills.

With increased scrutiny, will commissioners nationwide be more willing to stand up to utility requests in 2026 and beyond?

“What it comes down to is, do the regulators believe or not believe [in] what the utilities are paying for?” Hua said. “And that’s where the rubber hits the road.”